Artex designs Maltese Brexit fix for brokers

Artex Risk Solutions has formed a protected cell company on Malta specifically for brokers to use in the event of a no-deal Brexit, as Steve Quinn and Paul Eaton from Artex Risk Solutions explain to Monte Carlo Today.

“Malta is in the EU and already has legislation that enables intermediaries to use a cell within a licensed PCC structure.” Steve Quinn

Artex Risk Solutions, a specialist in captive management and alternative risk programmes including insurance-linked securities (ILS), has formed a new protected cell company (PCC) on Malta especially designed to be used by UK intermediaries in the event of a no-deal Brexit.

Under such a scenario, the passporting arrangements used by UK insurers and brokers to write business in the EU—and vice versa—would no longer be applicable. The vehicle formed by Artex in Malta could represent a cost-effective solution for medium-sized brokers seeking a solution.

Artex Insurance Brokers PCC, a new limited company in Malta, has been designed specifically with this in mind. Brokers can establish a cell to transact business and continue the intermediation of business in the EU. The entity will be managed by

Artex and staffed by qualified individuals experienced in insurance and broking, negating any concerns over so-called ‘substance’ issues whereby regulators insist such entities must be adequately resourced in the domicile.

Artex will also look after all the regulatory requirements surrounding the entity, again making life easy for brokers wishing to use this solution. Its facility will be available by the end of the year; three brokers have already committed to using it.

Steve Quinn, managing director and head of mainland Europe, Artex Risk Solutions, says he expects the large brokers to have made alternative arrangements already, and some smaller players may simply exit EU business in the event of the UK’s departure with no deal in place. But, he believes, there are many medium-sized players watching Brexit negotiations with interest which have still not made plans for a no-deal scenario.

A unique solution

“Malta is in the EU and already has legislation that enables intermediaries to use a cell within a licensed PCC structure—it’s a unique solution,” Quinn explains.

“That means you can use an insurance manager, such as ourselves, and avoid many of the complications and expense of dealing with a regulator directly in one of the other EU countries, especially with the requirement around demonstrating substance in a jurisdiction.”

Paul Eaton, business development director of Artex Risk Solutions, adds that once Artex has its facility licenced and operating, it will be extremely easy and quick for brokers to join. He also urges brokers to plan ahead, with the clock ticking on the UK’s membership of the EU.

“In about six months from now, the UK looks likely to leave the EU and it is quite possible that passporting arrangements will cease to exist,” Eaton says.

“We are seeing a lot of interest in this solution mainly because many medium-sized players have not made other arrangements so far. We suggest they need contingency plans in place very soon and this represents an easy and cost-effective option.”

He notes that Artex has had a presence in Malta for some 12 years and has 12 staff based there, making it one of the largest insurance managers in the jurisdiction.

Quinn adds that the legislation that allows intermediaries to use PCCs was introduced some time ago and without Brexit in mind, but it represents a perfect solution for this scenario.

He notes that the use of a PCC structure can also be suitable for insurers, but only within specific parameters and not for all lines of business. Also, the legal structure would be different from that used by intermediaries.

Eaton reiterates: “For any broker who is worried about Brexit I would recommend they get in touch to discuss the benefits of this structure. The PCC approach allows easy entry and exit, is low cost and has access to the support of an existing facility.

“As Brexit approaches, we recommend people to set out their contingency plans. Even if they are not required immediately and there is a deal, the passporting arrangement may still end at some point in the future so it remains a safety net that can be used at any time,” he concludes.

Steve Quinn is managing director and head of mainland Europe, Artex Risk Solutions. He can be contacted at: steve.quinn@artexrisk.gi

Paul Eaton is business development director of Artex Risk Solutions. He can be contacted at: paul.eaton@artexrisk.gg