A new haven in the sun

The Maltese people are a stoical race. Their island has been occupied many times by diverse invaders - the Phoenicians, the Romans, the Ottomans, the French, Italians, Germans and of course the English. As such, there is a popular phrase used by the locals, 'ix-xemx titla ghall-kulhadd.' "It translates roughly in English to 'the sun shines for everyone'," says Peter Grima managing director of United Insurance Management (UIM). "So when it comes to competition in business, we are happy that there seems to be enough to go round."Grima's company specialises in offering insurers and brokers services and facilities to set up captives on the domicile. Many have taken up the captive management offer. Aon has applied for a licence, Marsh announced an interest earlier this summer, and as yet unconfirmed, Jardine Lloyd Thompson, Heath Lambert and Willis are poised to begin placing business.Grima says the brokers' interest is very much client-led, with opportunities to place tricky liability business such as employers' liability and professional indemnity driving the market. He also says the direct insurers see Malta in a similar light to Gibraltar."Malta has the same advantages as Gibraltar, with EU membership, English speaking, low cost base and tax breaks. Malta is not a zero tax position, which Gibraltar claims to offer, but does have advantages for non-residents. The island is also bigger than Gibraltar, self-governing with good skill sets. The influx of new foreign business means the good local graduates have opportunities and will remain on the island."

Efficient vehiclesIn July this year, new rules for affiliated insurance and insurance management companies were issued by the Malta Financial Services Authority (MFSA). Under this legislation, Maltese companies become efficient vehicles for foreign companies. A company carrying on affiliated insurance is taxable at the normal company rate of 35%. But if the company underwrites risks outside Malta, it can operate a foreign income account and benefit from a tax refund on distributions from this account to non-resident shareholders. So for foreign sourced income it is possible to claim at company level a flat rate tax credit of 18.75% and then by dividend distribution, the company can claim back two-thirds of the tax paid, leading to an effective tax rate of 6.25%.Captive management services pay no VAT and no duty is paid for insurance contracts where the risk is placed outside Malta.The MFSA is tightening the reins on much of the financial services industry. Like Gibraltar, Malta has had to fight the stigma of the offshore status. Memories of the murdered banker Roberto Calvi, nicknamed God's Banker, who allegedly used Maltese banks and investment houses to filter millions of dollars of the Vatican's money, still casts a shadow over its international reputation. Even in July this year, Foreign Affairs Minister John Dalli resigned over allegations that he exercised ministerial influence to get an Iranian shipping line to choose a firm, in which his family had an interest, as its Malta agent.

Independent structureMFSA chairman and president Professor JV Bannister says: "We are often called a clone of the FSA. Well I say the FSA is a clone of us. Our internal structure is very independent compared to many regulators."He points out that the Maltese regulator is concomitant with all EU standards and has passed "exhaustive anti-money laundering reviews" with flying colours from both OECD and IMF investigations. It has also eradicated the 'brass plate' operations renowned in offshore tax havens and to gain a licence means abiding by stricter rules than the UK's FSA.MFSA head of insurance regulation Marisa Attard said: "Every two years each company is given an on-site inspection. But we can spring an inspection on a company particularly if a complaint has been made, for example, over its claims handling procedures or if its auditors have raised an issue."

Insurance qualificationTraining competent staff has become a priority. Directors must be fit and proper and hold a bona fide insurance qualification. The largest domestic insurer, Middlesea, has created a joint partnership with the MFSA, the Maltese government and the Malta Stock Exchange to open a training centre. Middlesea is a predominantly life insurer but controls 25% of the general insurance market, insuring the major commercial sites on the three islands. Anne Marie Tabone is general manager of International Insurance Management Services, the captive management arm of Middlesea Group. She said: "We are preparing all our students at the training centre to take exams up to ACII level. We are expecting a substantial number to graduate over the next two years."

Malta factfileMalta is made up of three islands; Malta, Gozo and Comino. Its population is 392,200, with 20,000 of that number foreign nationals. GDP is $3.6bn; GDP per capita is $9,500; and average annual growth rate in the past ten years is 4%.Malta has eight domestic insurers, 11 foreign insurers and Lloyd's insurers operating on the islands. So far, 22 agents and 24 brokers have licences to trade. There are also 500 sub-agents specialising mostly in life business but the general insurance sector is growing.In April 2003, the Hilton complex in the chic St Julian's district was opened. It has attracted the rich and glamorous after David Beckham bought a £1m penthouse in the adjoining marina. He has since encouraged his old Manchester United colleagues Gary Neville and Rio Ferdinand to buy properties in the complex. The Hilton Malta also has conference facilities which the local business community hopes will attract insurers and brokers.