Matthew Bianchi, chairman of the Malta Financial Services Advisory Council (MFSAC) working group on insurance and pensions, stated that Malta is in a strong position to enter the insurance-linked securities (ILS) market, leveraging its experience in captive insurance and reinsurance.
“As a jurisdiction, we are well positioned to step into this growing market,” Bianchi said in a report.
Bianchi explained that the necessary infrastructure for ILS is in place, and Malta's established presence in captive insurance gives it a competitive edge. The country has long been a leading European jurisdiction for captive insurance, attracting major companies from across the continent.
It also stands as the only European Union member to offer protected cell structures, which provide specialized services to the insurance market. Malta’s unique position was further solidified following Gibraltar’s exit from the EU, leaving it as the sole provider of such services within the Union.
However, while Malta has excelled in captive insurance, it has yet to venture into the reinsurance market’s collateralization, a key feature of ILS. This process allows investors to take on portions of the insured risk through specialized reinsurance vehicles.
These vehicles, which are often standalone companies or cells within protected cell companies, are highly regulated. Investors typically participate through bond markets or private placements, and these could be structured in Malta or other jurisdictions.
“This would do a number of things. It would raise the level of sophistication, opening up workstreams for insurance managers, accountants, lawyers and actuaries,” Bianchi said.
Two other EU jurisdictions are currently active in ILS, but he believes there is ample space for Malta to play a role. Malta already securitizes other assets, such as loans and receivables, and can offer a unique value proposition with its ability to provide both standalone vehicles and cell companies.
Malta’s regulator, the MFSA, has developed considerable expertise in this area, according to Bianchi, and the Insurance Supervision team is prepared to manage ILS transactions. The challenge now lies in attracting the first clients and facilitating initial transactions. Finance Malta has been engaging with larger players in the market, attending conferences, and encouraging dialogue between its members and key stakeholders.
“When the first deal comes, we will be ready to take it on board,” Bianchi said. “I think that we have been reaching out to enough people in the market to reap a few rewards. Hopefully, very soon we will see a few of these structures.”
In addition to ILS, the MFSAC working group is addressing other key issues, including occupational pension reform. This initiative, unlike ILS, would have a widespread impact, potentially affecting thousands of workers in Malta. The focus is on broadening the scope of occupational pensions, a goal to which the Maltese government is already committed.
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