Why Malta ia a reputable jurisdiction for captive insurance companies

Malta is home to a large variety of financial institutions drawn to its competitive attributes amongst other business hubs. More and more Captive Insurance companies are establishing themselves in Malta to take advantage of the edge it gives them in European operations and on a global scale.
 
Captive Insurance Companies
Captive Insurance Companies are an instrument used by many businesses in risk management. Generally, they can be subsidiaries created by a parent company to cater to its insurance needs instead of making use of unaffiliated insurance providers. Captive Insurance Companies can be established to serve a group of companies, entities with a majority stake on its shares and even trade associations.
 
Reasons for establishing a Captive Insurance Company
Having a captive insurance company gives the parent company more control over its insurance and reinsurance options. As a benefit of having lower expense ratios reinsurance can successfully be acquired without the additional costs of commissions and fees. Overly the cost of insuring operations and assets will be drastically reduced. This is because a captive insurance company will not inflate insurance costs with profit margins.
 
The parent company will also be in a position to benefit directly from the risk control measures it employs, thus promoting the culture of risk aversion. Insurance Premiums from a captive insurance company depend on the loss incurred from its previous activities, in contrast to its competitors. A commercial insurance company will charge premiums in accordance with the prevailing market conditions, thus making pricing a very fickle element.
 
Captive Insurance Companies in Malta
For a Captive Insurance Company operating or domiciled in Malta, a license issued by the Malta Financial Services Authority is a legal requisite. This type of business is governed by the legislature of the Business Insurance Act (Cap. 403).
 
Licensing conditions
The licensing of a Captive Insurance Company in Malta requires sufficient capital in accordance with the applicable minimum guarantee fund. The value of accessible own funds should at the very least be made up of paid-up share capital. Aside from capital, a business plan has to be submitted along with demonstration of intent to provide affiliated insurance only. The benefactors of the company will be vetted by the relevant authority to see if they are fit for their assigned duties and healthy influence. An adequate solvency margin will be expected once the company commences business.
 
Business Structures
Malta is one of the pioneers of legislature allowing for the setup of Protected Cell Company and Incorporate Cell Company. Investors have the option to set up their Captive Insurance Company as a stand-alone company or as a PCC and alternatively an ICC. A PCC offers limited liability and eliminates the need for an Own Guaranteed Fund provided the parent company has assured solvency.
An ICC is made up of incorporated cells considered separate legal entities. An incorporated cell in Malta is able to ensure own risks arising in the EEA. The cell also has the right to sell insurance to third parties within the EEA.
 
Benefits of Malta as a domicile
Malta’s position as a member state of the EU is a major boost for Captive Insurance companies who are domiciled there. The arrangement gives the companies passporting rights and access to all EU and EEA territories. This ease of access has seen many renowned Captive insurance firms and international insurance managers set up on the island.
 
Businesses in Malta are subject to an imputation system of taxation as per EU standards. Tax is chargeable on company profits and shareholders can claim refunds on their income arising from dividends. This is to avoid double taxation of shareholders.
 
Professional Assistance
For more insights on the regulation of insurance companies in Malta, you may contact SIGTAX. Our invaluable team, which consists of expert lawyers, accountants and consultants will give you detailed information and counsel during each step.  Our lawyers can also provide you with finer details on the legal aspects pertaining to Maltese insurance companies so that you don’t skip any necessary steps.
 

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