International developments in insurance legislation have led the MFSA to propose a new set of regulations that would enable the establishment of Incorporated Cell Companies (ICCs) under Maltese law. The relevant framework is now contained in the Companies Act (Incorporated Cell Companies Carrying on Business of Insurance) Regulations, published by Legal Notice 558 of 2010 which came into effect on 1st February. The business to be carried out under the ICC Regulations is limited to business of insurance as defined under the Insurance Business Act or of captive insurance in terms of the Insurance Business (Companies Carrying on Business of Affiliated Insurance) Regulations, 2003.

Although legislation permitting the formation of cell companies carrying on business of insurance has been in force in Malta since 2004, in the form of protected cell company (PCC) regulations, the new ICC Regulations adopt a fundamentally different approach to the cell company concept.

ICCs differ from PCCs mainly because within a PCC structure the PCC and its protected cells form one single legal entity so that, despite the segregation of assets and liabilities that exists between protected cells and the PCC and among the protected cells themselves, a protected cell has no separate legal identity. In contrast, an Incorporated Cell (IC) in an ICC has separate legal personality and is treated as a separate company. At the same time, the overall Scheme may still be structured to retain certain core features that will allow it to scale up to desired efficiency levels.

Since Incorporated Cells are limited companies in their own right it is also possible for an IC to contract with other ICs and also with the ICC. The ICC itself has no power to enter into transactions on behalf of any of its ICs, nor does an IC have the power to enter into contracts on behalf of the ICC.

Both the ICC and its ICs require individual authorisation in terms of the Insurance Business Act. In view of the ICs legal and operational independence, the individual IC is required to abide by the statutory financial obligations that are applicable to insurance companies and affiliated companies. The Regulations also provide that a non-cellular company (i.e. a normal company) or even a PCC may be transformed into an ICC in accordance with the relevant provisions.

This information note is for general information purposes only and does not have any legal force whatsoever. Any person wishing to look into the exact position at law should consult the relevant legislation. Any comments or suggestions on the content of this overview should be addressed to the Regulatory Development Unit, MFSA.

MFSA Ref: 07-2011