The Malta Financial Services Authority has amended Insurance Rule 1 of 2007 (Own Funds of Companies Carrying on Business Insurance) by inserting a new article concerning capital contributions.
This new Article 6 provides that capital contributions involving insurance companies are permitted as long as the following minimum conditions are satisfied:
- the memorandum or articles of association of the company concerned permit it to accept capital contributions from time to time ,
- the capital contribution is covered by a binding agreement,
- it is fully paid in, made in the nature of an unconditional transfer of funds, it is unfettered and irrevocable, it does not give rise to a credit in favour of the contributor and is free from any servicing costs or charges,
- it is classified as an undistributable reserve in the balance sheet of the company concerned.
In addition, the company concerned may, with the prior consent of the MFSA, distribute the capital contribution or part thereof back to the contributor, provided that the capital contribution or part thereof is not used to cover the required level of own funds or margin of solvency.
The amendment is applicable as from 15 November 2013.