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19th of May 2013

Malta issues pillar II risk management guidelines

Vicky Beckett 07/08/2012

Malta has issued a guidance paper on the risk management requirements of Solvency II’s Pillar II.
 
The Malta Financial Services Authority (MFSA) believes the issue deserves a separate paper as the requirement for a robust Risk Management System (RMS) underpins much of the proposed Solvency II regime.
 
The paper provides a detailed perspective of the risk management requirements and continues to support (re)insurers in their preparations for the Solvency II implementation.
 
The report states: “Similar to all other Pillar II requirements, it is strongly advisable that undertakings consider the implications of the risk management requirements.”
 
The guidelines stress the importance of risk-based proportionality, so that systems of governance are designed in a manner that reflects their operations whilst still satisfying the regulatory requirements.
 
The MFSA have said: “Proportionality should not only be related to the size of an undertaking but also to the ‘nature, scale and complexity’ of its business model/strategy.
 
“Therefore a small undertaking with a complex business model/strategy may be faced by more risks than a large undertaking with a simple business model/strategy.”
 
Captives will be required to show the MFSA the assessment performed, explaining the criteria used when applying proportionality.

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