Insurance Brokers as Protected Cell Companies

The continuous growth in popularity of the Protected Cell Company (PCC) structure in Malta is an ongoing trend. This is evidenced by the increase year on year since the legislation came into force in 2004 in the number of insurance undertakings being established as PCCs, reaching 16 as at the end of September 2019 with 55 approved protected cells.

This success story is also noticeably emerging in the insurance intermediary sector.

Taking advantage of the fact that the Maltese PCC legislation also extends to insurance managers and insurance brokers, Malta is experiencing growth in the establishment or conversion of such intermediaries into a PCC structure.As at 30^th June 2019, there were a total of 6 insurance intermediaries set up as PCCs, comprising of 3 insurance management companies with two approved cells between them and 3 insurance broking firms with 6 approved cells between them.

The uptake in the number of insurance intermediaries established or converted into a PCC structure has been mainly observed in the insurance broking field.The following are a number of factors which may be underpinning this upward trend:

1. Extending the cost-benefits and opportunities arising from the PCC structure to the insurance broking market;

2. Facilitating growth opportunities from new clients or investors wishing to set up their own protected cell within an existing insurance broking PCC structure;

3. Unique opportunity due to Malta being the only PCC jurisdiction which has applied this structure to insurance intermediaries;

4. Incubator for innovative insurance broking business models such as technology-driven start-ups;

5. Alleviate and mitigate the impact on insurance brokers of the new challenges arising from the Insurance Distribution Directive;

6. For UK insurance brokers where their insurance distribution activity involves risks situated in the EU, the PCC structure is an effective solution to retain access to such European markets in a post-Brexit environment by allowing them to continue transacting insurance business through the ownership or use of protected cells in insurance brokers PCC structures without the need to establish a stand-alone insurance broking company within the EU;

7. Tried and tested regime – the PCC concept and the flexibility and scalability which the PCC structure offers are well known and well understood by the Maltese insurance market with experience spanning over 15 years since the legislation came into effect.

Based on the above, it is envisaged that more insurance intermediaries consider the PCC structure as a vehicle to unlock new and untapped opportunities for further future growth.