Maltese company becomes the world’s first insurance broker PCC

KDM Insurance Brokers has scored a world first by converting into an insurance broker protected cell company after securing the Malta Financial Services Authority’s approval.

The company, which has been renamed KDM Insurance Brokers PCC Limited, is the world’s first insurance broker to have seized this opportunity following a change in PCC legislation.

Malta has established a track record of leading the way for PCC legislation in the European Union: the jurisdiction already boasts the first PCC insurance manager to set up in Europe, besides growing protected cell company insurer facilities.

Originally established in 2006, KDM Insurance Brokers PCC is a firm under the KDM Group of Companies’ umbrella. The company is currently in the throes of relocating from its Msida head office to the new Capital Business Centre in San Ġwann.

Just a week after the formal conversion, KDMIB PCC already has a first cell lined up and negotiations are under way with a couple other potential clients, group chief executive officer Kenneth DeMartino told The Sunday Times.

“We are ambitious as an organisation and innovative as a group of companies,” Mr DeMartino said. “We constantly endeavour to explore new markets. This is one way we believe our insurance broking arm can grow quicker, alongside our other brokerage business. This conversion is good news for the company and for Malta, and it means we can bring new, value added business to the country.”

This latest addition to Malta’s insurance landscape will give the jurisdiction another reason to promote itself as an international hub, provided the necessary support by other stakeholders and the authorities is granted to potential clients, he emphasised.

KDMIB PCC director Alberto Bisazza, who is the ‘face’ of the new project, is marketing the company’s new guise in various countries across the EU, primarily in the UK where he is networking with various potential cell owners.

British brokers are increasingly examining their options overseas as their operations creak under complex regulation and soaring tax rates. UK brokers complain they face a regulatory cost burden that is three times higher than that of any other European state.

Malta’s attractive tax regime, a highly accessible regulator, and efforts to ensure speed-to-market have contributed to luring some of the most prestigious names in insurance and reinsurance to the island. Now, Mr DeMartino and Mr Bisazza believe a similar trend is set to take hold in the brokerage segment.

Mr DeMartino said marketing was primarily a matter of building credibility and fostering relationships. He explained the company’s potential clients will essentially be brokers with operations similar to its own, but with large portfolios.

The PCC will allow them to redomicile in Malta but without having to go through the painstaking procedures to set up their own legal entity. Their front-end business will continue to be carried out in existing premises in the UK, for instance, and all business will be passed through their cell in Malta.

“KDMIB PCC will spare them significant bureaucracy and expense, and provide them with an alternative way to redomicile. The insurance broker PCC model provides the facility to offer cells to potential cell owners who would be able to benefit from the broker licence without having to incur the expenses and comply with the ongoing regulatory obligations required for a fully fledged licence.

The cell would be able to leverage the resources of the PCC to benefit from reduced management, operational and administrative costs.”

Mr Bisazza explained that after due diligence procedures and approval from the local regulator, KDMIB PCC can quickly begin to administer each new cell. It will shoulder considerable responsibility on clients’ behalf as it provides back office support for all the business they win in their own markets.

The company will act as the core, administering any number of cells, each of which is segregated and totally independent. If any cell closes or fails, it does not affect other cells or the core function.

The PCC’s board of directors, he continued, would be responsible for the entire company’s risk management strategy. Such a common approach to corporate governance would allow efficiencies to be created so that new cells would be able to tap into a common pool of knowledge, expertise and specialist administration by simply establishing a cell without having to train or hire staff.

Mr Bisazza outlined how the insurance broker PCC model may be used in several ways. There could be a broker cell company through which each broker cell offers a specialised or focused insurance offering creating an insurance broker PCC with different strands.

Another option could be a collection of broker cells each offering and competing on the basis of a combination of products.

KDMIB PCC’s teams will eventually grow to include additional cell administrators and other staff according to the requirements of the business’s expansion.

Mr DeMartino said KDMIB PCC’s initiative could now pave the way for a revolution in insurance brokerage in Malta.