Atlas Group

Enabling Insurtechs to Become Carriers: The Malta Cell Advantage

Over the last decade, insurtechs have disrupted traditional insurance models with innovative underwriting, distribution, and customer service approaches. Yet, many remain reliant on established insurers to underwrite their policies due to regulatory hurdles, management resources, and capital requirements that make it challenging for insurtechs to become full-fledged carriers.

Malta offers an alternative pathway for insurtechs seeking to become carriers. By leveraging Malta’s protected cell company (PCC) framework, insurtechs can directly access the European Economic Area (EEA) single market. Certain PCCs also maintain access to the UK market. Insurtechs can expand their operations or test new markets without relying on insurance or fronting partners while sharing overheads with the PCC.

In essence, a PCC allows the insurtech to house their insurance business in a ‘cell’ within a larger entity. PCC legislation provides protective separation between different cells and the core, with each cell having its own segregated assets and liabilities.

A PCC can offer insurtechs significant benefits:

  1. Regulatory Efficiency: As the only EU member state with cell legislation, Malta can offer cells direct access to the EEA single market, reducing fronting costs and requirements. 
  2. Cost Effectiveness: Cells within a PCC structure can be more cost-effective than establishing a standalone carrier due to shared economies of scale.
  3. Capital Efficiency: The PCC structure allows for capital efficiency, with EU Solvency II recognizing cells as ring-fenced funds. Individual cells have no absolute minimum capital requirement and typically have solvency capital needs below standalone insurer minimums.
  4. Flexibility and Adaptability: Some PCCs have active cores that can rapidly incubate and front risks, providing more time to assess and set up a cell. This agility can also help startups that need more data or capital to set up a cell. PCCs have, for example, assisted in micro-testing parametric and blockchain smart contracts to automate underwriting and claims processes.

The insurtech industry is ripe for change. As companies continue to innovate and disrupt traditional insurance models, a better pathway to becoming carriers is emerging. By leveraging the unique features of Malta’s PCC framework, insurtechs can access the benefits of being a carrier without the traditional hurdles.

In addition, Malta’s stable and growing economy, EU and OECD-compliant regulations, efficient business environment, and robust IT infrastructure make it an ideal domicile for insurtechs looking to evolve. The country’s well-resourced and experienced PCCs and global insurance management companies further enhance its appeal.

As the pace of change continues to accelerate, the ability to adopt an agile, iterative approach to setting up insurance vehicles is increasingly valuable. Malta’s PCC framework offers a viable path for insurtechs to transition from technology providers to insurance carriers. As the sector evolves, we expect more insurtechs will explore this route to accelerate growth and enhance competitive positioning.