The insurance sector in Malta has embarked on a transformation journey over the past decade. Today more than ever, the insurance sector needs to focus on growth strategies, operating efficiency and customer satisfaction, while also grappling with disruptive forces that are becoming the order of the day.
Captive insurance, a strategic risk management tool, empowers organisations to take control of their insurance needs by establishing their own insurance (or reinsurance) entities. It offers tailored coverage, cost efficiencies, and enhanced risk management, allowing companies to address specific, unique risks that traditional insurers may not adequately cover. The advantages of captive insurance include the ability to manage insurance costs, proactively mitigate risks, and access reinsurance markets, ultimately contributing to more predictable and stable risk management strategies.
Within the world of captive insurance, in addition to traditional standalone re/insurance captive setups, the Protected Cell Company (PCC) structure has gained prominence as a dynamic and flexible framework.
Why Malta?
A strong, growing EU Captive domicile
Since its accession to the EU and Eurozone, Malta has established itself as a strong player in the captive insurance business sector through the establishment of a robust regulatory framework, a single and forward-looking regulator for financial services, a comparatively low-cost base in the EU and knowledgeable professionals that are able to service the full spectrum of captive services.
Robust, captive-friendly legal framework
As part of its legal framework, Malta is the only EU member state with Protected Cell Company (PCC) legislation (in addition to traditional structures), under which insurance companies may opt to structure their legal entity into segregated cells to separate the risks associated with diverse captives, lines of business or policies. A PCC structure requires lower costs due to shared governance, risk management and reporting besides also reducing overall capital requirements.
PCC Legal considerations
Despite that the Maltese PCC legislation allows insurance companies to structure their entity structure into cells, from a legal (non-tax) perspective, a PCC should be considered as a single legal person notwithstanding that each cell of a PCC has its own distinct name or designation. Having said this, from a tax perspective each cell, as well as the Core entity in which the non-cellular assets are held, are deemed as a separate "company” and hence each cell is generally subject to Maltese income tax in accordance with the general tax provisions applicable to companies.
Tax legislation
Malta’s tax legislation also offers a very attractive and competitive regime. In today’s globalised economy, all countries are interconnected through cross-border transactions that may trigger tax consequences. Malta has concluded over 80 double taxation treaties to regulate the taxation of income between two contracting states and to eliminate double taxation. Malta offers an attractive income tax framework for captives and other insurance undertakings.
Accounting Considerations
Despite the introduction of IFRS 17 for insurance companies adopting IFRS in Malta, local regulations regulating the accounting principles for specific insurance undertakings, including captive (re)insurance undertakings, have been introduced. This regulation allows captive undertakings to elect to follow General Accounting Principles in respect of certain Eligible Entities (GAPEE), a local accounting framework, as opposed to adopting IFRS 17.
Capital requirements
Insurers are required to comply with Solvency II and capital requirements can be further reduced for PCCs, enabling capital to be optimised well below the thresholds that would be required for a standalone insurer, according to magnitude and risk profile.
Insurance specialism
Malta is a small island in the middle of the Mediterranean Sea, has a multilingual and well-educated workforce, where the English language is default for conducting business and is a short flight away from many European capitals. Malta also boasts of an excellent pool of human resources having insurance-specific knowledge and qualifications and a high presence of professional services firms with insurance sector expertise.
What services does PwC Malta offer?
PwC Malta has been the leading advisor to the Maltese insurance sector for many years. We provide services to most domestic insurance companies with a strong market share when also considering non-domestic principals. Over the years, we have established a solid market presence, giving us significant experience and knowledge of insurance market practices, challenges and developments.
We offer a full range of insurance related services to help insurance companies cope with a constantly changing business and regulatory environment.
Our services include:
- Implementation / Setting up assistance (covering regulatory, tax, legal and accounting);
- Audit of financial statements and Solvency II Reporting;
- Accounting Advisory services;
- Transaction services;
- Sustainability;
- Insurance managed services and temporary secondment of staff;
- Actuarial services;
- Regulatory & Compliance services;
- Internal Audit services;
- Tax Compliance & Advisory services.
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