John Tortell
Exchange Re SCC

Exchange Re’s John Tortell explains how Malta can become an ILS hub

Exchange Re has received approval for the EU’s first SSC platform for cell-based ILS and collateralised reinsurance transactions. How will this work and what do you have to go through to set it up?

Malta is the first EU member state to adapt cell structures for insurance-linked securities (ILS) transactions. Dedicated regulations give certainty to securing capital for insurance entities.

This is the first ILS platform in Malta for private collateralised reinsurance and other ILS transactions organised as a securitisation cell company (SCC).

Exchange Re’s segregated cells will be constituted to enter into securitisation transactions. Authorised as a reinsurance special purpose vehicle (RSPV) under the Maltese RSPVs regulations and fully compliant with the EU Solvency II regime, the platform offers lower costs and a quicker set-up time for individual transactions.

Exchange Re invites all managers to populate and manage cells on the platform. This is an independent structure that will allow other managers to manage cells in the structure. The purpose of this is to relieve the managers from the requirement of owning a platform together with the issues of conflict of interest that these may generate.

Market research was done and a niche market exists. Therefore, together with the Malta Financial Services Authority (MFSA), a process was enacted to ensure the application process was initiated and over the period a seamless transition to the market was made.

Do you think the approval of Exchange Re will spur an interest in others to follow suit?

It could be that others follow suit. In an ever-evolving market new solutions are continuously being looked at but first-mover advantage is what we were also looking at.

With time, do you think Malta has the potential to become a European ILS hub?

Definitely. As Malta has become an EU destination for captive entities, we also feel that Malta will also eventually also become a European ILS hub. The regulator has been providing the tools to the market operators, enacting laws that increase the visibility of Malta as an insurance destination.

Over the years, the local market operators, which include all the major international names, have moved ahead with these tools to enhance the local product offering internationally.

Cell creation is subject to regulatory approval and the MFSA is committed to processing applications in line with market-standard timeframes that are established with applicants beforehand. This business approach of the MFSA is crucial to the whole process.

The benefits of cells in the SCC include: a market-friendly authorisation process; cost-efficient structure; Solvency II-ready; managed or self-managed; tax neutral irrespective of funding model; all benefits of the Securitisation Act, for example statutory bankruptcy remoteness; and robust legal structure and segregation. These are all important if Malta is to become an EU ILS hub.

What more does Malta need to do to achieve a European ILS hub status and compete with the likes of Cayman and Bermuda?

The importance is credibility from all the service providers’ side and speed to market from the regulator. Malta needs to compete with the likes of Cayman and Bermuda to become an ILS hub that can provide an alternative cost-effective efficient solution. Being EU-based can add to the attraction for operators that need ease of access to markets.

In five years, where do you see Malta’s ILS market?

We see that EU companies would want to be located in the EU especially with the increasing compliance requests and ease of access. With some cells being authorised, one will be able to test the benefits of the scenario and will therefore push more arrangers, sponsors and brokers to use the domicile for their transactions.

The latest interviews from Captive Insurance Times
The latest features from Captive Insurance Times
What should a captive look for when hiring a firm to manage its portfolio? Stephen Nedwicki of Comerica Bank takes a look
Martin Membery and Andrew Holland of Sidley Austin discuss the signing of the EU-US bilateral covered agreement and who will potentially benefit from it
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Michael Zuckerman of Temple University Fox School of Business makes the case for a captive insurance company independent board director
This year’s Bermuda Captive Conference highlighted the importance of the captive industry to the island, and the need to stay ahead of the curve in terms of regulation and innovation in order to maintain its global status
Brady Young, Stuart King and Andrew Berry tell Becky Butcher about the decision to expand into Europe with a new operation in Dublin
Unscrupulous micro captive managers and their motley crews might have walked their last plank following the ruling in the good ship Avrahami
More than 200 delegates gathered in Charlotte, North Carolina, to attend the state’s three-day annual captive insurance conference. Becky Butcher reports
John Dies and Steve Miller of alliantgroup analyse the Avrahami tax court case decision, and warn captives to take a look at their own programmes
Domicile profiles
The latest domicile profiles from Captive Insurance Times
Although the Isle of Man is currently focusing on updating its regulatory framework, Solvency II, Brexit and the Asian market all hold big opportunities for the island
Debbie Walker of the North Carolina Department of Insurance tells Becky Butcher why the state is among 2017’s standout performers
Asset Servicing Times

Visit our sister site
for all the latest asset servicing news and analysis
Experts convene to talk to Becky Butcher about the stability that Guernsey represents in a challenging financial and political environment
In an era of increasing uncertainty, Tamatoa Jonassen suggests that the Cook Islands can be a bridge to financial security in a captive
With a dedicated captive plan in place, the Lone Star State is on the rise, says Josh Magden of the Texas Captive Insurance Association
After 36 years of captive business, Vermont boasts a culture of legislative change, and still has a few tricks up its sleeve. Dan Towle and David Provost explain
After a successful 2016 and the licensing of its first securitisation cell company, Malta insurance industry professionals are looking ahead to 2017
Missouri’s captive programme is approaching a decade in operation. John Talley explains how the state has made it to this milestone