The vast majority of insurance companies in Malta will not raise their insurance premiums, in spite of the onerous obligations they will have to shoulder because of new EU regulations.

Solvency II is aimed at ensuring that insurance companies have sufficient capital to meet their risks – much as Basel III did for banking. It is due to come into force on January 1, 2016. It covers three pillars: quantitative requirements; governance and risk management; and disclosure requirements.

A survey carried out by consultancy firm PKF Malta found that 92 per cent would not change premium prices, while only four per cent said that they would stop writing business as a result of costs. The costs for Pillar II were cited as being “material” by 48 per cent of respondents while 24 per cent said they would be “low”, with responses regarding Pillar III requirements being less onerous at 44 per cent and 32 per cent respectively.

The changes required are substantial, with almost two-thirds of the companies surveyed said they had to make “material” changes connected with risk management, and a third saying “material” changes would have to be made because of internal control systems.

The reporting systems will be enhanced as a result of the new directive and over half have been advised by the MFSA that they will need to submit both annual and quarterly information, with 12 per cent still waiting to be advised on what they will need to do.

The phasing in of Solvency II has already caused problems as the interim supervision requirements are in force, even though the existing requirements have not been eased.

In fact, 60 per cent of respondents said these were a burden, of which 20 per cent said they were a “material” burden.

However, the firms surveyed at least appreciated what Solvency II was trying to do: 91.7 per cent considered it to be an improvement over Solvency I when it came to maintaining the solvency and financial security of insurers or re-insurers. The target population focused on five main sectors: insurance principals (insurers and re-insurers), affiliated insurance companies (insurers and re-insurers) and protected cell companies. Thus the target population was that of 58 companies (some managed through an insurance manager) with the response rate being 45 per cent for firms and 71 per cent for individual companies and insurance managers.