Malta ready to host ILS and catastrophe bond issuers

by Artemis on January 2, 2014

Malta is now ready to act as a domicile for insurance-linked securities (ILS) and catastrophe bond issuers after regulations governing the formation and domicile of Reinsurance Special Purpose Vehicles (RSPV) were finalised and came into law.

The new law came into effect on the 27th December when the regulations were published by the government of Malta. This followed a six month consultation period, with the Malta Financial Services Authority (the MFSA) having put forward for consultation a draft version of the Reinsurance Special Purpose Vehicle regulations at the end of May.

The MFSA provided a response to the consultation in early December, publishing this document which addresses a number of the issues raised by respondents. In its feedback, the MFSA said that it would seek to fast-track any applications for establishing an RSPV in Malta, provided all the relevant information had been received at the relevant points in a transactions structuring and that timeframes were agreed in advance.

A Reinsurance Special Purpose Vehicle is defined in the regulations as:

“reinsurance special purpose vehicle” means 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 issuance or any other financing mechanism where the repayment right of the providers of such debt or financing mechanism are subordinated to the reinsurance obligations of such a vehicle.

Now that the regulations governing the formation and domicile of RSPV’s in Malta are finalised any sponsors of catastrophe bonds or ILS who want another choice of domicile can begin making applications to the MFSA. Whether Malta will be successful in becoming a host to cat bond and ILS issuers will depend on the cost and ease of establishing the vehicles.

With other domiciles such as Bermuda and the Cayman Islands already established in this sector, Malta may face an uphill battle attracting business to begin with. However if it can provide a competitively priced and streamlined alternative to the established domiciles there is every chance it may begin to attract some of the ILS market to its shores.

The final version of Malta’s RSPV regulations can be downloaded here from its government legal service.

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