Member Article

On the 9^th of July 2024, the MFSA published a Circular setting out its expectations with regards to the requirements listed in paragraph 6.8 of Chapter 6: System of Governance of the Insurance Rules in circumstances where authorised undertakings:

1. outsource a key and/or critical/important function to a service provider; and/or
2. enter into an arrangement with a Managing General Agent (“MGA”) and/or an intermediary (“INT”) and/or a Third-Party Administrator (“TPA”), giving them delegated underwriting and/or claims and/or distribution authority.

The MFSA made reference to the following authorised undertakings in this regard: authorised insurance undertakings, authorised reinsurance undertakings, captive insurance undertakings and captive reinsurance undertakings (“Authorised Undertakings”).

The Circular’s objectives included an explanation of the risk-based approach adopted by the MFSA and an indication of the required information and documentation in the context of the outsourcing arrangements and delegation of authority as described above.

(Re)insurance undertakings will need to submit, in addition to the formal notification and draft outsourcing agreement or delegation of authority agreement, information for the MFSA’s assessment and potential “no objection” assessment. This includes:

1. the completed “Annex II – Assessment Form” of Chapter 2 of the Insurance Rules
2. additional information regarding:

• • delegation of underwriting, claims, and/or distribution authority to MGAs and INTs (Tables 1 and 2, as annexed to the Circular)
  • delegation of claims handling authority to MGAs, INTs, and TPAs (Tables 1 and 2);
  • outsourcing of key and/or critical/important functions (Tables 1(E) and 2); and
  • termination of delegation of authority arrangements with MGAs, INTs, and TPAs (Table 3, as annexed to the Circular).

The MFSA also reminded (re)insurance undertakings of their obligation to notify it of any material or significant changes to outsourcing arrangements, including a delegation of authority, sixty (60) days prior to such changes.  The MFSA provided a non-exhaustive list of examples of material or significant changes by way of guidance, including changes in the original business model, changes of products, classes and jurisdictions and inclusions of addendums forming part of the delegation of authority agreements, among others.

The obligation of Authorised Undertakings to complete the tables annexed to the Circular shall come into force from the 9^th of September 2024.

This document does not purport to give legal, financial or tax advice. Should you require further information or legal assistance, please do not hesitate to contact [email protected]

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