Promoting captives in London

Published on the Malta Independent¸ issue 06 February 2011

It was a cold wintry day when I stepped out of Moorgate tube station in the heart of London’s financial district to attend a conference on captives. The conference was organised by Pageant Media in collaboration with a number of leading City firms that also included a sponsorship from Finance Malta. Called Captive Live UK¸ it was a full two-day event held in a converted brewery that hosted over 150 delegates from the various sectors of the insurance market. It certainly provided an excellent forum for networking apart from the number of topics that were dealt with in the sessions. Attendees included international players in the UK captive industry. This event was complemented by a number of exhibitors that promoted their firms/countries and offered advice on where to locate your captive.

Exhibitors were too numerous to recall but I can still remember Barclays Wealth¸ Qatar Financial Centre¸ Guernsey IFC¸ Isle of Man Captive¸ J.P Morgan Asset Management¸ Dublin International Insurance and Management Association (Dima)¸ Labuan IBFC¸ and the Government of Gibraltar. As stated earlier¸ Malta was represented by Finance Malta as an exhibitor¸ and by officers speaking on behalf of The Malta Insurance Managers Association in the sessions. The dominant topic was the influential new regulation Solvency 11 and how this will pan out on captives in the coming two years. This is a EU directive that lays down strict requirements on capital adequacy ratios and aims to influence investment behaviour by imposing varying capital charges on assets. It was decided that all insurance companies in the EU would be regulated under the new Solvency II¸ its main objective being to tighten management of systemic and insurance group risk. Last year¸ various lobby groups tried to carve out an exemption for captives saying that they aren’t part of the insurance system and they’re not part of insurance groups. But the die has been cast¸ and except for SMEs with risks falling under €5 million¸ all captives have to face the music come January 2013. As can be expected¸ a number of competing financial centres vied to attract the attention of prospective captive owners during the conference. Each of the seven jurisdictions tried its best to explain the unique advantages it offers to manage insurance risks. The advantages of using Malta were explained by John Tortell¸ representing the Malta Insurance Managers Association. I was impressed by the eloquent way he described the island’s attributes. He said that Malta provides an opportunity for companies to locate their captive insurance business and insurance management activity within an OECD-recognised tax environment that combines tax efficiency with controlled foreign company tax legislation requirements.

Its insurance legislation provides opportunities for captive insurance business and related activities¸ including cell companies¸ insurance management companies and regional operations for insurers¸ re-insurers and brokers. The advantage of being a full EU member state allows for pass porting rights in respect of any risks across the 27 states. Another plus is the ease of re-domiciliation of a captive… instead of tedious run-off and a re-start in the new domicile there is now a seamless transition. Captives which do not insure third party risks are defined as “Affiliated Insurance”¸ which can also be converted into a cell under certain conditions. The Companies Act (Cell Companies Carrying on Business of Insurance) Regulations¸ 2004 all