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INSURANCE COMPANY MANAGEMENT IN MALTA October 2008

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Page 1: INSURANCE COMPANY MANAGEMENT IN MALTA - willis.com · Willis Insurance Company Management in Malta 2008 1 CONTENTS ... – Cash management ... are a foundation stone of Malta since

INSURANCECOMPANYMANAGEMENTIN MALTAOctober 2008

Page 2: INSURANCE COMPANY MANAGEMENT IN MALTA - willis.com · Willis Insurance Company Management in Malta 2008 1 CONTENTS ... – Cash management ... are a foundation stone of Malta since
Page 3: INSURANCE COMPANY MANAGEMENT IN MALTA - willis.com · Willis Insurance Company Management in Malta 2008 1 CONTENTS ... – Cash management ... are a foundation stone of Malta since

Willis Insurance Company Management in Malta 2008 1

CONTENTSSECTION 1 – INTRODUCTION 2

SECTION 2 – CAPTIVE MANAGEMENT SERVICES 4

SECTION 3 – MALTA AS A CENTRE FOR CAPTIVE INSURANCE COMPANIES 6

SECTION 4 – WILLIS IN MALTA 10

SECTION 5 – TYPICAL OPERATING COSTS 12

SECTION 6 – REGULATORY REQUIREMENTS 14

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2 Willis Insurance Company Management in Malta 2008

SECTION 1 – INTRODUCTION

THE WILLIS CAPTIVEPRACTICE IS A MAJOR FORCE IN THE GLOBALCAPTIVE INDUSTRY WITHOPERATIONS WORLDWIDE.

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Willis Insurance Company Management in Malta 2008 3

Since joining the European Union in 2004,Malta has swiftly established its reputation as a credible and dynamic insurance domicile.

Malta combines a number of selling points toprovide clients with a very attractive packageof benefits:

– Ability to directly write fully admittedpolicies throughout the EU and EEA.

– Attractive fiscal regime.– Strong regulatory reputation based on EU

standards, combined with flexibleregulatory approach.

– Lower operating costs compared to manyother domiciles.

– Educated and motivated workforce –English as the primary language of business.

– Stable democratic political environment.– Excellent communication and convenient

time zone.

Willis is a pioneer of the Maltese captiveinsurance business with a presence on theisland from the early 1990s.

Willis Management (Malta) Limited would be delighted to discuss all aspects of Malta'soffering and explain Willis' local propositionas part of our Global Captive Practice.

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4 Willis Insurance Company Management in Malta 2008

SECTION 2 – CAPTIVEMANAGEMENTSERVICES

WILLIS IS AT THE FOREFRONTOF CAPTIVE MANAGEMENTTECHNOLOGY WORLDWIDE.

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Willis is one of the leading firms ofinternational insurance brokers specialising in the field of captive insurance companiesand their management. We have operations in all key locations including Arizona,Bermuda, Cayman, Dublin, Gibraltar,Guernsey, Hawaii, Isle of Man, Luxembourg,Malta, Nevada, New York, New Zealand,Singapore, South Carolina, Sweden, Tennesseeand Vermont operating within the WillisGlobal Captive Practice.

Captive development and feasibility studiesare carried out by our team of consultants.The captive management service platformenables clients to entrust the management of their insurance company to our localoperation, where our personnel will providethe underwriting, accounting, compliance and company secretarial expertise.

Willis Management (Malta) Limitedintegrates Willis' global expertise with an exceptional local delivery platform.

Our service objectives include:

– Aligning captive activity to parent’sstrategic aims

– Coordinating brokers, insurers, reinsurers,auditors and bankers

– Providing clear information and advice forexecutive decision making

– Designing and maintaining efficientsystems and procedures

– All aspects of routine captive managementand administration including:

INSURANCE MANAGEMENT– Captive development and

programme design– Underwriting– Premium administration– Policy documentation– Claims handling, administration

and reporting– Liaison with insurance and

reinsurance brokers– Maintaining underwriting accounts

and statistics

ACCOUNTANCY– Management accounts– Group consolidation reporting– Statutory annual accounts– Full accounting documentation including

budgets and cashflow statements

COMPANY SECRETARIAL – Compliance with Maltese legislation

and regulations– Provision of registered office (if required)– Maintenance of corporate records– Notice and minutes of directors meetings– Preparation of board papers

CORPORATE GOVERNANCECompliance with the Licensed Insurer's Code of Conduct through the production and maintenance of a corporate governanceframework including:

– Procedure manual– Key risk and control matrix– Schedule of key actions– Act as Compliance Officer– Act as Money Laundering

Reporting Officer

BANKING AND INVESTMENTS– Cash management– Monitoring of investment managers

(if appointed)– Monitoring currency exposures– Authorisation and payment of expenses

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6 Willis Insurance Company Management in Malta 2008

SECTION 3 – MALTA AS ACENTRE FORCAPTIVEINSURANCECOMPANIES

WILLIS IS PROUD TO BEAMONG THE VANGUARD OFINTERNATIONAL INSURANCEMANAGERS IN MALTA.

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REGULATORY ENVIRONMENT

The Maltese Financial Services Authority(MFSA) has built a reputation on theinternational stage as a proactive body that is looking to promote the island as a leadingfinancial services centre. In particular it isencouraging international businesses to setup new captives or relocate captives fromother domiciles by offering a responsive andflexible regulatory environment within theEU framework and a range of complimentaryfacilities including Protected Cell Company(PCC) legislation and company migration.

Insurance business in Malta is regulatedprimarily under the Insurance Business Act 1998 and the authority and ongoingsupervision is deemed to be with the MFSA.

EUROPEAN UNION MEMBERSHIPMalta is a full member of the EU providingaccess to the Single European Market which is aimed at establishing free movement ofcapital, removal of tariff barriers, freedom to establish and freedom to provide services. The general directives of the EU in regard to regulation and supervisory control ofinsurance companies apply providing fullintegration into the EU regulatory system.From 1 January 2007 the EU consists of 27member states.

MIGRATION LEGISLATIONMalta is one of only two captive domiciles within the European Union to adopt companymigration legislation . This legislation enablescaptive companies to relocate from other captivedomiciles with matching legislation. Thisprocess enables companies to avoid closingdown one entity and starting up a new one.

PCC LEGISLATIONMalta has legislation for the establishment ofPCC entities.

REINSURANCE AND DIRECT WRITINGMalta will permit a single insurance companyto carry out both inwards reinsurance anddirect insurance transactions withoutimposing any conditions on the compositionof either transaction type. In some otherterritories restrictions apply which can leadto an additional cost burden of employing atwo insurance company strategy.

OPERATING ENVIRONMENT

The Republic of Malta is an archipelagoconsisting of three inhabited islands Malta,Gozo and Comino. The Maltese islands aresituated in the middle of the MediterraneanSea about 100 km south of Italy.

Malta has a highly educated workforce andhas a comparatively lower cost of professionalservices when compared with many other EU centres.

POPULATION The population of the islands is circa 400,000.

POLITICAL STRUCTUREMalta has a rich history of tradition andculture that includes: Phoenicians;Carthaginians; Romans; Arabs; Aragonese;the Knights of St. John; the French underNapoleon Bonaparte and most recently theBritish. Malta obtained its independence in 1964.

A British style legal system and civil serviceare a foundation stone of Malta since itobtained independence from Britain in 1964 and eventually became a Republic.

Malta is a sovereign independent stateenjoying traditional political, economic and social stability. It enjoys a parliamentarydemocracy based on the British model. It joined the EU in May 2004 and forms an integral part of Western Europe bothpolitically and culturally. Malta is a memberof the United Nations, the Council of Europeand the Commonwealth. Malta maintainsfriendly relations with all countries throughits policy of non-alignment.

INFRASTRUCTURE AND ECONOMYA strong infrastructure and promotional drive has turned tourism into Malta's primary source of foreign income. Malta'snatural harbours host one of the mostrenowned dry-docks in the Mediterraneanand a shipbuilding yard.

The geography of the island has alwaysprovided natural attractive safe marinas for yachts from all over the world.

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8 Willis Insurance Company Management in Malta 2008

Malta’s regulatory framework for financialservices is fully consolidated and alignedto internationally recognised standards.

There are over 6,000 people currentlyemployed in the financial services sectorin Malta (excluding law firms andaccountancy firms), contributing asignificant 12% to the country’s GDP. The Maltese Government continues toevaluate and update relevant legislationand regulations, keeping it abreast ofdevelopments in the industry with a viewto maintaining Malta’s competitiveness in this sector.

Reserves for foreign currency per head areamongst the highest in the world. Maltaadopted the Euro from 1 January 2008.

LANGUAGEThe official languages are Maltese andEnglish. Business correspondence ismainly in English. Most of the population is also fluent in Italian.

CURRENCY Euro.

TYPE OF LAW Malta is a Civil Law jurisdiction, however,all modern legislation including company,tax and maritime laws are modelled ontheir UK counterparts.

TAXATIONMalta follows an imputation system of taxation agreed with the EuropeanUnion in 2006 under State Aid Rules andthe Code of Conduct Group for BusinessTaxation. Companies pay tax at the rate of 35% and upon declaration of a dividend,shareholders are entitled to claim a refundof 6/7ths of the tax paid.

The net effect is to create a potential net tax rate of 5% to the Group.

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10 Willis Insurance Company Management in Malta 2008

SECTION 4 – WILLIS INMALTA

WILLIS' TEAM COMBINESLOCAL AND INTERNATIONALEXPERIENCE TO PROVIDE THEMANAGEMENT STRENGTH TODELIVER OUR CLIENTS'EXPECTATIONS.

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Willis was one of the first captive managers to establish in Malta and we have had a captive management presence here since the early 1990s. Our offices are at 34 RegentHouse, Bisazza Street, Sliema, SLM 1641, Malta.

Our business operation in Malta adopts the Willis Global Captive Practice standards of insurance company management services.The procedures are tried and tested butflexible to adapt to specific demands ofconducting business in Malta.

We have access to specialised reinsuranceprofessionals, qualified accountants, companysecretarial services and experience in writingdirect insurance contracts from Malta intoother EU member states. We also have anunderstanding of customer insurance

business models and the complexmultinational financial service environment.The local office facilities include an expansiveboard room with conference call/videoconference options.

BOARD CONSTITUTION

The MFSA requires that there be a minimumof one local resident Maltese director. Other directors can be provided by thecaptive’s parent.

Willis is able to offer advice and assistance to conform to local laws, regulation andbusiness practice. We would be pleased to introduce a number of potential localdirectors from a range of professionalbackgrounds and experience.

Tim Byrne, AIB, ACIITim is the Managing Director of our Dublin captive managementcompany. Employed in the captive insurance industry from 1980 andhaving previously worked at senior level with Willis in their Isle ofMan and Cayman Islands offices. Has has extensive experience of UK,European and N. American captive operations.

Mark Bromell, BA, FCAMark is a director of insurance companies in UK, Malta, Isle of Man and Guernsey. He has extensive experience of financial projectmanagement, EU regulatory compliance and tax planning. He trainedas an accountant with KPMG.

Malcolm Cutts-Watson, BSc., CPFA Malcolm is the leader of the Willis Captive Practice. He has beenemployed in captive management for over 25 years having spentseven years in Bermuda and 5 in Vermont where he headed thelargest US captive operation before moving to Guernsey in December 1993.

Pauline Margrett, FCIIPauline is a Director of the Willis Facilities Practice with over 30years experience in the insurance industry. Pauline has extensiveexperience in captive management and currently sits on the Board of Directors of all Willis European captive operations.

KEY PERSONNEL

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SECTION 5 – TYPICAL OPERATINGCOSTS

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Willis Insurance Company Management in Malta 2008 13

CAPITALISATIONCapitalisation is one of the most importantaspects of insurance company formation.The level of capitalisation is dependent uponthe amount of underwriting capacity thecaptive wishes to offer its parent group andthe classes of business underwritten. Acaptive writing direct insurance is requiredto have a minimum paid up share capital of at least €2,200,000 and a captive writingreinsurance business only, a minimum paidup share capital of €1,000,000.

FEASIBILITY STUDIESWe can assist with the preparation of studieson the establishment of a captive andadditional programmes for the captive. Fees for this can be stand alone or can beincorporated into the management fees.

PRE-INCORPORATION FEESLegal fees in connection with drafting Articlesof Association and/or Members' Rules.

INITIAL INCORPORATION COSTSThere is no stamp duty on issued share capital.

REGISTRATION FEESThere is no initial registration fee. Pleasecontact us for information on annual feespayable to the MFSA.

MANAGEMENT FEESOur fees for the provision of services reflect the complexity of the (re)insurance programmes.

FORMATION FEESThese are charged by Willis in respect of time spent in the application for an insurancelicence, including the drafting of documentation,the formation of the business plan and thenegotiation of licence conditions and capitalrequirements with the MFSA.

OTHER ANNUAL COSTSAudit fees, actuarial fees, directors' fees,professional fees, travel, communications and incidental expenses.

FIRST YEAR OUTLAY DIRECT € REINSURANCE € CAPITALISATION* 2,200,000 1,000,000FORMATION FEES 30,000 20,000PROFESSIONAL/ 3,500 3,000LEGAL FEES**

2,233,500 1,023,000

ANNUAL COSTS DIRECT € REINSURANCE €MANAGEMENT FEES** 100,000 70,000DIRECTORS FEES** 10,000 10,000GOVERNMENT FEES 5,000 3,000AUDIT AND 20,000 15,000PROFESSIONAL FEES** SUNDRY COSTS - 1,000 1,000COMMUNICATIONS ETC**

136,000 99,000

*Dependent on classes to be written.** Indicative only – actual fees charged will depend on complexity of account.

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SECTION 6 – REGULATORYREQUIREMENTS

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Willis Insurance Company Management in Malta 2008 15

INSURANCE REGULATORYPOSITION

Captive insurance companies are regulated in accordance with the relevant EU Insuranceand Reinsurance Directives. These directiveshave been transposed into local law with theterm 'affiliated insurance company' referringto a captive.

CAPTIVES (DIRECT INSURANCE AND REINSURANCE)Authorisation to establish must be obtainedfrom the MFSA. There are on-goingrequirements for submission of annualreturns and accounts in prescribed formats to the regulatory authorities in addition totechnical reserves and solvency requirements.

TECHNICAL RESERVESA captive is required to establish and maintaintechnical reserves, such that its admittedassets are in accordance with the InsuranceBusiness (Assets & Liabilities Regulations).

SOLVENCY MARGINA captive is required to maintain an adequatesolvency margin in respect of its entirebusiness, which corresponds to the assets free of all foreseeable liabilities.

TIMELINEThe MFSA shall determine an application for authorisation for a:

– Direct insurer within six months ofreceiving documentation required to be submitted.

– Reinsurer within three months ofreceiving all the documentation requiredto be submitted.

– Captive within three months of receiving alldocumentation required to be submitted.

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GLOBAL CAPTIVE PRACTICE CONTACTS

Tim Byrnee-mail: [email protected] direct line: +353 1 407 4984mobile: +353 86 823 5256

Brendan Duggane-mail: [email protected] line: +44 (0)20 3124 7977mobile: +44 (0)7931 259334

Nigel Goodlad e-mail: [email protected] line: +44 (0)1446 773675mobile: +44 (0)7715 759451

Dominic Wheatley e-mail: [email protected] direct line: +44 (0)1481 735630mobile: +44 (0)7781 135630

Mark Bromelle-mail: [email protected] line: +356 2132 2076mobile: +356 9980 7641

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Willis Management (Malta) Limited

34 Regent HouseBisazza StreetSliemaSLM 1641MaltaTel: +356 2132 2076Fax: +356 2132 2356

www.willis.com

Willis Management (Malta) Limited Company Registration Number: C42791Willis Management (Malta) Limited is enrolled in the Managers List to act as an Insurance Manager in terms of the Insurance Intermediaries Act, 2006.

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