Wondering what 2022 has in store, in terms of the MFSA’s main supervisory and regulatory priority areas?
The annual publication of the MFSA’s ‘Supervision Priorities’ document is always a good source for the insurance sector, providing (re)insurance undertakings and intermediaries with an opportunity to better understand the areas to focus on and dedicate resources
It is evident that the MFSA is continuously striving to align its supervision priorities with European Supervisory Authorities’ (ESAs) activity and key European and national legislative developments, whilst also factoring in any major events occurring throughout a given year.
In fact, at the start of the COVID-19 pandemic, we saw MFSA’s priorities being shifted towards ensuring business continuity and stability, together with mitigating the impact on consumers of financial products and services. Furthermore, in the recent months, we have seen MFSA focusing on ESG factors, digitalisation and financial innovation and the importance of continuously shaping Malta’s reputation as a jurisdiction for serious operators.
In 2022, the MFSA has identified the following priority areas for the insurance sector.
- Corporate governance
- Conduct of Business
- Outsourcing
Corporate governance
Year after year, corporate governance remains a key focus area for MFSA across all sectors. The main objective is to ensure that authorised persons, including insurance players, are continuously working towards raising corporate standards and having governing bodies and senior management embed them within the firms’ culture.
Following the publication of the ‘Feedback Statement on the Stakeholder Consultation on Revisiting the Corporate Governance Framework’, the MFSA has published a draft Corporate Governance Code applicable to all authorised persons, which incorporates a number of principle-based rules intended to guide entities towards raising the bar in terms of the adoption of good corporate governance practices. The said Corporate Governance Code is still subject to consultation – however, licence holders should start familiarising themselves with the content and start planning how the various principles should be incorporated into current corporate governance practices.
Conduct of Business
Overall, protecting consumers remains a key strategic objective for the MFSA, cutting across all sectors.
Specific to the insurance sector, the MFSA will once again be focusing on the area of product oversight and governance – this time, with a view to assess whether policyholders are being provided with value for money insurance products and whether these meet expectations vis-à-vis the risk covered by the premia paid. More specifically, the MFSA will be reviewing:
whether manufacturers assess the design of their insurance products prior to manufacturing them, to ensure that there are easily understood and offer value vis-à-vis the identified target market;
whether insurance manufacturers have adequately performed product monitoring and review activities, with a particular focus on those products whose features and target market needs, objectives and characteristics have been impacted due the COVID-19 crisis, leading to a significant change to the risk profile; and
exclusions forming part of certain types of policies and their impact on the value for money for consumers.
In addition to the above, the MFSA will also be focusing on insurance distribution activities related to agents, focusing on assessing whether existing sales processes comply with applicable regulatory requirements.
Outsourcing
Throughout 2022, the MFSA also intends to review (re)insurance undertakings and intermediaries’ outsourcing arrangements.
By doing so, the MFSA is looking to assess whether the outsourcing of key and critical/ important operational functions and activities, may lead to material impairment of the quality of the licence holders’ system of governance, increase in operational risk, impairment of the MFSA’s ability to monitor licence-holders’ compliance with their obligations, as well as whether such outsourcing arrangements undermine continuous and satisfactory service to policyholders.
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Our Firm is well placed to assist you with ensuring effective compliance with applicable regulatory requirements and supporting your organisation when it comes to facing regulatory visits and inspections.
Should you require further information or any assistance in this regard, please do not hesitate to contact us.
This document does not purport to give any legal, financial or tax advice.
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