OECD Malta Report 101: Relevance to Insurance Undertakings (including PCC and/or Captives)

Date

Malta Stock Exchange from Barrakka Gardens

Share this article

Share on linkedin
LinkedIn
Share on twitter
Twitter
The aim of this short piece is to synthesize the OECD Report on Malta issued recently in 2020 which resulted in a downgrade for the country from 'largely compliant' to 'partially compliant' on matters of transparency and exchange of information for tax purposes.

OECD Malta Report 101: Relevance to Insurance Undertakings (including PCC and/or Captives)

James Portelli is a chartered insurance risk manager holding an senior executive role in an international insurance undertaking, non-executive directorships on a portfolio of insurance companies operating in or from Malta by virtue of the EU Freedom of Service Directive and a member of the Cutts-Watson Consulting panel. He is also lecturing on insurance programmes at the University of Malta.
Views expressed are personal and may not be deemed to constitute advice.
 
Aim
The aim of this short piece is to synthesize the OECD Report on Malta issued recently in 2020 which resulted in a downgrade for the country from ‘largely compliant’ to ‘partially compliant’ on matters of transparency and exchange of information for tax purposes.
 
More importantly the paper expresses views on the potential impact of this report on insurance undertakings and new applicants or entities considering applying to be authorized as an insurance undertaking in Malta.
 
Executive Summary
If you do not have time to read the rest of the paper the following 3 paragraphs succinctly summarize the piece and of the OECD report (in as far as it will impact insurance undertakings specifically).

Enterprises that use their insurance companies as insurance companies, i.e. to underwrite and carry risk and who share risks with their reinsurers to mitigate net exposure from or leverage capital on their balance sheet, have nothing to worry about. One is to expect increased scrutiny from banks in requests for information on ultimate beneficiary owners. But, other than that, there is no increased risk to their undertaking and/or their clients arising from the conclusion of this report. It is highly unlikely that profits, taxation on profits (6/7th rebates and/or NID) and repatriation of profits would be impacted by any actions arising from the findings of this report; and

 
Enterprises with multiple layers of ownership and/or opacity at ultimate beneficiary ownership, whose insurance companies are purely or, mainly, camouflaged vehicles for leveraging tax liabilities may have a problem. The whole focus of this ongoing exercise is specifically on transparency and exchange of information for tax purposes; and
 
The OECD Rating has no bearing on the country’s credit rating, which even in the wake of economic upheavals inflicted by Covid-19, Malta retained its A rating.
 
Report Caveats
What the report is and is not:
 
It provides insight into transparency and exchange of information for tax purposes.
It is not a credit rating report of the economy.
 
The Global Forum behind the report consists of 160 countries on equal footing charged with monitoring and with country peer reviews. So the report is not the result of a regulatory or supervisory inspection imposed upon a country but a peer review exercise. ‘Fishing expeditions’ are also not authorized since the underlying framework of such exercises are the United Nations Model Double Taxation Convention and all information is freely and officially provided or publicly available by / in countries under review.
 
Views expressed in these peer review reports are not necessarily the official views of OECD countries. Nonetheless they are a compelling ‘sanity check’, in this case for Malta, on issues of transparency and exchange of information for fiscal purposes.
 
Report Conclusions and the Underlying Factors
The full report is Below: Go to it right now 
 
Global Forum on Transparency and Exchange of Information for Tax Purposes: Malta 2020 (Second Round) Peer Review Report on the Exchange of Information on Request
 
 In the latest round of assessments Malta was deemed to be “Partially Compliant”. This is a downgrade from the earlier “Largely Compliant”.
 
Summarizing the result from the 10 categories that were assessed by rapporteurs, in 6 of these areas (including access to information, rights, safeguards, EOIR mechanisms, Network of EOIR Mechanisms and confidentiality) Malta was deemed to be “Compliant”. There is no change in 2020 from the earlier round of assessments in 2013 in these areas.
 
Which are the 4 areas that suffered a downgrade and why are they sufficiently important to drive an overall
 
“Largely Compliant” result in 2013 when 3 of the 10 assessment areas were largely compliant (the rest were compliant)?; and
“Partially Compliant” result in 2020 when 4 of the 10 assessment areas were partially compliant (the rest were compliant)?
 
The areas where, in the opinion of rapporteurs, Malta was partially compliant were:
 
1. The availability of ownership and identity information. This refers primarily to ultimate beneficiary ownership of companies registered and opening bank accounts in Malta.
 
2. Availability of accounting information, again, of ultimate beneficiary owners.
 
3. Quality and timeless of responses for information under the OECD Co-operation rules.
 
These 3 areas are at the heart of transparency principles and exchange of information for tax purposes between the cooperating countries and, therefore, largely viewed as a concern for the jurisdiction as a whole (and banks in particular), resulting in the said downgrade.
 
While affirmative action has already been taken to strike out inactive accounts, the report did note some 20,000 inactive companies in the Register of Companies and 12,000 inactive accounts with the Commissioner for Revenue. The inactive accounts caused concern on the availability of information and financials of ultimate beneficiary owners and, according to the report, “caused failure in practice to provide related information to partner countries.” Similarly, while the legal framework was in place for the collecting of UBO information, the supervisory process or regime for this to be undertaken was deemed by rapporteurs to be weak. This finding also perhaps explains the recent flurry of activity by the larger banks on the island to collect and or confirm UBO information that they have on file particularly for locally registered, foreign owned companies, for trusts, for foundations and for NGOs or voluntary organizations.
 
Conclusion
Malta is a willing participant country in these peer reviews and takes findings seriously. MFSA (Malta Financial Services Authority) has beefed up supervisory teams, banks are actively engaging with clients to ensure completeness of information where this was (or may be) deemed to be weak or insufficient, the Registry of Companies and the Commissioner for Revenue are striking off inactive companies / accounts and resources and regimes for EOI responses have been made more robust. The review process is a continuous exercise not unlike internal audit cycles in companies.
 
Therefore, with the above measures it is expected that Malta will regain the “Largely Compliant” or “Compliant” status again.
 
In the meantime, it should still be business as usual for insurance undertakings or applicants.
Lapsi1

Free
Consultation

You can contact us through social media, fill in the form below or give us a call.

Thank you

For taking the time to fill in the survey. If you would like to speak to one of the team feel free to contact us at CWC

Captive Managers

- Stakeholders -

We do not seek to assume or duplicate responsibilities and activities performed by a Captive Manager. Rather, we look to bring added value to client service and/or assist the Captive Manager’s management of their own business. We bring extensive experience of running a captive management business including strengthening a value proposition, winning business, innovative thinking and developing staff.

Examples of CWC services for Captive Managers:

  • Act as a Non Executive Director of clients under management.
  • Assist in responding to RFP’s.
  • Review internal processes and procedures.
  • Facilitate internal workshops or away days to set strategy, establish plans or solve a particular problem.
  • Assist in staff training and education.
  • Assist in development and delivery of marketing and sales plans.
  • Act as challenger or ‘Devil’s Advocate’ to test strategy.
  • Undertake client and employee surveys.
  • Provide market intelligence.
  • Advise on complex or unusual issues or situations that captive managers may not have encountered before.
  • Assist in identifying, and recruitment of, suitable candidates for vacant or newly created senior positions.

Our CWC Products designed for Captive Managers:

  • xxxxxxxx.
Captive Owners_blue hue

Captive Owners

- Stakeholders -

If you are considering captive insurance for the first time or need quality independent advice on change management, CWC can assist you ensuring the captive insurance vehicle is right for your organisation.

Examples of CWC services for Captive Owners:

  • Strategic review. Is your captive business plan still relevant and delivering real value?Creation of a strategic road map to optimise the captive’s effectiveness and meet key drivers.
  • Domicile review. Could your captive objectives be better achieved in another location?
  • Exit strategies. If your captive has run its course, what is the best means to exit the business?
  • Health check. Are you comfortable your captive is operating efficiently and in line with industry best practice?
  • Bespoke consulting to respond to particular issues your captive faces.

CWC Products for Captive Owners:

Captive Strategic Review

Captive Feasibility Study

Captive-Feasibility-Study-tile

Captive Health Check

Captice_Health_CHECK_tile

Industry Engagement

- Employment of Talent -

To continue to offer, or to create, a compelling and competitive captive offering, domicile authorities need to understand the global captive marketplace, changing stakeholder demands and threats or opportunities for the business. It can be a challenge for these bodies to be able to access independent, insightful advice upon which to base their strategic planning and resource allocation.

Examples of CWC services for Industry Engagement:

  • Advising regulators on pragmatic implementation of regulatory change.
  • Recommend to promotional agencies how to enhance their domicile proposition and advance their strategic thinking.
  • Assist governmental bodies on the needs of the captive industry to facilitate the delivery of enabling legislation to allow the local captive business to flourish.
Service Providers_blue hue

Service Providers

- Stakeholders -

If you are looking to create, enhance or take to market your captive proposition we can advise you on the best way to proceed. CWC is wholly independently owned and not associated with another broking or insurance company, giving it complete independence and flexibility. This allows us to work with you to deliver to the captive market a best in class offering that benefits from our combined accumulated knowledge and wisdom.

Examples of CWC services for Service Providers:

We maintain close links with captive industry globally and so are able to guide you through market dynamics, culture & accepted practice, trends and emerging developments. Our extensive network of contacts ensures honest feedback and access to key influencers and decision makers in the domiciles.

We can contribute to your marketing and sales planning and facilitate product launches, or simply be a sounding board for your ideas.

Captive Strategic Review

- for Captive Owners-

If you are looking to create, enhance or take to market your captive proposition we can advise you on the best way to proceed. CWC is wholly independently owned and not associated with another broking or insurance company, giving it complete independence and flexibility. This allows us to work with you to deliver to the captive market a best in class offering that benefits from our combined accumulated knowledge and wisdom.

Download the Brochure :

Coming Soon

Captive-Strategic-Study-A4
Captive-Feasibility-Study-tile

Captive Feasibility Study

- for Captive Owners-

If you are looking to create, enhance or take to market your captive proposition we can advise you on the best way to proceed. CWC is wholly independently owned and not associated with another broking or insurance company, giving it complete independence and flexibility. This allows us to work with you to deliver to the captive market a best in class offering that benefits from our combined accumulated knowledge and wisdom.

Download the Brochure :

Coming Soon

Captive-Feasibility-Study-A4
Captice_Health_CHECK_tile

Captive Health Check

- for Captive Owners-

If you are looking to create, enhance or take to market your captive proposition we can advise you on the best way to proceed. CWC is wholly independently owned and not associated with another broking or insurance company, giving it complete independence and flexibility. This allows us to work with you to deliver to the captive market a best in class offering that benefits from our combined accumulated knowledge and wisdom.

Download the Brochure :

Coming Soon

Captive-Health

Insurers & Reinsurers

- Partners -

The market typically interacts with a captive in the following ways:

  • Underwriting the risk of the insured and then reinsuring all or part of the risk to the captive (“fronting”).
  • Acting as a reinsurer of the captive to accept excess risk above the captive’s risk bearing appetite. The captive may have assumed risk on a direct basis from the insured or via a fronting arrangement.


In all situations (re)insurance industry stakeholders should interact with the captive on the same terms as they would with any other market participant yet recognising the unique characteristics of the captive arrangement.

Examples of CWC services for Insurers & Reinsurers:

  • Conduct In-house workshops to ensure full understanding of the captive model, the roles and relationship of all parties in a captive arrangement and flow of funds and documentation.
  • Advise on captive participation; programme design, operational processes and procedures, collateral, and reporting requirements.
  • Inform of the needs of the captive industry in respect of fronting services and reinsurance protection.
  • Advise on developments and trends in the captive industry such as governance and regulatory changes and explain the impact on the captive and on your involvement.
  • Act as your in-house captive centre of excellence, either remotely or participate in discussions with the insured and their advisers.
  • Introduce you to key captive stakeholders and influencers.
  • Assist and participate in marketing activities.

Domicile Regulators, Governments &
Promotional Agencies

- Partners -

To continue to offer, or to create, a compelling and competitive captive offering, domicile authorities need to understand the global captive marketplace, changing stakeholder demands and threats or opportunities for the business. It can be a challenge for these bodies to be able to access independent, insightful advice upon which to base their strategic planning and resource allocation.

Examples of CWC services for Domicile Regulators & Promotional Agencies:

  • Advising regulators on pragmatic implementation of regulatory change.
  • Recommend to promotional agencies how to enhance their domicile proposition and advance their strategic thinking.
  • Assist governmental bodies on the needs of the captive industry to facilitate the delivery of enabling legislation to allow the local captive business to flourish.

Education

- Human Capital -

CWC Human Capital Coloured line-8

As part of our commitment to develop the talent in the captive industry, we host various educational events. Recent examples include the 2015 UK Insurance Act and management of assets in a Solvency II world.

We also run an Advanced Captive Training programme as we have identified there is little structured educational resource in the industry beyond introductory courses.

Our consultants are frequent speakers at industry events covering technical topics as well as offering their outlook on the current and future captive landscape.

CWC Human Capital Coloured line-8

Examples of CWC services for our Commitment to Education:

CWC Human Capital Coloured line-8

Career Development

- Human Capital -

CWC Human Capital Coloured line-8
We offer an objective and confidential service to talent wishing to assess their career opportunities. We can draw upon many years of experience and offer detached advice on your career path and learning development
CWC Human Capital Coloured line-8

Examples of CWC services for our Commitment to Career Development:

CWC Human Capital Coloured line-8

International Recruitment

- Human Capital -

CWC Human Capital Coloured line-8
We offer an objective and confidential service to talent wishing to assess their career opportunities. We can draw upon many years of experience and offer detached advice on your career path and learning development
CWC Human Capital Coloured line-8

Examples of CWC services for our Commitment to Career Development:

CWC Human Capital Coloured line-8

Board Development

- Human Capital -

CWC Human Capital Coloured line-8

The Board, and individual Board Members, face a growing array of stakeholders’ scrutiny whilst directing a captive or SME insurer. Increasingly, they are looking to external independent counsel to ensure, and provide evidence, that they are a high performing and soundly governed caucus.

CWC Human Capital Coloured line-8

Examples of CWC services for our Commitment to Board Development:

CWC Human Capital Coloured line-8

Our Products:

Regenesis-Boardroom-Review-A4
CWC Human Capital Coloured line-8

Thomas Welsh

Board Development Coach

39+ years cross sector experience in releasing potential of boards, organisations, and their managers and leaders. Author of ‘Building the Future’ acclaimed development guide for boards and their members.

Thomas Welsh

Board Development Coach

39+ years cross sector experience in releasing potential of boards, organisations, and their managers and leaders. Author of ‘Building the Future’ acclaimed development guide for boards and their members.

Non-Executive Directorship

- Employment of Talent -

To continue to offer, or to create, a compelling and competitive captive offering, domicile authorities need to understand the global captive marketplace, changing stakeholder demands and threats or opportunities for the business. It can be a challenge for these bodies to be able to access independent, insightful advice upon which to base their strategic planning and resource allocation.

Examples of CWC Consultant held Non-Executive Directorships:

  • Advising regulators on pragmatic implementation of regulatory change.
  • Recommend to promotional agencies how to enhance their domicile proposition and advance their strategic thinking.
  • Assist governmental bodies on the needs of the captive industry to facilitate the delivery of enabling legislation to allow the local captive business to flourish.

Short Term Consignment

- Employment of Talent -

To continue to offer, or to create, a compelling and competitive captive offering, domicile authorities need to understand the global captive marketplace, changing stakeholder demands and threats or opportunities for the business. It can be a challenge for these bodies to be able to access independent, insightful advice upon which to base their strategic planning and resource allocation.

Examples of CWC services for Short Term Consignment:

  • Advising regulators on pragmatic implementation of regulatory change.
  • Recommend to promotional agencies how to enhance their domicile proposition and advance their strategic thinking.
  • Assist governmental bodies on the needs of the captive industry to facilitate the delivery of enabling legislation to allow the local captive business to flourish.
Malcolm_Square_shaped_white_backdrop

Malcolm Cutts-Watson

Founder & Managing Director

A seasoned captive practitioner and consultant, Malcolm has gathered vast experience over 4 decades working in different domiciles and advising companies and regulatory bodies across the world.

Malcolm Cutts-Watson has spent most of his professional career in the captive insurance industry.

He started in Bermuda in 1982, was in the vanguard of the development of Vermont captive business and then worked in Guernsey. During his career, Malcolm has advised captive stakeholders on strategic, operational and governance matters across a broad range of industries and jurisdictions . He also advises governmental and regulatory bodies on legislative and regulatory change.

He has served, and continues to serve, as a director on a variety of captive insurers and is an approved person in many captive domiciles. He qualified as an accountant in 1982.

Malcolm was a member of the Captive Review Power 50 and in 2015 received the industry’s outstanding contribution by an individual award.

In 2017 he became an inaugural inductee into the Captive Hall of Fame which recognises the most influential figures in the captive industry over the past 50 years.

He has acted as industry partner to AIRMIC’s Captive Special Interest Group. He is a regular contributor to industry debate and is a passionate advocate for the raising of standards in the captive industry.

Malcolm founded CWC in 2015 to allow organisations access to the accumulated knowledge, insight and solutions that he, and the rest of the CWC team of captive insurance experts, have gathered over their lifetimes.

Malcolm Cutts-Watson

Founder & Managing Director

Malcolm_Square_shaped_white_backdrop

A seasoned captive practitioner and consultant, Malcolm has gathered vast experience over 4 decades working in different domiciles and advising companies and regulatory bodies across the world.

Malcolm Cutts-Watson has spent most of his professional career in the captive insurance industry.

He started in Bermuda in 1982, was in the vanguard of the development of Vermont captive business and then worked in Guernsey. During his career, Malcolm has advised captive stakeholders on strategic, operational and governance matters across a broad range of industries and jurisdictions . He also advises governmental and regulatory bodies on legislative and regulatory change.

He has served, and continues to serve, as a director as a director on a variety of captive insurers and is an approved person in many captive domiciles. He qualified as an accountant in 1982.

Malcolm was a member of the Captive Review Power 50 and in 2015 received the industry’s outstanding contribution by an individual award.

In 2017 he became an inaugural inductee into the Captive Hall of Fame which recognises the most influential figures in the captive industry over the past 50 years.

He has acted as industry partner to AIRMIC’s Captive Special Interest Group. He is a regular contributor to industry debate and is a passionate advocate for the raising of standards in the captive industry.

Malcolm founded CWC in 2015 to allow organisations access to the accumulated knowledge, insight and solutions that he, and the rest of the CWC team of captive insurance experts, have gathered over their lifetimes.