1.1.
Captive Insurance under our law
A Captive Insurance Company is called an
“Affiliated Insurance Company” (AIC) under Maltese law and relates to
“the business of an insurance company which is registered in Malta and
whose business of insurance is restricted to risks originating with
shareholders or connected undertakings or entities.”
1.2. Own Funds
One-third of the required margin of
solvency constitutes the guarantee fund, provided that:
a) the guarantee fund shall not be less
than the minimum guarantee fund, whether the required margin of solvency
is greater or less than that amount.
b) In the case of long term business, items
that are not implicit items shall be at least large enough to cover
either the minimum guarantee fund or 50 per centum of the guarantee
fund, whichever is the greater.
Own funds are to be unencumbered at all
times.
The components making up the own funds are
to consist of:
Paid up share capital which must be not less than 50% of the value of
the own funds requirement;
A mixture of issued and unpaid share
capital, preferential share capital and subordinated loans, retained
profits and reserves.
1.3. Equalisation Reserves
Subject to cases of exemptions, AICs
carrying on general business of a prescribed nature are required to
maintain an equalisation reserve.
This notwithstanding, since technical
provisions and equalisation reserves are allowed as a deduction in the
computation of taxable income, an affiliated company carrying on
reinsurance business may still elect to hold an equalisation reserve if
its business is less than the aforementioned thresholds.
1.4. Financial Statements
AICs are permitted to draw up accounts in
abridged form. Moreover, they are exempted from publishing accounts in
local newspapers, subject to the condition that any person may apply for
a copy of the audited financial statements of the company at a
reasonable fee.
1.5. Protected Cell Companies
An AIC may be registered as or converted
into a Protected Cell Company thus allowing for, inter alia, segregation
and protection of cellular assets from other assets of the company;
creation and issue of cell shares; transfer of cellular assets to other
persons, and extension of protected cell assets to transferee; use of
non-cellular assets as a secondary asset base where cellular assets are
exhausted.
The transfer of cellular assets is subject
to approval by the Malta Financial Services Authority, the autonomous
public authority responsible for the licensing, regulation and
supervision of insurance companies and intermediaries, including AICs.
1.6. AICs Registered in Malta to Date
- Ergon Insurance Limited
- Falcon Insurance Limited
- Nautilius Indemnity (Europe) Ltd
- Rhenas Insurance Ltd
1.7. Procedures & Fees
An application for authorisation by an
affiliated company is processed within a statutory period of three (3)
months.
The fees applicable to AICs are as follows:
- Application for authorisation Lm 500 (c.
€ 1,250)
- Acceptance of Apllication Lm 500 (c. € 1,250)
- Continuance of authorisation Lm 1,000 annually (c. € 2,500 annually)
2. INSURANCE MANAGEMENT
COMPANIES
Companies carrying on affiliated insurance
may employ the services of an insurance management company. The
Insurance Business Act defines an Insurance Manager as a person
authorised to carry out activities that consist of accepting an
appointment from a company to manage any part of its business, or to
exercise managerial functions therein, or to be responsible for
maintaining accounts or other records of such company.
Currently there are 8 Insurance Management
Companies domiciled in Malta that can provide you with such services,
namely:
- Alternative Risk Management (Malta) Ltd
- Aon Insurance Managers (Malta) Ltd
- Ark Insurance Management (Malta) Ltd
- Heath Lambert Insurance Management (Malta) Ltd
- HSBC Insurance Management (Malta) Ltd
- International Insurance Management Services Ltd
- Marsh Management Services Malta Ltd
- United Insurance Management Ltd
3. TAXATION
3.1. Corporate Taxation
The effective rate of Taxation for an AIC
registered as an
International Trading Companies
is 4.17 %.
An AIC is taxable at the normal company
rate of tax which currently is 35%. Yet, if such a company underwrites
risks situated outside Malta, it is able to operate the foreign income
account and non-resident shareholders may benefit from the refund of tax
on distributions from this account. In respect of income allocated to
the foreign income account it is possible to claim, at company level a
flat rate foreign tax credit which produces an effective rate of 18.75%.
Moreover, pursuant to a dividend distribution non-resident shareholders
may claim back two thirds of the tax paid by the company in respect of
the profits out of which the dividend was paid.
One might also suggest dividend feeder
companies being set up for receiving dividends and return it to
re-capitalise the insurance company.
3.2. Other Tax Benefits
technical provisions and equalisation
reserves may be deduced in the computation of taxable income;
double tax relieves – such as the 44
double taxation treaties currently in force in Malta and the flat rate
foreign tax credit;
duty is not chargeable under the Duty
on Documents and Transfers Act in respect of any contract of insurance
relating to a risk situated outside Malta;
captive management services are also
zero rated for VAT purposes.
See also:
Library:
Malta International Trading Companies
International Tax
Licensing
.
