Protection of policyholders

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The Protection and Compensation Fund is regulated by the Protection and Compensation Fund Regulations 2003 issued under the Insurance Business Act (Cap. 403). The consolidated text of the Regulations is available from here.

The purposes of the Fund are the following:

  • To pay for any claims against an insurer which have remained unpaid because the insurer became insolvent. These claims must be in respect of protected risks situated in Malta or protected commitments where Malta is the country of commitment; and
  • To compensate victims of road traffic accidents in certain specified circumstances.

The Protection and Compensation Fund Regulations provide for the setting up of a Management Committee. The Management Committee is responsible for the administration and general control of the Fund.

The Management Committee may be contacted as follows:

Address:     The Chairman 
                   Protection and Compensation Fund 
                   c/o Malta Financial Services Authority 
                   Notabile Road
                   Attard BKR3000

The Management Committee is required to prepare and publish audited financial statements of the Fund on an annual basis.

Excluded from the application of this section are the following:

The Fund makes payment only in two circumstances:

  1. whenever an insurer is unable to meet its obligations arising from a claim under a policy of insurance covering a protected risk or a protected commitment; or
  2. whenever the insolvent insurer is at the time that it is unable to meet its obligations, servicing or running-off the business of insurance it was licensed to carry on under the Insurance Business Act.

Payment is also conditional on the fact that the insolvent insurer is being struck off the register or definitely wound up.

Payment may only be made to a qualifying person. In the case of long term business protected commitments, payments shall be made to every qualifying person.

In the case of general business protected risks, payments shall be made to the following:

 

  • every qualifying person who is an individual; and
  • every non-corporate body or association of persons if all such persons are individuals.

In the case of protected liability which must necessarily be covered by compulsory insurance legislation, payment shall cover the all such liabilities. However in respect of all other protected liabilities, payments shall be made as follows:

  1. In the case of long term business protected commitments payment shall be limited to 75% of actuarial valuation of contracts of insurance remaining unpaid at the time the company concerned ceased to carry on business or €23,293.73 whichever is the less;
  2. In the case of general business protected risks payment shall be limited to 75% of liabilities incurred remaining unpaid or €23,293.73 whichever is the less.

IN EACH CASE, THE TOTAL AMOUNT OF PAYMENTS MADE OUT OF THE FUND SHALL NOT EXCEED €2,329,373.40.

Payment shall not be made in the following cases:

  1. where the claim is in respect of unearned premiums;
  2. where the claim is by or in respect of a person who is a shareholder of the insolvent insurer and holds 20% or more of the issued shares of such insolvent insurer;

Where the Management Committee deems that the applicant is not entitled to compensation in whole or in part, it shall inform the applicant in writing of its opinion and the reasons therefor.

In considering compensation to any applicant, the Committee shall take into account any other amount of compensation which has been paid to the applicant in respect of the same liability under the Insurance Business Act or any other law. In calculating the amount in respect of which the insurer is unable to meet its liabilities, the Committee shall deduct from the insolvent insurer’s liability any such amount or other compensation paid.

NO PAYMENT SHALL BE MADE TO THE APPLICANT UNLESS AND UNTIL LATTER HAS ASSIGNED TO THE FUND ANY RIGHT TO PAYMENT TO WHICH HE MAY BE ENTITLED WITH REGARDS TO THE SAME LIABILTY. FURTHERMORE, WHERE SUCH LIABILITY IS COVERED BY REINSURANCE, THE FUND SHALL ALSO BE ENTITLED TO PURSUE ANY REINSURANCE RECOVERIES AS IF IT WERE THE INSOLVENT INSURER.

The fund shall make payments, if there is no insurer concerned, out of its funds set aside for the payment of compensation relating to protected liabilities, to a person/s in whose favour a judgement in respect of any civil liability which is required to be covered by a policy of insurance under compulsory insurance legislation is obtained against any person/s and:

  • either at the time of the accident giving rise to such liability a policy of insurance as required by legislation is not in force; or
  • such policy is ineffective for any reason other than the inability of the insurer to make payment; and
  • any such liability is not satisfied in full within 28 days from the date upon which the person/s in which favour such judgement was given became entitled to enforce it.

The Regulations prescribe specific conditions which have to be fulfilled for the fund to accede to payment.

“INSURER CONCERNED” CONCEPT

The terms “insurer concerned” signifies the insurer who at the time of the accident which gave rise to a civil liability was providing insurance against such liability in respect of the vehicle arising out of the use of which the liability of the debtor was incurred.

An insurer is not an “insurer concerned” in the following cases:

  1. when the insurance was cancelled before the date on which the civil liability was incurred by agreement between the parties to the insurance and with the prior written permission of the Commissioner of Police; or
  2. when the civil liability was incurred after the cancellation of the insurance under a power of cancellation contained in such insurance and after notice of such cancellation was given to the Commissioner of Police;
  3. when the insurance has ceased to be operative before the date on which the civil liability was incurred by reason of a transfer of interest in the vehicle which the insurance purports to cover; or
  4. when the civil liability was incurred after a decision of a competent court which has become res judicata declaring the insurance void or unenforceable; or
  5. when the civil liability was incurred after the date on which the insurance has, by its term, lapsed.

No payment shall be made where the judgement relates to a vehicle, the use of which is covered by a security or by a deposit in accordance with compulsory insurance legislation, unless there is also in force in respect of such vehicle, a policy of insurance purporting to cover such use of the vehicle.

The Protection and Compensation Fund covers the following additional cases of compensation:

COMPENSATION IN RESPECT OF DEATH OR BODILY INJURY TO ANY PERSON THROUGH USE OF A MOTOR VEHICLE

The Fund shall make payments in respect of civil liability to any person caused by or arising out of the use of a motor vehicle if:

  • the applicant for payment is unable to trace any person responsible for the civil liability;
  • the civil liability was caused in such circumstances that on the balance of probabilities the unidentified person would be liable to pay damages to the applicant in respect of such civil liability;
  • the liability of the unidentified person to pay damages to the applicant is one which is required to be covered by insurance under compulsory insurance legislation;
  • the civil liability was not caused by a deliberate attempt to run down the deceased or injured person; and
  • the application for compensation is made in writing within two years from the date of the event giving rise to the civil liability.

However, payments relating to damage to property shall only be made where the Fund has paid compensation for significant personal injuries to victims of the same accident in which damage to property was caused by the use of a vehicle by an unidentified person. In such cases, the Fund shall apply an excess of € 500 for which the person suffering such damage to property may be responsible.


Payment for compensation shall be of such amount as a court in Malta applying Maltese law would assess as damages which an applicant would have been entitled to recover from the unidentified person in respect of that civil liability, if proceedings to enforce a claim for damages in respect thereof had been successfully brought by the applicant against the unidentified person.

COMPENSATION IN RESPECT OF CASES ARISING FROM THE USE OF VEHICLES STOLEN OR OBTAINED BY VIOLENCE

In the case of an accident arising from the use of a stolen vehicle or a vehicle obtained by violence and giving rise to civil liability, compensation by the fund to the injured party shall be made in the following circumstances:

  1. persons who do not have express or implied authorisation to drive the vehicle; or
  2. persons who do not hold a licence permitting them to drive the motor vehicle concerned; or
  3. persons who are in breach of the prescribed technical requirements concerning the condition and safety of the motor vehicle concerned,

In the case where civil liability relates to damages to property, the Fund shall apply an excess of €232.94 with respect to each and every payment.

No payment of compensation in respect of civil liability may be made under the regulations where at the time of the accident:

  • at the time of the accident, the person:

    1. being the owner or driver was using, or causing or permitting the vehicle to be used, without there being in force in relation to such use a policy of insurance or such security as would comply with the compulsory insurance legislation, knowing or having reason to believe that no such policy or security was in force; or 
    2.  was allowing himself to be carried in a vehicle knowing or having reason to believe that the vehicle had been taken without the consent of the owner or other lawful authority; or
    3. who sustained the death, bodily injury or damage to property, voluntarily entered the vehicle which caused such death, bodily injury or damage when the Fund can prove that such person knew it was uninsured;
    4. the death or injury in respect of which compensation would otherwise be payable occurred before 1st July 1986.



Last updated: Sep 07, 2016