News, Events and Press Releases

06-12-2010 | BEE’s Regulatory and Industry Update October 2010

The following are Legal Notices that have been issued recently in Malta and which may be pertinent to the financial services industry (copies attached):-

  • Notice of coming into force of the Designated Financial Instruments Regulations, 2009 (L.N. 443/2010)
  • Commencement Notice of the Aircraft Registration Act, 2010 (Act No. VIII of 2010) (L.N. 446/2010)
  • Immovable Property (Acquisition by Non-Residents) Act (Chapter 246) Immovable Property Price Index (L.N. 451/2010)
  • Duty on Documents and Transfers (Amendment No. 2) Rules, 2010 (L.N. 452/2010).

Furthermore, the following Bills have been issued for consideration by the Parliament in Malta:

  • Bill entitled “An Act to amend the Permanent Commission Against Corruption Act, Cap. 326.”
  • Bill entitled “An Act to make provision for procedures in terms of which employees in both the private sector and the public administration may disclose information regarding improper practices by their employers or other employees in the employ of their employers and to protect employees who make said disclosures from detrimental action.” (Whistleblower Act)

News from the EU Commission

  • 14.10.2010 - Public Hearing on the revision of the Insurance Mediation Directive (10.12.2010)
  • 30.09.2010 - Financial Services: Commission requests Slovenia to comply with EU rules on complementary health insurance (IP/10/1247)
  • 25.09.2010 - Decision on a reorganisation measure relating to ARFIN Compagnia di Assicurazioni e Riassicurazioni SpA (OJ C259 of 25/9/2010)

News from CEIOPS (Committee of European Insurance and Occupational Pensions Supervisors)

  • 13.10.2010 - US and EU plan way to smooth Solvency II equivalence. US and European insurance regulation representatives are working away to smooth the passage for a Solvency II equivalence agreement as soon as a Federal Insurance Office is up and running. The European Commission is expected to announce next month the two non-EU jurisdictions that it will assess for equivalence with the Solvency II framework and it is still possible that the US will be one. Representation from the National Association of Insurance Commissioners (NAIC) lobbied hard for the US to be included in the first wave. But continued unhappiness over reinsurance collateral requirements are widely felt to have turned the decision makers against the US. Bermuda and Switzerland are considered to be the most likely successful applicants for full consultation, having been given the nod from Ceiops.
  • 11.10.2010 - Non Life and non-SLT Health data request to review the calibration. To support the European Commission in finalising the Solvency II implementing measures, CEIOPS has launched a European wide data request in order to provide recommendations based on robust, empirical data for the calibration of the premium and reserve risk factors in the non-life underwriting risk module of the SCR standard formula tested in QIS5. Data should be submitted to national supervisors as part of the QIS5 exercise – with an extended submission date for this specific data requirement of 30 November 2010.
  • 28.09.2010 - Draft Methodology for equivalence assessments by CEIOPS under Solvency II. CEIOPS has released for public consultation its Draft Methodology for equivalence assessments by CEIOPS under Solvency II. Equivalence assessments aim to determine whether the third country supervisory system provides a similar level of policyholder/ beneficiary protection. Supervisory cooperation & professional secrecy is a key, determinative element of a positive equivalence finding. Equivalence is a flexible process based on principles and objectives. Until 22 October 2010, 17.30 CET, CEIOPS invites stakeholders to send comments on Consultation Paper no. 82 via e-mail to secretariat@ceiops.eu.
  • 22.09.2010 - 3L3 Committees welcomes the European Parliament’s landmark vote to reform financial supervision in Europe. The Level 3 Committees, CESR, CEBS and CEIOPS (“the 3L3 Committees”) welcome the landmark decision of the European Parliament to endorse the EU financial supervision reform package. The political agreement reached between Member States and EU legislators allows Europe to move into a new era of financial supervision. The new European System of Financial Supervisors (ESFS) integrates the three European Supervisory Authorities (ESAs) and the European Systemic Risk Board (ESRB), establishing the key pillars of a new institutional infrastructure which aims to ensure a stable, reliable and robust Single Market for financial services. The European Parliament vote also launches the 3L3 Committees’ institutional transformation. This is a complex process, requiring the existing Committees (CESR, CEBS and CEIOPS) to evolve quickly into European Authorities by January 2011. It will entail significant enhancements to current competencies and the implementation of support structures for the new tasks ahead. This work is now well underway in each of the Committees, in close cooperation with the European Commission.

News from CEA (Comité Européen des Assurances/European insurance and reinsurance federation)

  • 13.10.2010 - CEA welcomes EC report on Environmental Liability Directive. CEA welcomes the decision in the report by the European Commission not to propose an EU-wide compulsory liability scheme at this time to cover environmental damage, or imminent threat of environmental damage, under the Environmental Liability Directive (ELD). The EC’s study into the ELD also concluded the time is not right to impose a compulsory liability scheme on the imminent threat of environmental damage under the ELD. The late implementation of the ELD in many EU member states has meant little data exists relating to claims and the cost of preventive and remedial measures. Consequently, insurers have faced difficulties when trying to develop ELD related insurance products.
  • 30.09.2010 - CEA warns of implications if insurers can no longer differentiate on basis of sex. The CEA warns that there could be far-reaching implications for the price and availability of insurance cover if the opinion by the Advocate General is upheld by the European Court of Justice (ECJ). The Advocate General’s opinion in the case brought by the Belgian consumer association Test-Achats disagrees with the current derogation in EU law which permits insurers to make sex-specific differences in insurance premiums and benefits when sex is a determining risk factor.
  • 28.09.2010 - CEA publishes key statistical data on European insurance sector. The CEA has published its statistical booklet "European Insurance — Key facts" with facts and figures about the European insurance market and the contribution of European insurance to society and the economy. The following being the primary statistics: - Life insurers paid out around €530bn in benefits to insureds in 2009, providing them with capital, annuities, pension revenue and death benefits. - on-life insurers paid out almost €300bn in claims to insureds in 2009, of which about €100bn was for motor insurance, almost €80bn for health insurance and around €60bn for property insurance claims. - Private health insurers accounted for around 12% of all current health expenditure in the European Union in 2008. - European insurers invested more than €6 800bn in the global economy in 2009. This is equal to 53% of the GDP of the European Union. - The European insurance industry employs more than 1 million people directly.
  • 20.09.2010 - CEA stresses importance of uniform collateral reform in its response to NAIC consultation. While welcoming the US National Association of Insurance Commissioners’ commitment to addressing the issue of reinsurance collateral reform, the CEA’s response to the NAIC’s consultation expresses disappointment that the NAIC’s recommendations on accreditation would only apply to those states that choose to reform.

Below is a list of International warnings issued by various Financial Services Regulators

(pertinent to Customer Due Diligence procedures):

  • JFSC (Jersey) – Warning against Mr Peter Wilson Michel (“Mr Michel”) (Born 26 October 1946) of: Pot du Rocher House, La Rue du Pot du Rocher, Trinity, Jersey, JE3 5BH Former Principal Person and Director
  • JFSC (Jersey) – Warning against Mclandish Offshore Bank 'mclandishobn.com'
  • SIX Exchange Regulation (Swiss) – Decisions regarding Corporate Governance
  • AFM (Netherland) – Warning against Stewart Alexandra(m), trading as Global Loans and Investment Company (Stewart Alexandra(m))
  • KreditTilsynet (FSA Norway) – Warning against Kensington Advisory & Investment Group
  • FINRA Investor Alert- Ponzi scheme – High Yield Investment Programs
  • Hellenic Capital Market Commission – Warning against Avgitidis Trading Group
  • Central Bank of Ireland – Warning against Marcus Jones International
  • FMA (Austria) – Warning against FOS Asset Management Co. Ltd.
  • FMA (Austria) – Warning against WIDMER Options
  • FMA (Austria) – Warning against UNAICO Ltd. (Enigro Group)
  • FI (Sweden) – Warning against Cartwright & Keating
  • CBFA Belgium – Warning - Hudson Asset Management
  • CBFA Belgium – Warning against Belgium Financial Group

Details of the warnings are available upon request.

Lists of the names of some firms and/or individuals who are not approved or authorised by the UK FSA to conduct regulated activities or of unauthorised overseas firms known to be, or to have been, targeting UK investors may be obtained from the following webpage: www.fsa.gov.uk/Pages/Doing/Regulated/Law/Alerts/index.shtml

DEVELOPMENTS TO WATCH:

Strong showing for Financial Services in Global Competitiveness Report.

Malta has moved into 11th position in financial market development according to the World Economic Forum’s Competitiveness Index 2010-2011. Key performance indicators also confirm the sector’s standing as a leading innovator in the Maltese economy. This ranking is two notches up from the previous year. The soundness of Maltese banks has been ranked in 10th position (up from 13th). Malta effectively retained its joint 5th position in this area if it is considered that there are eight countries tying in the top 10 segment. Malta also moved up from 13th to 12th position (joint 6th) in the assessment carried out on the regulation of securities exchanges and from 12th to 8th position on the strength of auditing and reporting standards. The Maltese economy has also moved into 50th position worldwide, up from 52nd last year.

The UK Bribery Act substitutes the old anti-bribery legislation and common law and creates an effective and far-reaching weapon for enforcement against corruption.

The Ac:

  • applies to any corporate entity or partnership, wherever it may be incorporated, registered or conduct its activities, as long as part of its business, is conducted in the UK
  • covers the activities of those businesses wherever in the world they occur
  • applies to bribe taker as well as bribe maker
  • punishes not only bribery, but also the failure to prevent bribery

A company can be held liable for the corrupt actions of any person that “performs services” on its behalf. Whether an act is corrupt is judged not on the local customs of a foreign market, but on the basis of what is acceptable practice in the UK. Companies can only defend against a charge of failing to prevent bribery if they can prove that they have “adequate procedures” in place.

German Federal Criminal Police Office and Federal Financial Supervisory Authority report on money laundering and the financing of terrorism. The German Federal Criminal Police Office (Bundeskriminalamt) and BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht) reported on their work and on current developments in the area of combating money laundering and terrorist financing. In this context, the BKA presented the Annual Report 2009 of the Financial Intelligence Unit (FIU) Germany according to which last year a total of 9,046 suspicious transaction reports were filed pursuant to the German Money Laundering Act (Geldwäschegesetz – GwG). Compared to the previous year (2008: 7,349 reports), this translates into an increase of 23%. For the most part this growth stems from the fact that the number of reports in connection with financial agents rose to 2,394 in 2009 (2008: 971).

OTHER NEWS ITEMS:-

Car insurance: soaring insurance premiums for young male motorists

[Posted 14 October, 2010 by Tom Scott, Scotland Herald, UK]

Young male motorists are being hit hardest by the sharpest rises in insurance premiums for 16 years with average premiums almost doubling in the last 12 months, research has found. The AA published figures that showed premiums for drivers aged between 17 and 22 rose by 47% – the biggest jump of any age group. The motoring group, which has been tracking the car insurance market since 1994, found that the average of three cheapest quotes offered to young male drivers in the group is £2457, slightly less than twice the price offered to their female counterparts. Its British Insurance Premium Index follows Department for Transport statistics that show almost a third of male car drivers killed or seriously injured in accidents last year were under the age of 25.

Captive owners express Solvency II concerns

[Posted 14 October, 2010, insuranceday.com]

Solvency II’s reporting requirements threaten to increase captive owners’ exposure to compensation-hungry plaintiff lawyers. The captive community is fighting back against the administrative, financial and reporting burdens that they fear the new framework could impose. Jonathan Groves, leader of Marsh’s UK captive consulting practice, acknowledged that Solvency II was rocketing up the agenda for companies operating captives: “[Solvency II] is clearly a concern for captive owners, particularly those captive owners that have units in the EU and to a certain extent in the offshore jurisdictions.” Financial concerns, based on the increased capital requirements the new framework is expected to impose are high on the list, but business are also worried about the administrative burden from governance and the amount of information that will have to be divulged to the public through reporting requirements.

The solvency financial condition report (SFCR) included under Pillar III will be freely available to anybody that wishes to access it, and according to Groves: “It does create some concern when you remember that a lot of captives are only writing their parent risk, and maybe only writing a couple of lines of risk. “Within this they have to talk about their largest claims and their reserving costs. So it has the potential to be of great interest to plaintiff lawyers.” Groves described the concerns as “significant” and said Marsh, alongside the European Captive Insurance and Reinsurance Owners Association (ECIROA) was “trying to influence the outcome as much as we can”. Meanwhile Solvency II is seen as one of the future business drivers for Grafton Europe, a Malta-based insurer set up earlier this year which, through the novation of reinsurance assets and liabilities, aims to help captive owners free up capital by releasing legacy letters of credit lodged with fronting carriers. This week Grafton confirmed it had signed up supermarket giant Wm Morrison – a client of Marsh – as its latest customer. Marsh UK chief executive Martin South indicated that concerns over Solvency II equivalency had been a factor in Morrisons’ decision. And Grafton Group’s chairman Caspar Gilroy told Insurance Day: “Solvency II obviously has people worried. We all know that Solvency II equivalency is a big thing in every single offshore domicile. Inevitably with the stricter regulations that will come into force you will need an increased level of reserving in your captive.” “We don’t know what form equivalency will take, but nobody out there thinks it’s not going to be a more conservative approach. If you’re having to hold on to all those tail year reserves and having to add more capital, why would you do that?”

Allianz faces Hungarian toxic spill claims

[Posted 8 October, 2010, insuranceday.com]

The Hungarian aluminium manufacturer MAL is covered against both property damage to the plant and liability claims through Allianz Hungaria, the Hungarian subsidiary of Europe’s largest insurer. This was confirmed by a spokesman for parent Allianz SE in Munich. The industrial insurance specialist Allianz Global Corporate & Specialty is not affected, neither are other insurers. The spokesman was not prepared to name the insured sum, nor whether the policy would actually apply. If the manufacturer had in fact acted negligently, the insurer might want to stall on the claim. Environmental organisations put the blame on MAL. Greenpeace said that the dam securing the basin had not been safe, while the World Wildlife Fund believes that considerably more red sludge than permitted had been retained. One million cubic metres of the poisonous red sludge leaked out of a basin at MAL on Monday. Four people died. In the meantime, the mud has reached the river Marcal and thus flowed into the Danube. FURTHER dam collapses across Eastern Europe would potentially spread toxic spills for hundreds of kilometres across the region and across international borders, heightening the risk of disputes over liability for clean-up costs. Hundreds of dams across Eastern Europe are at risk of failure similar to the leakage from Hungarian aluminium manufacturer MAL’s plant in western Hungary.

Alert : US issues travel alert for Europe

[Posted 3 October, 2010 by Sofia Ashmore, Washington (AFP)]

The US State Department issued a formal alert Sunday warning Americans traveling in Europe to remain vigilant against “the potential for terrorist attacks” and urging precaution in public places and transportation systems. France and Britain immediately voiced support for the security statement, which said “current information suggests that Al-Qaeda and affiliated organizations continue to plan terrorist attacks.” “US citizens should take every precaution to be aware of their surroundings and to adopt appropriate safety measures to protect themselves when traveling,” according to the alert. It said attackers may use “a variety of means and weapons and target both official and private interests,” and that particular targets could be railways, subways and other tourist infrastructure. The alert — which the State Department issues regarding specific events, and is one step down from a travel warning — follows intelligence reports which suggested an Al-Qaeda attack could be imminent.

Allianz’s Diekmann urges Solvency II delay

[Posted 9 August, 2010, insuranceday.com]

ALLIANZ chief executive Michael Diekmann has called for Solvency II to be postponed. Diekmann made his comments during the presentation of the company’s secondquarter figures at which he also indicated that Allianz might bundle its EU companies into one property and casualty insurer. ”We believe that there is considerable need for discussion, which could call into question the timetable for Solvency II,” Diekmann said. The EU Commission has set 2013 as the date when the EU-wide rules for supervision and capital adequacy are set to come into force. Allianz believed that it was right to see insurance more in terms of economic risk, he added. For that reason, Allianz had carried out stress tests for years and had supported Solvency II from the very beginning. The company also supported the IASB’s efforts to harmonise insurance accounts, in order to make companies more easily comparable for investors and customers.

Kessler criticises Solvency II implementation plan

[Posted 4 July, 2010, insuranceday.com]

SCOR chief executive Denis Kessler is the latest senior industry figure to predict dire outcomes from the current version of Solvency II. Speaking during a reinsurance symposium at the Cologne University of Applied Sciences, Kessler warned the introduction of the Solvency II regulations in the way envisaged by the insurance supervisors could prove seriously problematic for the whole of the insurance industry. The supervisors plan to penalise companies with capital investments in inflation-safe forms like shares and real estate, by enforcing a high capital charge. “They put a capital charge on equity, and no capital charge on fixed-income government bonds,” Kessler said. ”If the crisis comes, and inflation comes, the regulators will say why did you not prepare for a sharp rise in interest rates,” he said. “The latest version of Solvency II is the best way to move the insurance industry towards a big mess.” Kessler acknowledged that Solvency II was in itself a good thing, but insisted the introduction should be done differently. “We should be free to make our own decisions about investments,” said Kessler. Insurers are afraid of inflation. They have billions in claims reserves, but if claims become more expensive, the reserves will not be adequate. “I really do believe that inflation could come,” said Thorsten Polleit, chief economist at Barclays Capital for Germany.

LOCAL EVENTS:-

The Malta International Risk and Insurance Congress at Hilton Hotel, St. Julian’s, Malta on the 25th & 26th November 2010 A gathering of leading European risk and insurance professionals in the insurance and onshore financial centre of Malta to discuss the fast changing risk and insurance landscape in Europe and identify the best strategic and tactical response. Key speakers include: Gabriel Bernardino, Chairman, CEIOPS and the man responsible for delivering Solvency II to the European Commission (invited); Peter den Dekker, FERMA; Axel Theis, Allianz Global Corporate & Specialty; Eileen McCusker, International Property & Casualty, XL Insurance; Lex Baugh, Chartis Europe; Daniel San Millan, Ferrovial; Carl Leeman, BELRIM and Katoen Naatle

Notice:-

The above information is based on sources we believe to be official sources, which we believe to be reliable, but we do not guarantee its accuracy. It is true as at 15 October (a.m.). Readers should consult BEE Insurance Management or their own insurance/legal advisors regarding specific coverage and other issues. No intellectual property right is being claimed on the material being used or quoted.