The 1st February 2024 marked the publication by the Malta Financial Services Authority (“MFSAs”) of its 9th volume from its series on ‘The Nature and Art of Financial Supervision’. This new volume focuses on the insurance sector, particularly on Malta-based (re)insurance undertakings and insurance intermediaries.
Through this publication, the regulator, inter alia, (1) identifies the off-site and on-site work which has been carried out by the Insurance and Pensions Supervisory team and the Conduct Supervision team in the insurance supervision space, (2) highlights areas where enhancements are being strongly encouraged to address common deficiencies and gaps which have been observed from MFSA’s supervisory work and (3) clarifies the Authority’s expectations to address the weaknesses identified.
The main common deficiencies which the Authority came across during its supervisory work include:
Governance
Common weaknesses/deficiencies
- Composition and collective competencies of the Board
- Board Committees reporting structures
- Understanding of business model resilience to stress scenarios
- Board meetings’ minutes
- Discussion time on compliance matters, effectiveness of Board and Committees performance, system of governance reviews, effectiveness of risk management system and internal controls
- Fit and proper assessments
Compliance
Common weaknesses/deficiencies
- Knowledge of the applicable legal and regulatory framework
- Resources and support of the Compliance function
- Compliance plans and comprehensive and timely reporting of compliance matters
- Disclosure requirements and complaints handling
Internal Audit
Common weaknesses/deficiencies
- Comprehensive internal audit plans
Distribution Channels
Common weaknesses/deficiencies
- Review and monitoring of distribution network
- Internal controls, including manuals, documented procedures and reporting processes
- Oversight being exercised by appointed individual within the regulated entity
Reserving and Claims Handling
Common weaknesses/deficiencies
- Documentation of reserving process, assumptions and methodology
- Audit checks and audit trails
- Claims handling procedures, processing and oversight
Business Continuity
Common weaknesses/deficiencies
- Documenting, testing, review and updating of contingency and business continuity plans
- Exit strategies for outsourced critical or important functions or activities
Complaints Handling
Common weaknesses/deficiencies
- Complaints register
- Insurers’ monitoring of intermediaries compliance with complaints handling policy and procedures
- Timely complaints handling
- Complaints analysis
Disclosure Requirements by Tied Insurance Intermediaries
Common weaknesses/deficiencies
- Awareness of IPIDs and KIDs content
- Adequate and comprehensive knowledge of pre-contractual disclosure requirements
Demands and Needs
Common weaknesses/deficiencies
- Understanding and implementation of the demands and needs assessment
Should you require any clarifications on the above, kindly contact Matthew Bianchi, Romina Bonnici, Philippa Taylor-East or Elaine Magri.