Malta Captive Insurance

Updated: July 30, 2020 | 5 minute read

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Malta’s accession to the EU, the country’s flexible legislative framework combined with an efficient tax environment and the renowned excellence of the island’s financial services regulator, the Malta Financial Services Authority (MFSA), contribute to Malta being a recognised and sophisticated jurisdiction for captive insurance companies.

A captive insurance company is formed by industrial, financial or commercial groups or governmental organisations, with the purpose of underwriting all, or a selection of, the risks of that institution and its affiliates.

Captives, referred to as ‘affiliated insurance companies’ under Maltese insurance legislation, are defined as ‘insurance companies whose business of insurance is restricted to risks originating with shareholders +or connected undertakings or entities’.

Maltese captive companies may insure the risks originating from:

  • Parent companies;

  • Associated or group undertakings;

  • Individuals or other entities having majority ownership or controlling interest in the captive; and

  • Members of trade, industry or professional associations insuring risks related to the particular trade, industry or profession.

Why Locate to Malta?

Malta offers some advantages:

  • Ability to write policies directly into the EU and European Economic Area - Full EU membership enables Maltese captives to dispense with the need for fronting companies into the EU/EEA;

  • Effective but responsive regulation - The regulation follows EU standards and remains flexible and responsive being the most successful established captive domicile;

  • Established financial centre - Insurance, legal and accounting expertise is all available within Malta’s highly trained professional workforce;

  • Tax efficiency - similarly to all other Maltese companies, captive insurance companies are taxable at the normal corporate rate of 35%. Upon distribution of dividends by captive insurance to its shareholders, the said shareholders would be entitled to claim a refund from the Malta Tax Authority for the tax paid by the captive insurance on the distributed profits. In addition, Malta has concluded double taxation tax treaties with over 70 countries;

  • Protected cell companies - PCC legislation enables a PCC to be formed in Malta whereby each cell’s assets and liabilities are legally separated;

  • Migration from other jurisdictions  - The Continuation of Insurance Companies Regulations 2003 enables captives to be easily relocated from other jurisdictions which have similar legislation;

  • International Standards - Application of IFRS enables companies to prepare their financial statements in a manner that easily integrates with those of their parents.

Malta will be worth considering as the location for a captive where the ability to issue policies directly into the EU/EEA may provide significant savings on fronting and collateral costs. This will be worth looking at for:

  • Multinationals with operations in EU locations;

  • UK corporations paying significant employers’ liability and motor third party premiums; and

  • Companies using captives to provide insurance to their customer base, e.g. travel, credit protection, etc.

Benefits of Using Captive

  • Solutions to market limitations by providing cover for risks that is not available in the traditional insurance market;

  • Improved and flexible risk management through custom-designed policies;

  • Reduced risk in financing expenses;

  • Better cash flow management over the payment of premiums, and the timing and payment of claims;

  • Direct access to reinsurers and the opportunity of negotiating price and contract terms directly;

  • Coordinated risk management at the group level; and

  • Protection from price fluctuations.

Insurance Managers

The first two international insurance managers to establish a presence on the islands were AON and Marsh, that collectively manage more than half the captives registered across all domiciles. From 2005, when the first of Malta’s captive insurers had been established, the number of insurance companies domiciled in Malta grew fast. However, the majority of these have not been captive - or affiliated - insurers at all. After the first five were established, the next 15 were all direct writers, selling insurance beyond the confines on their parent group of companies.

In 2014, 33 insurance companies were being managed by 27 insurance managers. The top three international managers - AON, Marsh and Willis - all participate in the market, along with HSBC. But several mid-tier operators are also attracting their fair share of the business, in partnership with Maltese insurers and brokers. And the local operations - including International Insurance Management Services Ltd, FirstUnited, Ark and Island Insurance are also attracting their fair share of the business.

Minimum Own Funds

Affiliated Insurance Companies are required to maintain own funds, which must remain unencumbered at all times. Own funds consist mainly of share capital, reserves, retained profits and subordinated loans. The own funds should amount to:

Insurance Captive:

  • General business - minimum € 2.5m / € 3.7m, depending on the class of business; or

  • Long-term business - minimum € 3.7m.

Reinsurance Captive:

  • Business of reinsurance - minimum € 1.2m.

The minimum own funds' requirement for the combined business of insurance and reinsurance varies between € 2.5m and € 7.4m, depending on the class of business

The own funds consist of the paid-up share capital which must not be less than 50% of the value of the own funds' requirement, and a mixture of issued and unpaid share capital, preferential share capital, subordinated loans, retained profits and reserves. However, the MFSA usually requests that 100% of the initial own funds' requirements consist of paid-up capital.

Licensing Requirements and Fees

The MFSA must license affiliated Insurance Companies carrying business in, or from Malta under the Insurance Business Act. The license authorisation is processed within a period of 3 months.

The fees applicable to affiliated insurance companies are:

  • Submission of application € 1,800;

  • Acceptance of application € 2,500; and

  • Continuance of authorisation € 5,000.

Our Services

We provide a wide range of services ranging from basic company incorporation and compliance to specialised advisory services, audit, tax and accounting, for particular sectors such as financial services, international trade, remote gaming, investment funds, shipping and aviation. We offer international support including back-office operations and advisory services, in a responsive, proficient and professional manner.

Through a collaboration with a major insurance manager, our multi-discipline team of professionals can provide the full range of consultancy, project management and ongoing management services for your Malta insurance vehicle:

  • Feasibility study;

  • Incorporation and licensing;

  • Underwriting;

  • Reinsurance;

  • Accounting;

  • Corporate Secretary;

  • Cash management; and

  • Compliance.

Click here to download our full PDF Captive Insurance.

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