AIC Licence Requirements and Fees

Under Maltese Law, Captive Insurance Companies are also known as Affiliated Insurance Companies (AICs) and are regulated by Subsidiary Legislation 403.11 entitled Insurance Business (Companies carrying on business of affiliated insurance regulations).

The business of AICs is restricted to risks originating:

  • With undertakings being members of a group of which it is itself an undertaking; or
  • With undertakings having common membership up to the ultimate beneficial owner level with the AIC, amounting to at least 51%;
  • With a society, corporation, body or individuals who hold 51% or more of the share capital issued by the company or of the voting rights attaching to such capital; or
  • With members of an association or an organisation of a particular trade, industry or profession with risks relating to such trade, industry or profession.

Licensing Requirements

Companies carrying on the business of affiliated insurance in Malta must be licensed by the Malta Financial Services Authority (‘MFSA’). The MFSA is the sole regulatory authority in Malta which also regulates AICs.

Own Funds

One of the requirements for obtaining a licence from the MFSA is that the AIC is required to maintain own funds unencumbered at all times.

The own funds differ according to the category of insurance business of the AIC and amount to:

Category of Insurance Business Minimum Own Funds Requirement (€)
Long Term Business 3,700,000
General Business 2,500,000
Reinsurance 1,200,000

The own funds may be comprised of:

  • The initial paid up share capital of the AIC which must be not less than 50% of the value of the own funds requirement;
  • Reserves (not including technical provisions or the equalisation reserve);
  • Profit or loss brought forward after deduction of dividends to be paid;
  • Cumulative preferential share capital and subordinated loan capital up to 50% of the value of the own funds of the AIC (this is subject to a number of conditions which must be satisfied);
  • Securities with no specified maturity date and other instruments;
  • Capital contribution (this is subject to a number of conditions which must be satisfied);

Margin of Solvency

A licensed AIC must at all times maintain the established minimum margin of solvency. It is currently established that the solvency margin for general business is determined on the basis of either the annual amount of premiums or on the average amount of claims for the previous three financial years, whichever is the highest.

Minimum Guarantee Fund

Another a requirement is that the AIC must also maintain a minimum guarantee fund which is equivalent to the greater of the minimum guarantee fund and one-third of the required margin of solvency.

Technical Provisions

An AIC is also required to maintain and establish adequate technical provisions, including mathematical provisions in respect of the business it is authorised to carry on. This is to be done on a yearly basis. It is also required that the technical provisions must at all times be covered by equivalent and matching assets.

Licensing Fees

Upon submission of the application, the person applying for such AIC is licence is to pay the application fee of €1,800 and an annual supervisory fee of €6,500.

Captive Insurance

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David Gonzi
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Augusto Quintano
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