Malta: Malta's Proposition To The Insurance Sector

One may well ask, with so much competition, what can Malta offer which distinguishes it from other jurisdictions? During the past years, Malta's economy has flourished into one of the most dynamic economies within the European Union (EU). It has recorded positive and strong economic performance.European Commission Spring 2019 Economic Forecast for Malta estimates real GDP growth for 2018 at 6.6% and unemployment rate at 4%.This robust performance has contributed to Malta being re-affirmed with high credit ratings from rating agencies such as Standard and Poor's, and Fitch and Moody's.In the financial services sphere, Malta has been making a name for itself as a strong and reputable jurisdiction.

Statistics put the contribution of the financial services sector to a gross value added of 11% and rising. The financial services sector also accounts for more than 10% of Malta's employment. The number of licensed financial services entities exceeds the 2,000 mark.

Turning the focus to insurance, since joining the EU in 2004, Malta has experienced significant growth in its insurance industry, in terms of both volume and also the type of structures being set up.The sector has grown from a handful of domestic insurance companies and insurance agents of foreign underwriters into an international industry, operating across EU Member States and in other international markets. The sector comprises insurance companies carrying on both life and non-life business, subsidiaries of major international insurance and reinsurance groups, and also a significant number of insurance distributors.

The number of insurance undertakings licensed in Malta has risen significantly in the past 10 years from 41 in 2008 to 67 as at the end of March 2019.One fourth (16) of the licensed insurance undertaking are protected cell companies with 54 approved protected cells.Gross written premium in 2017 reached €4.2 billion, a surge of more than 10% when compared to 2016.The number of insurance intermediaries, including insurance managers and other service providers, has also continued to grow in order to support the increase in newly set up companies.

A growing number of law firms, accountancy firms, and other professional service providers are also specialising in insurance. We see important international names setting up insurance operations in Malta such as Munich Re with two insurance companies set up, Peugeot with four insurance companies and two insurance intermediaries set up, and Renault with two insurance companies set up.

But what is underpinning this growth? What are the factors which are driving this positive and dynamic environment which Malta is experiencing in its insurance sector?

Malta presents several opportunities to companies considering setting up an insurance operation in another jurisdiction or re-domiciliation.

Examples of such opportunities are:

Protected and Incorporated Cell Company StructuresProtected cell company (PCC) and incorporated cell company structures are considered to be the 'crown jewels' of Malta's insurance sector. Malta is the only EU Member State which has legislation in place allowing for the establishment of such structures.The flexibility and cost-effectiveness which such structures offer make them a very attractive vehicle to set up insurance operations in Malta. A testament to such popularity is the increase, year on year since the legislation came into force in 2004, in the number of insurance undertakings being established as protected cell companies, which has reached 16 as at end of March 2019 with 54 approved protected cells.Taking advantage of the fact that the Maltese PCC legislation also extends to insurance managers and insurance brokers, Malta is also experiencing growth in the establishment or conversion of such intermediaries into a PCC structure – presently there are 3 insurance management companies and 3 insurance broking firms set-up as PCCs.

For those who may not be familiar with cell company structures, the concept is based on the limited liability company model, the aim of which is to segregate assets and liabilities of separate operations under one single corporate structure.

There are many strong points which the PCC structure offers including flexibility, capital efficiency, cost efficiency and economies of scale.The significant opportunities presented by a PCC structure is evidenced by its diversity of use.The following are tried and tested practical applications of PCC structures:

a) Incubator for innovative business models such as technology-driven start-ups;

b) Insurance operators looking to mitigate the challenges of Solvency II;

c) Run-off specialists segregating different legacy portfolios into separate protected cells;

d) An effective solution for UK insurers and intermediaries writing risks in the EU to retain access to such markets in a post-Brexit environment by allowing them to continue transacting insurance business through the ownership or use of protected cells in existing PCC structures;

e) Insurance intermediaries seeking to evolve their business model into that of an insurer.

2. Re-domiciliation
Pursuant to the legal framework introduced in 2002 entities constituted outside Malta can be re-domiciled to Malta. This is an efficient way of migrating an insurance company to Malta without having to dissolve and re-incorporate it, thus ensuring continuity of performance and minimum inconvenience to policyholders.

3. Passporting rights into the European UnionOn the basis of the single market principle, the licence issued to insurance undertakings and insurance distributors setting up their head office in Malta is recognised throughout the EU and opens the door to the European market, by virtue of which operators are able to undertake cross border business within the EU on a services basis or by establishing a branch without the need to obtain an individual licence in each EU Member State.

4. Robust Regulatory EnvironmentFrom a regulatory standpoint, we see Malta obtaining positive recognition of its regulatory framework and approach.This is evidenced in two separate reports published by the European Insurance and Occupational Pensions Authority (EIOPA) in recent months on the results of the Peer Review on probity of board members and qualifying shareholders and of the Peer Review on key functions. These EIOPA reports evidence and support Malta's efforts in having a robust and rigorous regulatory framework whilst at the same time seeking to deliver an efficient and effective process.

Furthermore, the Malta Financial Services Authority (MFSA), Malta's single financial services regulator, is considered by market practitioners as an accessible and efficient regulator which encourages an interactive licensing process involving engagement at an early stage of the application journey, encouraging preliminary discussions promoting a transparent dialogue to understand the applicant's business model, strategies and underlying risks, and also to explain the regulator's expectations.MFSA's commitment to reach out and engage with market practitioners was recently evidenced during a regulatory briefing session organised by MFSA for the financial services industry where MFSA outlined the changes within its internal organisational structure, its supervisory priorities and also a number of initiatives aimed at enhancing further the authorisation process.

5. p>Blockchain, Fintech and Crypto
Malta has embarked on a very ambitious and unique project of implementing a legal and regulatory framework for the blockchain space through the enactment of three new pieces of legislation: the Malta Digital Innovation Authority Act, the Virtual Financial Asset Act and the Innovative Technology Arrangements and Services Act.This framework aims at providing the legal basis for Malta's vision as the Blockchain Island.

In conclusion, amid today's reality of ongoing uncertainty, Malta offers a breath of fresh air with several value propositions:

  • for those who wish to operate in a robust, forward looking and dynamic environment;
  • for those seeking a solid legislative framework;
  • for those looking for continued access to the European markets;
  • for those who want to unlock access to a diverse and unique choice of company structures.

These opportunities are a reality and are there to be grasped.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
MFSA – Malta Financial Services Authority
EMD Advocates
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
MFSA – Malta Financial Services Authority
EMD Advocates
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions