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

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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.
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Dominic-Wheatley_CWC_Team

Dom Wheatley

Consultant

A seasoned captive practitioner and consultant, finance industry experience with over 25 years  world class knowledge.

Exiting Chief Executive of Guernsey Finance, the promotional agency for Guernsey’s finance industry.

His role included business development and the promotion of Guernsey’s finance industry in the Island’s target markets including Europe, the US and the emerging markets, technical research to support promotional activities and liaison with industry associations and government.

Previously Chief Marketing Officer of the Willis Global Captive Practice and Managing Director of its Guernsey business. Over 25 years of finance experience in London and, for the past 19 years in Guernsey.

A member of the Institute of Directors and serve as a non-executive director on a number of local boards. A fellow of the Chartered Insurance Institute and holds an M.B.A from Warwick University.

Dom Wheatley

Consultant

Dominic-Wheatley_CWC_Team

A seasoned captive practitioner and consultant, finance industry experience with over 25 years  world class knowledge.

Exiting Chief Executive of Guernsey Finance, the promotional agency for Guernsey’s finance industry.

His role included business development and the promotion of Guernsey’s finance industry in the Island’s target markets including Europe, the US and the emerging markets, technical research to support promotional activities and liaison with industry associations and government.

Previously Chief Marketing Officer of the Willis Global Captive Practice and Managing Director of its Guernsey business. Over 25 years of finance experience in London and, for the past 19 years in Guernsey.

A member of the Institute of Directors and serve as a non-executive director on a number of local boards. A fellow of the Chartered Insurance Institute and holds an M.B.A from Warwick University.

Ashley-Paxton_CWC_380-450

Ashley Paxton FCA

Project Consultant

Guernsey based chartered accountant with c30 years’ experience spent in practice.

Recently retired as partner and head of Advisory for KPMG in the Channel Islands.

Guernsey based chartered accountant with c30 years’ experience spent in practice.

Unique blend of operational and client experience split between audit and advisory latterly focused on providing transactional support across the insurance, funds, fiduciary and banking sectors as well as local government.

Led a number of high profile and innovative engagements for the States of Guernsey including:

2017 – States bond issue commissioned by the Scrutiny Management Committee
2017 – Guernsey housing market review
2016 – Strategic review of the Guernsey fiduciary industry
2015 – Financial mitigation for milk distributors
2015 – International Capital Flows (funds sector)
Various other confidential engagements

Qualifications
Fellow of the Institute of Chartered Accountants in England and Wales
BSc (Hons) Economics, University of Warwick

Ashley Paxton FCA​

Project Consultant

Ashley-Paxton_CWC_380-450

Guernsey based chartered accountant with c30 years’ experience spent in practice.

Recently retired as partner and head of Advisory for KPMG in the Channel Islands.

Guernsey based chartered accountant with c30 years’ experience spent in practice.

Unique blend of operational and client experience split between audit and advisory latterly focused on providing transactional support across the insurance, funds, fiduciary and banking sectors as well as local government.

Led a number of high profile and innovative engagements for the States of Guernsey including:

2017 – States bond issue commissioned by the Scrutiny Management Committee
2017 – Guernsey housing market review
2016 – Strategic review of the Guernsey fiduciary industry
2015 – Financial mitigation for milk distributors
2015 – International Capital Flows (funds sector)
Various other confidential engagements

Qualifications
Fellow of the Institute of Chartered Accountants in England and Wales
BSc (Hons) Economics, University of Warwick

Graham-Powell_CWCTeam

Graham Powell

Consultant

Graham has spent four decades working in the insurance industry. He has a wealth of experience in all aspects of an insurer’s life cycle including feasibility, formation, management, revalidation and de-risking. In recent years Graham has specialized more on regulatory and compliance work for commercial insurers.

Based in Guernsey, Graham brings his unique skill-set CWC working centrally with the team as it responds to the diverse and ever-changing needs of its clients.

Graham has made his career in the Guernsey finance industry. For more than 35 years he held a senior position at the largest and most innovative captive manager in Europe. As a practitioner, Graham’s own diverse portfolio of clients were accustomed to 1) new ideas and techniques being introduced on a regular basis and 2) no stone being left unturned in the unceasing quest for new lines of business.

As a result of so many years at the “coal face” Graham has a unique insight into every aspect of insurance management. This wealth of experience is now channeled into helping CWC’s clients realise the full potential of their insurers.

Outside of CWC, Graham also acts as an independent director on a number of Guernsey regulated and non-regulated boards of entities for groups operating in a wide range of industries. The owners of these groups range from private individuals to constituents of the FTSE 100.

Graham is a Chartered Insurance Practitioner and a Fellow of the Chartered Insurance Institute by examination. He is registered and approved as a Director with the Guernsey Financial Services Commission.

Graham Powell

Consultant

Graham-Powell_CWCTeam
Graham has spent four decades working in the insurance industry. He has a wealth of experience in all aspects of an insurer’s life cycle including feasibility, formation, management, revalidation and de-risking. In recent years Graham has specialized more on regulatory and compliance work for commercial insurers.

Based in Guernsey, Graham brings his unique skill-set CWC working centrally with the team as it responds to the diverse and ever-changing needs of its clients.

Graham has made his career in the Guernsey finance industry. For more than 35 years he held a senior position at the largest and most innovative captive manager in Europe. As a practitioner, Graham’s own diverse portfolio of clients were accustomed to 1) new ideas and techniques being introduced on a regular basis and 2) no stone being left unturned in the unceasing quest for new lines of business.

As a result of so many years at the “coal face” Graham has a unique insight into every aspect of insurance management. This wealth of experience is now channeled into helping CWC’s clients realise the full potential of their insurers.

Outside of CWC, Graham also acts as an independent director on a number of Guernsey regulated and non-regulated boards of entities for groups operating in a wide range of industries. The owners of these groups range from private individuals to constituents of the FTSE 100.

Graham is a Chartered Insurance Practitioner and a Fellow of the Chartered Insurance Institute by examination. He is registered and approved as a Director with the Guernsey Financial Services Commission.

Paul-Wakefield-CWCTEAM

Paul Wakefield

Consultant

Longstanding experience in on & offshore environments most recently as a Non Executive Director with a London market insurance Company. Experienced in feasibility studies, regulatory matters and the set up of insurance subsidiaries for global multi national corporations.

Paul delivers his own in-depth market knowledge of, and insight into, the captive insurance world.

Paul brings longstanding experience of working in both onshore and offshore environments, most recently as a Non Executive Director with a London market insurance company.

He is also currently a Non Executive Director of a number of Guernsey based insurance companies. He provides CWC clients with further valuable knowledge and a proven track record of strategic and operational consulting.

Paul has undertaken numerous feasibility studies and set up insurance subsidiaries for multi- national corporations across the globe.

As part of the work with captives he has overseen portfolio transfers, novations, redomiciliation of captives, Protected Cell Company formation and the design and implementation of multi-year multi-line reinsurance programmes. He also has undertaken various consultancy work on the regulatory side of insurance.

Paul is an Associate of the Chartered Insurance Institute. He is registered and approved as a Director with the UK Prudential Regulatory Authority and the Guernsey Financial Services Commission.

Paul Wakefield

Consultant

Paul-Wakefield-CWCTEAM
Longstanding experience in on & offshore environments most recently as a Non Executive Director with a London market insurance Company. Experienced in feasibility studies, regulatory matters and the set up of insurance subsidiaries for global multi national corporations.

Paul delivers his own in-depth market knowledge of, and insight into, the captive insurance world.

Paul brings longstanding experience of working in both onshore and offshore environments, most recently as a Non Executive Director with a London market insurance company.

He is also currently a Non Executive Director of a number of Guernsey based insurance companies. He provides CWC clients with further valuable knowledge and a proven track record of strategic and operational consulting.

Paul has undertaken numerous feasibility studies and set up insurance subsidiaries for multi- national corporations across the globe.

As part of the work with captives he has overseen portfolio transfers, novations, redomiciliation of captives, Protected Cell Company formation and the design and implementation of multi-year multi-line reinsurance programmes. He also has undertaken various consultancy work on the regulatory side of insurance.

Paul is an Associate of the Chartered Insurance Institute. He is registered and approved as a Director with the UK Prudential Regulatory Authority and the Guernsey Financial Services Commission.

Niall_Lucas_CWCTeam

Niall Lucas

Consultant

Niall has spent most of his professional career in the captive insurance industry. Holds the ACII, FPC & Chartered Insurer along with various accounting, marketing & computer vocations.

Niall has spent most of his professional career in the captive insurance industry.

He started in Guernsey in 1996, where he provided underwriting support the UK Post Office captive.

During his career, Niall has advised captive stakeholders on underwriting, strategic, operational and governance matters across a broad range of industries and jurisdictions.

He has lead difficult consulting projects requiring innovative thinking, high quality communication skills and perseverance.

Niall has exceptional IT knowledge with highly developed research and analytical skills and qualified as a Chartered Insurer and Financial Planner. These attributes together with his vast captive experience allows Niall to fulfill his role as Chief Operating Officer of CWC.

Niall joined CWC in 2015 to support Malcolm in the development of the company. In 2016 he was promoted to COO as CWC continues to grow.

Niall Lucas

Chief Operating Officer

Niall_Lucas_CWCTeam

Niall has spent most of his professional career in the captive insurance industry. Holds the ACII, FPC & Chartered Insurer along with various accounting, marketing & computer vocations.

Niall has spent most of his professional career in the captive insurance industry.

He started in Guernsey in 1996, where he provided underwriting support the UK Post Office captive.

During his career, Niall has advised captive stakeholders on underwriting, strategic, operational and governance matters across a broad range of industries and jurisdictions.

He has lead difficult consulting projects requiring innovative thinking, high quality communication skills and perseverance.

Niall has exceptional IT knowledge with highly developed research and analytical skills and qualified as a Chartered Insurer and Financial Planner. These attributes together with his vast captive experience allows Niall to fulfill his role as Chief Operating Officer of CWC.

Niall joined CWC in 2015 to support Malcolm in the development of the company. In 2016 he was promoted to COO as CWC continues to grow.

Conor_Jennings_CWC_Team

Conor Jennings

Consultant

Conor Jennings FCII, FIRM, TEP is an insurance and risk management professional of many years’ experience.

He has lived and worked in Ireland, UK, Asia, Guernsey, BVI and more recently in the Cayman Islands.

During this time Conor has managed and directed captive insurance companies for clients ranging from small, family-held businesses to US Fortune 500 companies encompassing a whole host of industries.


Having, most recently, spent over a decade in the Caribbean managing mainly North and South American captive insurance clients Conor leverages his deep global knowledge and skills set to provide creative risk financing solutions to clients from all over the world.

Conor Jennings

Consultant

Conor_Jennings_CWC_Team

Conor Jennings FCII, FIRM, TEP is an insurance and risk management professional of many years’ experience.

He has lived and worked in Ireland, UK, Asia, Guernsey, BVI and more recently in the Cayman Islands

During this time Conor has managed and directed captive insurance companies for clients ranging from small, family-held businesses to US Fortune 500 companies encompassing a whole host of industries.

Having, most recently, spent over a decade in the Caribbean managing mainly North and South American captive insurance clients Conor leverages his deep global knowledge and skills set to provide creative risk financing solutions to clients from all over the world.

Malcolm-Cutts-Watson_CWC

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-Cutts-Watson_CWC

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.