Insurance companies which objected to the agreement between Maltapost and Middlesea Insurance are now concerned that a local company may actually be intent on taking up the opportunity ­– and have called on the MFSA to take a stand.

Maltapost confirmed some weeks ago that the company is still interested in a partnership which would allow it to sell non-life insurance products, after its agreement with Middlesea Insurance fell through at the eleventh hour.

Middlesea and Maltapost had been talking for a while about the partnership, which would have seen the postal company employees trained over the medium-term to start selling insurance products like motor and household insurance, diversifying the company’s revenue streams.

The partnership required approval from the Malta Financial Services Authority, which was given in principle, sources said.

However, a number of the leading insurance companies went to the Prime Minister and to the MFSA to object on the grounds that Maltapost’s main shareholder is Lombard Bank and according to insurance regulations, banks cannot sell non-life insurance.

“This regulation has never been challenged and it may actually be contested one day as being against free competition,” insurance sources said. “However, the principle is in force and it has been defended vociferously by various governments who did not want banks to dominate non-life the way that they did life insurance. The point was made forcefully that the industry would be very upset if the deal went through as Lombard would be selling non-life insurance – albeit indirectly. It would set a very serious precedent.”

Middlesea, faced with a situation which would put it into a situation that the MFSA was finding increasingly uncomfortable, decided to unilaterally back off, to no small extent because its majority foreign shareholder prefers to maintain good relations in the host country.

The decision was subsequently confirmed by both Maltapost and Middlesea in Company Announcements at the beginning of December.

However, Maltapost’s confirmation that it is still interested in a partnership raised the hackles of several insurance companies, all of whom only spoke on condition of anonymity.

“Those that objected to the Middlesea deal will feel quite silly if they find out that they were merely being used by the interested party so it could get its own foot in the door,” the sources said, with the majority of the big household names confirming that they were not in the running, although Maltapost might have international names in mind.

“But there is a second aspect: The MFSA should not allow a bank to get into non-life insurance, even if it is not directly. That principle should still be upheld by the MFSA and the sector needs a clear statement of its intent.”

business@timesofmalta.com