Protected Cell Companies in Malta could provide a lifeline to brokers and other UK insurance businesses seeking to write business in the European Economic Area (EEA) after Brexit.
Speaking alongside Kenneth Farrugia, chair of Finance Malta, at a City event for insurance specialists,* Michael Whitfield, non-executive director of specialist insurer Building Block PCC Ltd, a Malta-based protected cell company, said protected cells (PCCs) could potentially be used by firms to continue to write schemes and other business in the event of a hard Brexit.
Mr Whitfield said: “To date most of the interest in protected cells has come from insurers seeking our assistance in mitigating the onerous capital and governance requirements involved in setting up entities in Europe.”
“However, we are also very happy to talk to brokers who might be worried about the likely disappearance of passporting rights if the UK government fails to agree a suitable single market access with the EU27.”
He explained that PCCs are single legal entities, comprising a core (which holds the capital) and a number of cells. “A PCC enables different owners and interests to participate in one insurance entity by setting up their own cells within that entity.”
He added: “Capital requirements reflect the needs of the individual cells, rather than the much higher minimum Solvency II capital requirements for an insurer, so it can potentially be much more cost effective to do business through a cell structure.”
Mr Whitfield noted that while a number of offshore jurisdictions offer protected cell enabling legislation, Malta is the only EU Member State to have a fully developed PCC facility, making it a prime target for progressive insurance businesses thinking about their future planning.”
“If you trust Liam Fox and Boris Johnson to negotiate a wholly satisfactory future trading arrangement for UK financial services post-Brexit, then you might consider it a safe option to do nothing,” said Mr Whitfield, “but we would urge brokers, (and MGAs and insurers) with a more sanguine view of the UK’s trading future in the EU to come and talk to us.”
Earlier, delegates heard Kenneth Farrugia say that Malta’s insurance sector had grown from, eight operators in 2004 to 58 by the end of last year, writing €3.80bn GWP. Mr Farrugia said that growth was driven by a number of factors, including a legal and regulatory framework, a pro-business single regulator, and a high quality English-speaking workforce.
* PKF Littlejohn LLP Breakfast Briefing: Navigating Brexit: Insurance Cells in Malta. 26 May