SFCR, a study of the Maltese insurance industry reporting and comparative analysis with foreign insurance companies : proposals and recommendations

Abstract

Objective: Following the first wave of SFCRs compiled by local companies in terms of Solvency II, it was considered opportune to support the local insurance industry through a study to improve SFCR quality. The relatively small size of the Maltese market will likely not be conductive for an independent analyst to undertake such a review, primarily for economic reasons. The research was tackled through: 1. Identification of the challenges to compile SFCR.

2. Establishing how the document can add value to all stakeholders.

3. Analysing the quality of documents produced by local entities and benchmarking these against the SFCRs produced by larger and more resource-rich foreign companies. Design: The findings of this study were established through; 1. A review of what was proposed and adopted in the UK and Ireland to improve the SFCR process. 2. A comparative analysis of five SFCRs from five main insurance companies targeting the domestic market and three SFCRs of foreign based companies selected on the basis of what was considered a good document on the back of a desktop selection review. 3. An interview process with senior executives from the five local insurance companies whose SFCRs were reviewed, three major local brokers, the MFSA and a legal practitioner advising the insurance industry. Findings: SFCRs produced varied in quality. There is scope for improvement in structure, presentation and certain sections of the document need to be enhanced in detail. The SFCR process identified the need for investment in certain areas, particularly the risk function. Value and conclusion: Companies need to invest more in the compilation of SFCR, to render the compilation itself less of a burden, possibly offering value added to the companies and stakeholders and to make it more readable and understandable. A branded and strong document can be a sound investment and a powerful marketing tool. It will be an opportunity for the company to differentiate itself and position strengths. Companies need to critically review what they have produced and gauge it against that of local and foreign peers. This dissertation establishes that the SFCR document can be an effective tool for the benefit of all stakeholders if it is improved quantitatively and qualitatively. An investment in required to create awareness in the value of SFCR with the general public. The potential value of SFCR also needs to be explained to operators in the industry. This should be an industry lead initiative with the support of the Regulator and educational organisations such as MITC.