Ivan Grech of Finance Malta discusses why Malta is one of the top jurisdictions for captive insurance
Ivan Grech of Finance Malta discusses why Malta is one of the top jurisdictions for captive insurance
Malta has been on the radar of captive owners for quite some time now with a number of large international groups opting to establish their insurance operations on the island. These include internationally famous brands such as BMW, Renault, Peugeot-Citroen, Nissan, Vodafone, E.On and many others. So, what is making Malta one of the top jurisdictions for captives?
Malta is onshore within the EU
This avoids many of the difficulties linked with offshore operations, particularly the lack of authorisation to operate within the EU. Malta’s full EU membership offers captives the right to passport its licence throughout EU and EEA states via a simple notification to regulators, leading to savings from the economies of scale of a centralised operation and the avoidance of a need for costly fronting arrangements.
Language
English is the business language on the island leading to a simpler interaction process with the regulator and service providers. Furthermore, the population in Malta has become very international with ex-pats from many different countries residing on the island. This has led to native speakers of many different languages being available if and when needed.
A single and business-minded regulator
The Malta Financial Services Authority (MFSA) is the single regulator of financial services in Malta, regulating investment business, insurance business, banking, trustee services and private pensions. The MFSA building also houses the International Taxation Unit and the Company Registry which, besides ensuring coordination between these three important bodies, provides a useful ‘one stop shop’ for practitioners and consumers alike.
The MFSA has a ‘firm but flexible’ reputation, encouraging informal discussion at all levels with insurance company stakeholders, sponsors, managers, applicants and other interested parties. The Authorisation Unit and the Insurance and Pensions Supervision Unit of the MFSA recognise the varying business techniques and numerous accounting conventions applicable in different countries where the parent companies of captives may be situated and the overall approach is generally aimed at establishing acceptable requisites tailored to meet applicants’ specific business requirements. The MFSA is considered very business-minded and Malta remains one of the top countries when it comes to efficiency in processing new applications in the shortest possible timeframe.
A preferential regulatory regime for captives
Although EU membership means that all European insurance companies are to abide by a set of standard regulatory rules, Malta recognises the particular nature of captives and offers a preferential regime with certain derogations and shorter application processing times. Malta’s experience in the field has also seen a number of captives also develop into third party underwriters, particularly for affiliated business.
An advanced legal system
Malta’s sound company law, fiscal legislation (which operates a full imputation taxation system) and insurance law are all firmly based on tried and tested UK legal principles and implement all applicable EU legislation. The Maltese courts have historically always referred to English law in matters involving insurance and reinsurance law.
Cell option ideal for smaller captives
Innovative legislation, such as the protected cell company (PCC) legislation and redomiciliation regulations, adds to the allure of the Maltese legal system. The PCC system allows companies to form their captive within a cell of an existent insurer, as these can ride on the licence and capital guarantee of the established PCC company to lower the capital needs, when compared to the minimum requirements set at law. The time required for a cell authorisation application is also reduced. PCC cells are particularly popular for smaller captives. Larger captives owners wanting to segregate different portfolios within their insured assets (such as by country or high risk from low-risk lines of business), may also benefit from setting up a PCC company and hiving off the different portfolios in different cells.
Furthermore, resource requirements are also reduced in view that most key functions (such as risk management, compliance and internal audit) would already be covered by the PCC company’s own key functions.
An extensive double taxation treaty network
Malta’s extensive double taxation treaty network covers over 70 countries including the UK, France, Germany, Italy and the US. The Maltese Government is actively pursuing additional treaties with particular emphasis on income arising from financial and investment services.
This extensive double tax treaty network makes Malta a very attractive jurisdiction for establishing captive insurance companies.
A comparatively low cost jurisdiction in the EU
As an established financial services centre, Malta is consistently topping the charts as one of the most cost-efficient domiciles for captives.
A central location and time zone
The Maltese Islands are also ideal due to their location. Malta is one hour ahead of GMT and only a short flight away from mainland Europe with most destinations covered by an extensive flight network, thereby making its location ideal for efficient and quick communication with mainland Europe.
Availability of international service providers
Captives moving to Malta will be required to appoint an insurance manager authorised in Malta, unless they are self-managed, as well as an external auditor in Malta. Malta offers an impressive array of international captive and insurance managers who have set up operations in Malta, the big four audit firms as well as a number of local operators.
A strong IT Infrastructure
Malta has invested heavily in its IT infrastructure also due to various large IT-reliant industries which have based themselves on the island. The state-of-the-art infrastructure has been a key factor in the success of Malta’s financial services industry.
Much more to offer
Apart from all the above, Malta also offers a well educated and multilingual workforce, a knowledgeable pool of professional service providers, a modern communications network and much more, including a very hip lifestyle and nice weather all-year round.
The all-round package that Malta offers makes it a perfect jurisdiction for captive owners seeking the perfect location for their business. Its popularity amongst captive owners is certainly set to grow, also considering the consequences of Brexit now placing the UK and its foreign territories as offshore countries and, Malta being the only British-influenced country left within the EU’s borders post-Brexit.
