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The Maltese regulator, together with its government, have developed a regulatory environment in which they believe reinsurance SPVs can flourish, but Professor Bannister stressed that Malta is not trying to compete with any other jurisdiction.
According to the IFSP, reinsurance SPVs are designed to complement traditional (re)insurance arrangements and be a cost-effective mechanism to provide additional capital to (re)insurers while contributing to premium price competitiveness and smoothing against adverse insurance market cycles.
Professor Bannister said the island has no specific targets in terms of numbers of reinsurance SPVs established but is determined to deliver in terms of quality and reputation. He added the jurisdiction has already gained considerable traction in this area since January.
His words were echoed by the IFSP's Neville Gatt who said that the system in Malta was designed to be as straightforward as possible. From a taxation perspective, for example, the rules in Malta are clearer than other countries and are designed to be cost neutral for businesses bringing a RSPV to the island, he said. "We wanted to ensure there were no tax obstacles", he explained.
Malta hopes to be the first European Union member state to offer an operating environment for reinsurance SPVs compliant with Solvency II. The EU Reinsurance Directive provides member states with an authorisation and regulatory framework that enables insurance or reinsurance undertakings to transfer risks to reinsurance SPVs.
The MFSA has been aligning the regulatory regime for reinsurance SPVs under the Insurance Business Act to EIOPA Advice for Level 2 Implementing Measures on Solvency II: Special Purpose Vehicles.
The Maltese Reinsurance SPV Regulations define such entities as 'an undertaking, other than an existing insurance undertaking or reinsurance undertaking, which assumes risks from a ceding undertaking and which fully funds its exposure to such risks through the proceeds of a debt instrument or any other financing mechanism where the repayment right of the providers of the particular debt or financing mechanism are subordinated to the reinsurance obligations of the RSPV'.
The regulatory framework for reinsurance SPVs includes: