Malta has been chosen as a location of domicile for many new insurance and reinsurance businesses. But what does this mean for those relying on Malta as a choice of jurisdiction for insurance or reinsurance disputes?

W Denis Europe trades with insurers throughout the EU including Malta.  The Maltese (re)insurance industry offers capacity for insurance and reinsurance transactions elsewhere in Europe and internationally. In this article W Denis Europe looks more closely at Malta to explore the legal position and its impact on the insurance and reinsurance markets.

Background:

The Malta Financial Services Authority (MFSA) has encouraged the growth of the insurance and reinsurance business, including captive insurance companies passporting their services throughout the European Union. Consequently, the insurance industry in Malta has experienced significant growth in recent times.

Companies licensed in Malta can write business in any other EU member state, and Malta has even attracted Fortune 100 companies to set up insurance companies in the country in respect of their EU exposures. Many (re)insurance businesses are registered in Malta, with the large majority being international and only a handful of companies active in the local market.

As a result, international insurance business now accounts for a substantial part of the total gross written premiums with a reported 455 foreign insurers based in the European Union underwriting direct risks in Malta.

Legal System

The Maltese legal system has foundations in both English common law and civil law with the basis of insurance law is general contract law. While there is no generic insurance contract law, in 2005, a number of amendments were added to the Maltese Civil Code aimed at regulating life insurance contracts.

Case law precedents are not binding and courts are free to interpret the law, which could result in the same issue being treated differently by the courts. The elements of contract law are governed by civil law doctrine contained in the Civil Code. The Insurance Business Act (IBA) and the Insurance Distribution Act (IDA), together with the regulations, insurance rules and insurance distribution rules issued by the MFSA under the respective Acts, create the legal and prudential framework for regulating insurance business and insurance intermediaries activities in Malta.

Together with the Civil Code elements, Maltese jurisprudence has established the importance of the common law principles of insurable interest and utmost good faith in contracts of insurance. A contract can be concluded verbally, however, the IBA requires a written policy document to be issued by the insurer to the policyholder.

Interpretation

Insurance and reinsurance contracts are subject to the same general rules of interpretation that apply to other contracts, as provided for in the Civil Code. In case of any doubt, the agreement shall be interpreted against the insurer and in favour of the insured.

Insurance contracts, intermediaries and brokers

It is common practice for an insurance policy to include clauses relating to policy limits, excess amounts and other general exclusions, indemnity limit and period of insurance, warranties, conditions precedent and consumer complaints' process.

Insurance intermediaries such as insurance agents, insurance brokers and tied insurance intermediaries are required to be authorised by the MFSA.

Claims Notification

The procedure for filing insurance claims is typically set out in the insurance contract itself. It is common practice for contracts of insurance and reinsurance, especially liability policies, to require that the insured notifies his or her insurer of a claim within a given time frame for the claim to be valid. Prompt notification of an event that may or is likely to give rise to a claim is usually included in the contract as a condition precedent.

In terms of the Civil Code, the prescriptive period for filing a judicial action for damages for breach of contract is typically five years. If the damages are in tort, the prescriptive period is two years, which may be extended if the action for compensation is related to a personal injury. The aforementioned periods may be suspended or interrupted in certain cases as prescribed by law.

Malta – a growing insurance and reinsurance business hub

Good faith and claims

The insured is required to provide the insurer with full, complete and correct information both pre-contractually and at claims stage. Providing false information will result in the denial of claim, cancellation ab initio of the policy and could give rise to criminal liability for insurance fraud.

Set-off, funding and reinstatement

Article 1166(c) of the Civil Code grants the insurer an automatic right of subrogation on payment of an indemnity. Nonetheless, a subrogation clause is included in most insurance contracts. Upon payment of an insurance claim by the insurer, the insurer may claim indemnity from a third party for the loss covered by the insurance contract. An act or omission on the part of the insured that could prejudice the insurer's subrogation rights may forfeit policy coverage.

Malta has grown to become an important destination for insurance capacity, but remains far behind the more dominant and established markets in London, Singapore, Bermuda. However, for the right transaction, Malta offers some interesting alternatives. W Denis Group has a wide range of (re)insurer relationships which helps to find meaningful capacity and exclusive options for its growing range of international clients.

For further information visit www.wdenis.eu or contact Vida.Jarasiunaite@wdenis.eu