On 26 August 2016, the Malta Financial Services Authority (the
"MFSA") issued a consultation document
proposing the introduction of external auditing requirements for
certain quantitative reporting templates that will form part of the
Solvency Financial Condition Report (the
The SFCR is an annual report required under Pillar III of
Solvency II and includes both quantitative and narrative reporting.
This report will be disclosed to the public and also submitted to
the MFSA. Although Solvency II does not impose any auditing
requirements in relation to this reporting, the European Insurance
and Occupation Pensions Authority
("EIOPA") had issued a paper in June
2015 where it noted that external audit of public disclosure
reporting may serve to ensure a high quality in the
The MFSA is therefore proposing that certain templates be
included in the SFCR will require external audit by an approved
auditor in terms of Article 21 of the Insurance Business Act. This
may be the statutory auditor appointed by the re/insurance
undertaking. The selected templates are those that relate to the
Solvency II Balance Sheet, Own Funds, Capital requirements (MCR and
SCR) and Technical Provisions. The approved auditor will be
required to draw up a report which includes a reasonable assurance
opinion on the said templates. Importantly, although the SFCR is
made public, the external audit report will not be made publicly
available but only submitted to the MFSA.
This audit requirement will apply to both individual insurance
undertakings as well as groups, where applicable. Undertakings
using full internal models will be excluded in view of the fact
that such models are subject to internal validation and prior MFSA
approval. For those undertakings using a partial internal model,
the audit requirement will apply to those elements in the
quantitative templates which are calculated on the basis of the
Standard Formula modules only.
The MFSA intends to apply these audit requirements with respect
to the financial year ending on or after 30 June 2017 and therefore
this will not apply to the initial submissions of the SFCR which
are due in respect of financial year 2016.
The consultation period has now closed, and therefore it is now
up to the MFSA to issue further advice.
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