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17-09-2010 | Malta: your home for insurance and reinsurance business

Malta’s history dates back to about 5,200BC when the first settlers arrived on Malta from Sicily. Subsequent colonisers over the centuries included the Greeks, Phoenicians, Carthaginians, Romans, Byzantines, Arabs, Normans, the Knights of St. John and finally the British until Malta become an independent State in 1964 and ten years later a Republic. Malta became a member of the European Union in 2004 and joined the Euro zone in 2008.

Malta is geographically located in the middle of the Mediterranean Sea, 60 miles south of the Italian island of Sicily and 221 miles north of Libya. It is connected to major cities in Europe, North Africa and the Middle East, with flights leaving daily to most international airports. This enables the business community to commute comfortably, regularly and with ease. The official languages are Maltese and English, whilst Italian is also spoken fluently. French and German are also taught at schools.

The University of Malta is one of the oldest Universities in Europe dating back to 1592. The University offers a diverse spectrum of degrees, including law, accounting, banking and finance, I.T. and more recently, insurance. This allows for a large human resource pool available to service the industry. In addition, most university students (especially those following the accounting and insurance degree) are offered stages by dominant insurance companies in the local market as well as leading auditing firms thus enabling hands-on work experience during the course of their studies. In addition from an insurance perspective, the UK Chartered Insurance Institute has been present on our island for a considerable number of years with the result that Malta can boast quite a large number of qualified insurers.

Financial Services Regime

The Maltese government has enacted a series of laws in a process that spans over two decades aimed towards promoting Malta as a financial centre of repute. Malta has in place stringent anti money laundering and terrorist financing legislation in line with European Union and International obligations. The Malta Financial Services Authority has in place a number of Memorandums of Understanding with other major financial centres, such as China and Dubai. In addition Malta avails itself of over 50 double taxation agreements with one of the most recent being with the USA.

Other advantages related to Malta as an insurance domicile are being detailed hereunder.

  • Malta has been able to provide consistent and reliable legislation, together with a stable and forward looking regulatory regime. The management flexibility combined with a pro-active regulatory approach has started to, and is intended, to continue to pay dividends.
  • Insurance companies in Malta can be incorporated either as third party insurers or reinsuers or as affiliated (captive) insurers or reinsurers. In addition Malta is the only EU domicile to offer Protected Cell Company legislation. The biggest benefit of this structure is the pooling of assets by various stakeholders (cell owners) into one vehicle (the core), with the assets of each cell owner being protected from the liabilities of other cell owner. Capital requirements are considered for the whole structure, thereby allowing the cell to benefit from the capital in place at the core.
  • Through Malta’s membership in the EU, insurance companies incorporated in Malta have full access to all European markets passporting within the EU either under the freedom of services legislation or the freedom of establishment legislation.
  • Under local legislation, companies can opt to operate in a currency other than Euro. There are, in fact, a number of GBP denominated companies who passport into the UK and whose main market is, in fact, the United Kingdom. This system enables the company to match its assets and liabilities and to avoid profit leaks through currency exposures. Additionally, since most currency and banking transactions happen in the denominated currency, this also facilitates reporting and record keeping.
  • Malta’s tax regime is a transparent and simple one. Maltese companies are taxed at the current corporate taxation rate of 35% of taxable profits. However at shareholder level certain refunds exist at dividend distribution stage resulting in an overall very attractive tax rate in the hands of the shareholders.

Minimum Solvency Capital Requirements

Given Malta’s compliance with EU regulations, the minimum capital requirements follow the EU Solvency I directives as follows.

Long Term Business

Mutual €2,250,000
Pure reinsurer €3,200,000
Affiliated (captive) reinsurance company €1,100,000
Other cases €3,500,000

General Business

Insurer - all classes except liability €2,300,000
Insurer – all classes including liability €3,500,000
Affiliated (captive) reinsurer €1,100,000
Pure non-affiliated reinsurer €3,200,000

Above minimum requirements are subject to , company specific solvency considerations (eg level of business being written and overall claims experience of the company) could dictate a higher capital requirement.

Incorporating an Insurance/Reinsurance Company in Malta

All insurance companies in Malta are regulated by the Malta Financial Services Authority. Most insurance companies looking to domicile in Malta have used the services of regulated insurance managers in order to help them obtain a licence. Certain of these companies have subsequently continued to use the services of the insurance manager for both their front office and back office operations, whilst others have chosen to employ their own personnel, retaining the insurance manager for the more technical matters, including matters of a compliance nature.

The application for the license is a straight forward one. The application must be accompanied by a Scheme of Operations (SOO). This will include the strategy for incorporating the entity, which considers the marketing and business and operational risk strategies (which will include insurance and investment strategies) of the company, a business plan inclusive of 3 year projections as well as any use of reinsurance (reinsurance plan) or outsourced services. In the case of the reinsurance or outsourced services, draft agreements/contracts would also be included within the SOO. The SOO will also be accompanied by detailed information about the promoters and key management personnel of the entity to be licensed.

The regulator may take up to three months to consider granting a licence to a reinsurer and up to six months to consider granting a licence to an insurer from the date the application is made to the Regulator.

IIMS at a glance

IIMS forms part of the Middlesea Insurance Group, the leading insurance group in Malta. Middlesea Insurance p.l.c. is listed on the Malta Stock Exchange and its strategic shareholders include Corporacion Mapfre, Munich Re and Bank of Valletta p.l.c. Incorporated in 1991 with the aim of servicing companies within the Middlesea Group and third party companies interested in operating from Malta, IIMS has now focused its operations purely on third party business. The company’s qualified and experienced personnel include insurers and accountants, in addition to personnel qualified in the risk management and compliance fields.

IIMS offers a whole range of services including:

  • Feasibility studies (viability for a captive or insurance company, including market research, product research and ideal vehicle study)
  • Pre-incorporation services (including preparation of the Scheme of Operations, business plan and application for license, incorporation of the company)
  • Insurance underwriting and claims management administration
  • Accounting services
  • Cash Management services
  • Statutory and Regulatory reporting
  • Regulatory Compliance
  • Company Secretariat
  • Risk Management
  • Payroll services
  • Administration services

IIMS’s licensing statement