Malta’s population has only just tipped the 400,000 mark, but since joining the EU in 2004, the tiny Mediterranean island state has seen a huge rise in the stature of its financial services sector, relative to its size.
Services such as banking, investments and insurance grew by 30% last year, and now count for 12% of Malta’s GDP. The number of hedge funds domiciled in Malta has risen from four to 150 and the captive insurance business, which has attracted Marsh and AON among others, now has about 23 captives there. The country has its own stock exchange and, since January, has been signed up to the euro.
It is Malta’s professional community that is driving much of this growth, with the government acting as a facilitator.
The foundation of Malta’s services sector appeal is that it is a well-regulated jurisdiction within the EU fortress. And the EU tag is critical. Insurance brokerage firm Heath Lambert found that many of its clients needed a domicile within the EU because their business had to conform with EU rules. As a result, it started up a joint venture in Malta.
Similarly, AIG has put Malta on its list of preferred jurisdictions for captive insurance. David Stafford, regional director for AIG insurance management services, Europe, says: “We only consider domiciles that are reputationally strong and this is why Malta, which has implemented all of the necessary EU directives, has a caché which some other domiciles do not have.”
Flexibility and accessibility
However, the key attraction is that Malta has combined its EU credentials with a flexibility and accessibility in regulatory affairs which businesses appreciate.
Nick Rees, a partner at asset management and investment company Absolute Return Partners, which has now launched three funds in Malta, says: “The regulatory framework is very robust, yet at the same time the Malta Financial Services Authority (MFSA) is easy to work with: it is accommodating to new businesses starting up.”
This attitude is deliberate, says the chairman of the MFSA, Professor Joe Bannister: “We made a conscious decision to be accessible.”
Added to this, the island is cost-effective by European standards. Peter Hughes, group managing director of Apex Funds, a fund administrator that is sending four staff to its new Malta operations, says: “Malta is an upwardly mobile jurisdiction. It has experienced and qualified accountants and lawyers, who are excellent value. An accountant is the same price as in India, for instance,”
Merise Wheatley, managing director of Heath Lambert’s operations in Guernsey, with responsibility for Malta, agrees. When the broker decided that it needed an EU domicile it chose Malta, she says, because “it has a highly educated workforce and yet the labour and real estate costs are lower than in Dublin, for instance. For many companies, the tax regime is also favourable.”