Malta has made its mark on the European risk management community and captive industry, by hosting this year's Federation of European Risk Management Associations (FERMA) risk management seminar. The biennial seminar takes place in alternate years from the FERMA forum exclusively for risk managers, where they have the opportunity to focus on their professional interests and concerns. Big topics included digital risk, resilience, business continuity, insurance programmes and captives, leadership as well as recognition of the risk management profession. A short video showing the event's atmosphere can be found at https://youtu.be/7od11qdZHoM
Speaking on the opening day of the seminar, Malta's Prime Minister Dr Joseph Muscat said that Malta has gained a strong reputation as an insurance domicile in Europe. Insurance premiums written on the island have increased from €596m to €3.8bn over the last decade.
This has been driven by innovative regulation such as PCC legislation, the only full EU member state to have it. Dr Muscat also noted that Malta has recently extended legislation to securitisation vehicles and reinsurance special purpose vehicles, making it the first EU member state to adapt the cell structure for insurance-linked securities (ILS) transactions. He said that Malta's economy is vibrating with success and predicts 2016 will be another year for growth of insurance companies. Dr Muscat added that in Malta, regulators will continue to work with the industry to create new structures enabling further opportunities.
Keynote speaker and Swedish entrepreneur Ola Ahlvarsson combined his hands on experience of building entrepreneurial businesses with a mission to convey knowledge and a belief that every organization can and should be entrepreneurial, since if they stand still they can only go backwards. Ola expressed that intrapreneurship is the most important form of entrepreneurship. Intrapreneurship means giving employees authority to act as entrepreneurs within the company, being allowed to take a degree of risk to develop new products and services.
On the opening of the seminar's second day, Malta's Minister for Finance Professor Edward Scicluna stated that while risk needs to be carefully managed, risk aversion in itself can potentially stifle investment especially in relation to emerging markets. Minister Scicluna recalled how the European Parliament had devised strict financial and anti-money laundering regulations in order to avert banking crises in the future, however, in doing so, these same regulations are so tight, that they can hinder investments.
There is rising demand for capital market risk transfer solutions, according to an expert panel held during the seminar, as ILS markets mature and appreciation of the potential offered by this uncorrelated risk by pension and hedge funds grows. Several examples of how these are being used by corporates and government entities were discussed. One such case was non-damage business interruption cover for a theme park in Tokyo, where cover was triggered when an earthquake occurred. The pay-out was parametric, as in the majority of such structures, rather than indemnity-based and depended upon the scale of the quake within specific zones measured by the Japanese earthquake agency. Such cover would be hard to find in the traditional insurance market.
Malta enabling innovation in captives and cells
MARM organised a session offering delegates practical insight from two perspectives as to how local insurance companies have navigated through Solvency II and benefited from it.
Dorothy Kim Vella, who heads the risk, internal control and compliance function of RCI and is also a MARM board member, set out how an insurer owned by a motor vehicle financing company and domiciled in Malta has approached Solvency II implementation and described the transformative process resulting in optimised processes, stronger governance and reinforced risk awareness. Participants were taken through the maturity cycle of the company's risk management framework resulting from its obligations under Solvency II.
Later, Ian-Edward Stafrace, MARM president and Atlas group's chief risk officer, discussed the use and implementation of protected cell structures through real live examples. Stafrace explained that a PCC is a single legal entity with a non-cellular core. Although it is licensed like any normal insurance company, owners outside of the company can set up their own ring-fenced cells within that company. While each cell's assets are always protected by law from liabilities of the core or other cells, as part of a single legal entity such benefit under all Solvency II pillars from reduced capital requirements and significant cost burden sharing on governance and reporting. Due to Malta's positioning in the EU and
direct access to the single market, Stafrace said that a number of cells being set up in Malta are also tapping into consumer business for diversification and additional revenue. He also used an example of a captive cell model, wherein a supermarket that owns a large fleet of vehicles created a cell to insure its motor fleet directly, without the need of a fronting insurer.
Benchmarking Survey: Risk managers developing strategic role and wider view of risks
The seminar also served to publish and discuss FERMA's 8th biennial European Risk and Insurance Survey. Amongst its findings it concluded that European risk managers are taking a more strategic role in their companies. The President of FERMA Jo Willaert commented: "From this survey, we see that risk managers are moving into a position where they are helping embed risk management into the business model and culture of their organisations. They are taking an enterprise wide vision of risks, including the wider business environment, and the majority report to a chief officer or the board." The report and related presentations are available at:
The programme encompassed additional sessions within the framework of the conference themes: leadership, knowledge and education.
The risk manager-only roundtable workshops, moderated by FERMA board members and other risk managers, covered five very topical issues:
- Financial transparency including implications for captives
- Risk management in small and medium sized companies and how it relates to large corporates
- Enterprise Risk Management (ERM) and risk leadership
- Digital risks across a wide spectrum
- Resilience and business continuity
The UK risk management association Airmic organised a session on risk leadership and the risk manager's professional contribution on the boardroom agenda. It set out some of the issues and offered practical ideas and suggestions on how risk managers can seize opportunities. The session focused on how risk management can be embedded in the business model of the organisation and the importance of risk culture. It introduced models, tools and techniques designed for the risk manager developed in partnership with colleagues from other professions and in consultation with those who have a seat at the boardroom table.
An interactive workshop organised by the Belgian risk management association BELRIM challenged risk managers, representing the executive board of a fictional company, to respond to a live simulated major incident and its consequences. It helped demonstrate in an unconventional way the challenges posed by technology risks and connected risks such as intellectual property and reputation, and showed the benefits of scenario testing to build resilience.
First rimap® examination
The first examination under FERMA's professional programme rimap® were held in Malta during the seminar. 18 risk managers including 4 Maltese passed and were presented the first qualifications by examination. Michel Dennery, chairman of the rimap® programme, said: "The first certified risk managers will be seen in the future as the pioneers in the new standard for the risk manager's profession." Rimap® provides independent confirmation of the professional competences, experience and standards of individual risk managers. The examination is rimap®'s latest milestone following accreditation of the first six education programmes, which supported by MARM included the University of Malta's Bachelor of Commerce (Honours) in Insurance and Risk Management. Isabel Martinez Torre-Enciso, vice-president of FERMA and member of the rimap® steering committee commented: "The next step is to refine the rimap® examination on the basis of experience so that it reflects the complexity and diversity of the profession, and then to make the examination available for as many risk managers as possible".
Jo Willaert closed the seminar by inviting attendees to the FERMA Risk Management Forum 2017, which will be held in Monte Carlo between 15 and 18 October next year where the theme will be 'Risk Managers in Pole Position' conveying images of risk, performance, anticipation, prevention, crisis management, team spirit and new technologies.
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