Malta as the domicile of choice for insurance vehicles in Europe

Danielle Hermansen from PKF Malta discusses how Malta can and is fully utilising its potential in the insurance industry.

PKF is supporting Finance Malta in its quest to promote Malta, by organising a conference on the 29th March 2016 which will focus on what Malta can offer to US Captives seeking to tap into their European risks. It will showcase benefits of setting up in Malta as the domicile of choice.

Finance Malta, as a private/public partnership is geared to promote the sector, mindful that it faces tough competition fielded by established jurisdictions, yet it succeeds to attract international companies seeking an alternative EU jurisdiction traditionally offered by tried and tested places such as Dublin and Guernsey.

The conference venue is the prestigious Bar Association building located at 42 West 44th Street in New York, USA.

One may well ask, with so much competition, what can Malta offer in this sector which sets it apart from other centres such as the Isle of Man, Channel Islands, Gibraltar and the Caribbean stalwarts such as Bermuda, Barbados and Cayman Islands? The answer is: flexible and fair regulation, a competitive fiscal regime, over 70 double tax agreements and all the financial services support available at a high professional level.

It is common knowledge that an insurance vehicle domiciled in an EU member state can provide cover for risks across the entire EU, subject to local regulatory requirements and thanks to this facility, most captives take advantage of the EEA freedom of passporting to write insurance directly without the need of a fronter.

Malta can be said to have a firm advantage for insurance companies continuing and/or seeking to establish themselves in Europe.

Malta with its respectable number of 62 insurance companies, nine affiliated, 12 PCC’s with 27 cells and eight insurers of domestic origin, is pushing ahead to attract quality not quantity, but of course the numbers are important and no effort is to be spared to expand the internal market. It goes without saying that, a number of jurisdictions, are active to pursue captive owners and reinsurance companies encouraging them to redomicile, so one may ask in the context of Malta, why are the numbers so modest and what can be done to overcome the challenge to attract more investors.

The answer is that as an EU member state and EIOPA member, Malta has contributed to the development of Solvency II and its expertise has grown thanks to the open dialogue with the local one-stop shop authority (MFSA).

A US captive owner wanting to set up an insurance vehicle to insure its European risks or enter the insurance linked securities market, will find that it is mandatory to set up in Europe. They can easily set up vehicles including cells as fronting facilities in Malta in order to reduce their EEA fronting costs and reinsure back to the US.

Typically, a non-EU captive would use a licensed insurance company as the fronter, to write business in EU and the captive will then reinsure the fronter. However, this has its disadvantages. There are no general guidelines in EU domiciles which limits or controls the amount and type of collateral that must be provided to a fronting insurance company. This collateral is trapped money which may be utilised elsewhere, so many do find that the cost of setting up a cell in a EU domicile would be more competitive, whilst ensuring full control on it as a risk management tool.

Captive owners therefore need to assess which solution is best to reduce the amount of collateral that become trapped and the ongoing costs of fronting arrangements. It is common to expect that the demand for collateral will be driven by the fronter’s requirements, based on its own risk assessment and invariably will be a matter of commercial negotiation between the parties. It is also a common knowledge that fronting partners assess offshore differently to onshore captives.

This is a potential market which Malta needs to tap into, to establish itself as one of the domiciles of choice within Europe for captive insurance and reinsurance companies. Operating from Malta, means utilising the freedom to provide services to companies that operate between EU member states, thus it can insure or provide insurance services to the vast European insurance market.

Malta can be said to have a firm advantage for insurance companies because it enjoys the enviable position in the entire EU to provide Protected Cell Companies, Cells that do not suffer additional financial costs associated with both establishing and running of an insurance vehicle. The island is fully equipped to cater for PCC structures, since we have been the forerunners and only full EU member to have legislated these structures in the Solvency II arena in Europe, and one might add will continue to introduce innovative products in the near future. The PCC concept has also been taken further to include insurance intermediaries and now SCC (Securitisation Cell Companies).

Setting up and running these companies in Malta is reputed to be on average 60% less compared to other EU jurisdictions.

Malta has proven itself, by the existence of a growing captive and (re)insurance industry, this also thanks to its openly accessible regulator, who has been proactive in understanding the needs of the insurance business community and embraces regulatory innovation.

For sponsorship opportunities or to attend this event, kindly contact Anna Golis, Research & Development Manager on agolis@pkfmalta.com or call us on +356 21 484 373.

Biography: Danielle Hermansen has been in the insurance industry for 15 years, working both as an underwriter and broker, specialising in commercial business. She has recently worked in the captive insurance management industry and is well versed in the process of setting up insurance vehicles.

PKF Malta has a dedicated insurance team providing specialized services and technical solutions. We will be your partner in setting up your Solvency Two compliant insurance vehicle in Malta, from the initial feasibility stages to meeting with the regulator, financial projections, license application and selection of service providers as required.

PKF’s advice is tailored to each client, going beyond mere compliance to incorporate a whole range of flexible services. Services such as internal or external audit, financial reporting, and risk management advice, give your business the edge you need to manage effectively and achieve your objectives.

Danielle Hermansen

Danielle Hermansen

Director at PKF Malta

Email: dhermansen@pkfmalta.com
Tel: +356 21 493 041

Danielle Hermansen ACII Chartered Insurance Risk Manager, Mgt (Maastricht), is an Insurance Specialist at PKF Malta. She has been in the insurance industry for 15 years, working both as an underwriter, broker and insurance manager, specializing in commercial business. She has more recently worked in the captive insurance management industry and is an ACII Chartered Insurance Risk Manager.

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About Danielle Hermansen

Email: dhermansen@pkfmalta.com
Tel: +356 21 493 041
Danielle Hermansen ACII Chartered Insurance Risk Manager, Mgt (Maastricht), is an Insurance Specialist at PKF Malta. She has been in the insurance industry for 15 years, working both as an underwriter, broker and insurance manager, specializing in commercial business. She has more recently worked in the captive insurance management industry and is an ACII Chartered Insurance Risk Manager.