Insurance update: The Nature and Art of Financial Supervision (Volume IX) Author: Romina Bonnici Published on February 21, 2024 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. Go back