Legal barriers faced by financial service providers when setting up an insurance company in Malta

Abstract

This research paper focuses on the business of direct insurance undertakings as regulated by the Maltese law. The licensing process is considered from a regulatory point of view together with the requirements which must be fulfilled in order to retain a license to provide insurance service in Malta. The legal obstacles alluded to are those which create a conflict between the operation of a profitable business of insurance vis-a-vis the duty to adhere to a legal and regulatory framework. Furthermore dispute settlement channels are also explored.

The aspects under examination are financial, organizational, operational and substantive in nature but they are all stemming from the laws put in place to regulate the industry; both domestic and European.

The legislation which is of primary focus to the purpose of this research is the Insurance Business Act (Cap. 403) on a domestic level, and the Solvency II Directive and the Insurance Distribution Directive on a European level. Relevant Subsidiary Legislation and Insurance Rules issued by the Malta Financial Services Authority (MFSA) play a supporting role in the legal analysis.

Considering the fact that the insurance industry in Malta operates within a larger European framework which seeks to harmonize the financial markets of Member States from a legal and regulatory perspective, passporting processes are also examined within the context of the freedom to provide services within the EU and freedom of establishment.

The research methodology adopted is two-fold, consisting of semi-structured interviews and black-letter law research. This deliberate choice was made in order to achieve the goal of this research which is namely, to provide an overview of the law of insurance, and to gauge the practical experiences of professionals working directly with the business of insurance or as part of an auxiliary industry.