On November 7th, 2023, the Malta Financial Services Authority ("MFSA") issued a Circular addressing the structure and composition of the Board of Directors of certain licensed entities (the "Circular"). Directed towards Insurance Agents, Insurance Brokers, and Retirement Scheme Administrators ("licence-holders"), the Circular introduces a compelling requirement – the mandatory appointment by licence-holders of an Independent Non-Executive Director ("INED") to the Board of Directors.
The Circular refers to the Corporate Governance Code (the "Code") published by the MFSA in August 2022. The Code outlines expectations in relation to the structure of the Board of Directors of persons authorised by the MFSA to provide financial services in or from within Malta, specifying that the Board of Directors of such persons should, where practicable, be composed of a combination of Executive and Non-Executive Directors, including at least one Independent Non-Executive Director. The Code defines an INED as a non-executive director who is free from any present and past business, family or other relationship with the authorised entity, its controlling shareholder/s or the management of either that could influence the Director's objective and balanced judgement, potentially compromising independent decision-making.
The Circular now provides that licence-holders without an appointed INED on the Board of Directors must identify an individual to the MFSA which satisfies the criteria outlined in the aforementioned definition of an INED under Section 3 of the Code. The MFSA is adopting a risk-based approach, providing for different timelines for compliance, based on the nature of the licence-holder. Within six months from the Circular's issuance date, Retirement Scheme Administrators must propose an individual for the INED role and submit an online Personal Questionnaire for the MFSA's assessment and approval. The same timeline applies to Insurance Agents and Brokers generating over €5m in premium income. On the other hand, other Insurance Agents and Brokers which generate less than €5 million in premium income are being granted up to eighteen months from the Circular's issuance date to propose an INED and submit an online Personal Questionnaire for the MFSA's assessment and approval.
The Circular undoubtedly carries tangible implications for Insurance Agents, Insurance Brokers and Retirement Scheme Administrators and will require said licence-holders to strategically reassess their board compositions going forward.
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