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.

Interviews
The latest interviews from Captive Insurance Times
Features
The latest features from Captive Insurance Times
Jeremy Colombik of MSI and NCCIA chair explains to Becky Butcher that Notice 2016-66 could be detrimental to not just North Carolina, but other domiciles that are home to smaller captives
Alan Fine of Brown Smith Wallace explains how the industry should proceed after the Avrahami court case ruling
Join Our Newsletter

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

Subscribe now
Dana Hentges Sheridan, general counsel and chief compliance officer at Active Captive Management, provides insight into the differences between business risks and insurance risks
Predicting when interest rates will change is difficult, which is even more reason to maintain a disciplined approach to your investments, according to Stephen Nedwicki of Comerica Bank
Looking ahead to 2018, Phillip Giles of QBE North America predicts continued uncertainty for the healthcare reform
Michael Schroeder of Roundstone explains why transparency, control and cost savings are the secret sauce offered by a medical captive
Attendees of the Guernsey Insurance Forum heard how important it is for different parts of the industry to work together not only to co-exist, but also to collaborate
Captives must demonstrate they are both efficient and cost effective. Colin Freeman and Peter Downey explain what Barclays can do to help
Domicile profiles
The latest domicile profiles from Captive Insurance Times
Tennessee’s governor, commissioner, general assembly and business community have all worked together to create ‘explosive growth’ in the state’s captive insurance industry. Julie Mix McPeak explains more
Newly-appointed chairman of CCIA Michael Maglaras suggests that the future is bright for state’s captive industry
Asset Servicing Times

Visit our sister site
for all the latest asset servicing news and analysis

assetservicingtimes.com
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
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