Malta Financial Services Authority: Captive Success

Building on its programme of legislative and regulatory reform, Malta’s entry into the EU has seen these changes pay off. The country has recorded steady progress as global giants pick the island as a captive insurance location, writes William Boyle.

The manner in which the Maltese have gone about building financial services into one of the strongest pillars of the national economy should perhaps be a business school case study. For it’s a story that in around 15 years has seen an essentially domestic finance jurisdiction grow into a place that has attracted blue-chip players from across the world.

In the ten years since 1994, Malta has implemented a programme of legislative and regulatory reform, of international perception building and of investment in specialist education.

Initially, it reaped the rewards in steady, if unspectacular, growth. With the arrival of Malta into the EU in 2004, the previous decade of change, investment and promotion really paid off. Finance has been growing at around 30% a year, employment numbers have tripled to around 7,000 and the sector now accounts for around 12% of GDP.

Business dynamo

As always with successful economic revitalisation, there are numerous reasons for success. Prime among them is the business dynamism and national stability brought by almost 20 years of Maltese economic liberalisation and deregulation.

A nation of natural entrepreneurs has been liberated from the corporatism of the past and every part of the economy has benefited from this confidence in local conditions.

Overseas investors have caught the Malta mood. Alongside the international banks, professional fund managers, insurance managers, call centres, stockbrokers and wealth managers, there is a big cluster of overseas-owned concerns in pharmaceuticals, high technology manufacturing, commercial aircraft service and repair and marine electronics.

At Smart City Malta, Middle Eastern investors are building what is likely to be one of Europe’s great IT hubs. While the arrival of the global business slowdown has not bypassed Malta, the country’s relatively low labour costs, strong reputation for high skills and high productivity, language expertise (English is one of Malta’s two official languages) and EU membership is keeping the island attractive to those who want all the sophistication of an advanced EU location at significantly less cost than much of mainland Europe.

Insurance advantages

In no sector are Malta’s benefits plainer than in captive insurance. Six Fortune 100 companies now have captives in Malta and a raft of companies from across the world and in numerous sectors are being looked after by the country’s insurance managers. The global names of Aon, Marsh, Willis and Heath Lambert can be found in competitive convoy with the indigenous insurance management companies.

The key to Malta’s success in captives lies in its EU membership, which allows captives regulated in Malta to write business into any of the other 26 EU countries, its tailor-made and fully EU-compliant captives legislation and its protected cell company law. Malta’s PCC structure for captives is especially attractive to mid-cap and smaller companies.

It may be that tough global business conditions will see Malta’s redomiciliation regulations pay dividends for captives owners and the country. Malta’s rules allow a company to redomicile a captive from one approved domicile to Malta, without having to shut down the operations of the captive.

The specialist insurance expertise needed for potentially complex changes like redomiciliation is less daunting because Malta has the insurance expertise and the legal and accountancy skills required (and it often helps that Malta operates International Financial Reporting Standards).

Add in a regulatory authority that believes in service as strongly as it believes in probity, a potentially favourable fiscal regime and an ever-improving transport and IT infrastructure, and Malta’s future as a leading EU insurance and financial services jurisdiction looks promising.