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'Motor insurance deteriorating performance is unsustainable' - Atlas Managing Director

Intense competition in Malta’s domestic insurance market is putting pressure on pricing and margins, and there is growing concern about mispricing of risks.

 

In an interview with maltaprofile.info Michael Gatt, Managing Director of Atlas Insurance PCC, one of Malta’s largest home-grown insurance companies, says that in the past years “the market seemed to be driven by market share rather than writing business based on solid fundamentals and insurance underwriting criteria.”

Gatt said that this was mostly evident in the motor insurance classes of business, which account for 45% of the non-life premiums written on risks based in Malta. The first signs of stress emerged when a few long established insurers withdrew from the motor market during 2015. “It remains to be seen whether the market will adjust itself in an effort to improve deteriorating performance which cannot be sustained in the long-term.”

On the bright side, Gatt says, Atlas is seeing increased enquiries from leading insurance management companies interested in tapping into Atlas’ Protected Cell Company (PCC) solution.

A national frontrunner

The Atlas Group has its roots in the insurance services for the Maltese shipping industry of the 1920s and later branched into the motor, accident and fire business.

After decades of growth and expansion, with Malta’s accession to the EU on 1 May 2004, Atlas started to operate as a local insurance company, as opposed to an agency for an overseas insurer.

In 2006, Atlas Insurance restructured to become a protected cell company and has built up a reputation as an EU PCC expert, having assessed and implemented a variety of direct third-party, reinsurance and captive cells.

Changing weather patterns

Another issues that has been troubling local insurers is the hailstorm phenomenon. In fact, Michael Gatt says that changing weather patterns had a negative effect with hailstorm damages running into millions for a second time in three years. 

Michael Gatt, Managing Director, Atlas Insurance“Underwriters and risk managers are asking if similar events will become more frequent when, up to the recent past, hailstorms of such proportion were only events that happened in other countries and were never experienced in Malta”, he highlighted.

 

The Brexit issue

Touching upon Brexit, Gatt states that if the UK loses its passporting rights it is  likely that a bilateral agreement would be in place between Malta and the United Kingdom thus maintaining access between the two countries.

“If that doesn’t happen, then other contingencies exist for Maltese insurers writing risks in the UK such as using UK fronting partners, setting up fronting subsidiaries in the UK or obtaining a form of third country licence”, he explains.

Brexit might even be an opportunity for growth for Malta’s insurance sector “In insurance, the only other current EEA passporting domicile with Protected Cell Legislation is Gibraltar. With Brexit, this could be relegated to offshore status and cells with direct EU exposures would probably prefer re-domiciling to Malta.”, he concludes.

 

Cell solutions

Over the last years Atlas was also busy focusing on the implementation of the EU’s new solvency regime, the Solvency II Directive.

“In 2015 we strived to make all Solvency II governance requirements part of business-as-usual. We are now reaping the benefit of years of Solvency II preparation. We are seeing an increased demand in enquiries through leading international insurance management companies and various entities seeking cost and capital savings, preferring the more efficient cellular route to underwrite insurance”, highlights Gatt.

 

PCC's: “Atlas is seeing growth with  cells coming from the Netherlands, Austria and Italy.”

 

He explains that while in the early days most enquiries used to be from UK parent companies, most recent enquiries and cell formations now emanate from continental Europe, where awareness of onshore PCC solutions is growing “Atlas is seeing growth in this area with recent cells coming from the Netherlands, Austria and Italy.”

Mapping the way ahead

Innovation is clearly a key player in Atlas’s roadmap: “We have launched new products such as pet insurance and more recently, a product for bicycles, the first of its kind in Malta. We saw the need to expand our services to offer an innovative cover so that our clients can concentrate on enjoying their hobby,” Gatt says.

The PCC side of their business is also set to flourish. Atlas currently host 7 protected cells all writing premiums on risks situated outside Malta two of which were added in 2015.

“We are confident that premiums in this area will continue to develop and grow and that we will continue to attract new cells to Malta.”

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