Captives: Promoting Malta in Toronto

George M. Mangion¸ PKF Malta. April 2012



The Strategy Institute of Toronto will hold the eighth Annual Canadian Captives & Corporate Insurance Strategies Summit at the Sutton Place Hotel in Toronto¸ Canada on 16 and 17 May. This annual event is uniquely designed for risk managers and is the ideal place to gain the crucial business intelligence needed to maximise the effectiveness of corporate insurance programmes. One of the speakers is Gordon Anderson¸ president of Cidel Trust¸ whose theme will centre on the maxim that if any company has significant¸ profitable international operations¸ a captive insurance company is worth serious consideration. An interesting case study is being presented by Richard Christensen¸ president and general manager of Nissan Global Reinsurance (Nissan has a captive registered in Malta). Mr Christensen will talk about the process behind merging and closing inactive captives¸ which is of topical interest in an economic slowdown. Inactive captives can be a burden on the bottom line so timely awareness of when to close or merge your captives successfully is an invaluable tool. This involves many tasks¸ such as how to properly assess the factors¸ players and costs at play when any captive starts underperforming.

While the soft market continues¸ catastrophes have raged on with a number of ever increasing natural disasters. All this points to better understanding of the reinsurance market realities¸ conditions and the summit is an excellent venue to meet and discuss latest trends with reinsurance market leaders. Successful captive managers need to estimate correctly the market’s capacity and accurately assess the new collateral regime of reinsurance securities agreements. Rising premiums¸ changing regulations¸ and multi-national exposures are some of the challenges facing risk managers¸ and this and other topics will be discussed at this event. Speakers at the Toronto seminar will dwell in detail on the best solution on how to tackle the added pressures arising from tougher regulation (typically Solvency II) which countries may impose to combat the aftermath of the sub-prime collapse and its disastrous effect on bank credit insurance. This heightens the need for well-organised units to provide a superlative means of risk management in a turbulent market.

Their main advantages are factors such as reduced costs¸ flexibility and improved claims management. With heightened frequency¸ corporate insurance buyers and mid-sized business owners who are squeezed by higher costs are exacerbating the compensation of captive ownership. As these factors can be significant in cases of larger corporate structures¸ it shows why captives are considered to be a more cost effective solution in a downturn. For example¸ we can say that living in a soft market¸ risk managers can opt to rent a captive¸ thus taking advantage of the low rates by reinsuring a relatively large proportion of risks. The lower cost of reinsurance allows the captive to build its reserve base. This is due to the clever way that captives generally retain a portion of the overall risk and reinsure the balance. My presentation on day one will focus on the advantages and disadvantages of selecting Malta as a captive domicile. This will consist of a virtual tour¸ comparing the largest and fastest growing onshore and offshore domiciles. Malta’s attribute