The MFSA issued a Circular on the 22nd of December 2022 in which it proposed amendments to the Companies Act (Cell Companies carrying on business of Insurance) Regulations, Subsidiary Legislation 386.10 (“the PCC Regulations”).
The PCC Regulations provide for the creation and regulation of cell companies. Currently, regulation 15 of the PCC Regulations provides that where a cell exclusively carries on business of affiliated re/insurance, the cell company may, by written agreement, provide that only the cellular assets of that cell may be utilized to satisfy the cellular liability of that cell. Hence, regulation 15 allows for the limitation of recourse available to creditors of a cell company which, under regulation 14, is available also in respect of non-cellular assets of the cell company.
The MFSA’s proposed amendments include the deletion of this regulation 15, thereby requiring that all cell applications as from the date of the Circular provide for recourse to non-cellular assets of the cell company irrespective of whether the cells carry on business of affiliated re/insurance exclusively or not, and that the cells’ notional Solvency Capital Requirement is to be adequately calculated without reliance to ‘pay as paid’ or ‘cell limitation’ clauses.
These proposed amendments are planned to take effect following the completion of a consultation process with market players, which process is due to be launched in the near future.