Financial Crime World

MFSA Issues Guidance on Solvency II Reporting Limitations and Exemptions

The Malta Financial Services Authority (MFSA) has issued guidance on the reporting limitations and exemptions applicable to insurance and reinsurance undertakings under the Solvency II Directive.

Reporting Limitations and Exemptions

According to the MFSA’s Circular, the competent authority may limit supervisory reporting to annual reporting in certain situations. These include:

  • When the submission of information would be overly burdensome due to the nature, scale, and complexity of the risks inherent in an undertaking’s business.
  • When the submission of information is not necessary for effective supervision or if it would undermine financial stability.

Additionally, the competent authority may exempt undertakings from reporting on an item-by-item basis if:

  • The submission of information is not necessary for effective supervision.
  • It would undermine financial stability.

Specific Requirements

The guidance outlines specific requirements for certain types of undertakings, including:

  • Group Undertakings: Group undertakings may be granted a limitation on regular supervisory reporting with a frequency shorter than one year if they can demonstrate that regular reporting is inappropriate given the nature, scale, and complexity of their risks.
  • Protected Cell Companies: Protected cell companies are subject to specific requirements regarding reporting and disclosure.
  • Undertakings Carrying on General or Long-Term Business: Undertakings carrying on general or long-term business are required to comply with specific reporting and disclosure requirements.

Market Share Determination

The MFSA has specified that an undertaking’s market share will determine its eligibility for exemptions. The authority will use the methods outlined in the European Insurance and Occupational Pensions Authority (EIOPA) Guidelines on methods for determining market shares for reporting to calculate these shares.

Transparency Requirements

The guidance emphasizes the importance of transparency, requiring undertakings to publicly disclose their Solvency and Financial Condition Report (SFCR) on an annual basis. The SFCR must include information on:

  • The undertaking’s business
  • Governance system
  • Risk exposure
  • Risk mitigation measures

Public Disclosure Requirements

The MFSA has issued this guidance in accordance with Article 18F of the Insurance Business Act, which requires undertakings to disclose publicly their SFCR annually.