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> Prime Minister Lawrence Gonzi's Inauguration Speech  
 

Address by the Hon Lawrence Gonzi, Prime Minister, at the inauguration of the merged company FirstUnited Insurance Brokers Limited at the Westin Dragonara Hotel, St Julian's. Friday 21 April 2006 

It is a great pleasure for me to be with you here this afternoon to officially inaugurate the merger of the operations of two leading local insurance broking firms – First Insurers Brokers Ltd and United Insurance Brokers Ltd in the new merged broking firm FirstUnited Insurance Brokers Ltd.


Insurance is a field that offers incredible commercial opportunities.  When we take a look around us today, we find that almost everywhere in our modern societies insurance plays a key role in managing the risks in every kind of contemporary problem – environmental risk, industrial and natural catastrophes, health and so on.  Again while up to the last decade insurance was considered the poor relation of the financial services sector, one now gets the impression that some of the large international insurers, far from being accessories to the financial world, are now at the centre of the new financial system.


This growing trend in the insurance sector can also be witnessed locally.  In fact the steady growth of Malta’s insurance sector over the last few years is particularly notable.  The Malta Financial Services Authority, in its 2005 annual report, reported that the year was characterised by an increase in the number of licensed insurance companies, including captive insurance companies and insurance management companies.  I am pleased to note that during the first full year of EU membership the MFSA issued eight new licences to insurance companies.  I am informed that these companies all do business on a cross–border basis.  2005 also saw a build–up in insurance management capacity and expertise that has proved to be a determining factor in the expansion and internationalisation of the insurance industry.  In fact during the year, the MFSA licensed four insurance management companies.  This steady growth can be seen across the entire financial services sector.  The long established policy adopted by the MFSA of seeking quality financial services providers is a prudent approach that has helped to triple the size of Malta’s finance industry over the last ten years.


The success of the financial services sector in Malta is reflected by the Government’s commitment in having the right legal framework in place.  This commitment started in 1994 and has continued throughout the years.  In fact, 2005 was particularly intensive on the legislative financial services front due to the transposition of a number of EU directives, most notably the Market Abuse Directive, the Prospectus Directive and the Pensions Directive.  As regards the insurance sector, in 2005 the EU Directive on Insurance Mediation was partially transposed by means of subsidiary legislation.  Moreover, in the first week of March of this year a new Insurance Mediation Act was published.  The new Act will shortly be debated in Parliament.  The main objectives of this Act can be summarised as follows: - Firstly the consolidation of the various insurance intermediaries activities carried out in or from Malta under one Act – the Insurance Intermediaries Act; secondly the introduction of new provisions which are considered essential in view of developments in the domestic and international insurance intermediaries market; and thirdly the proposed new Act fully implements the provisions of the EU Insurance Mediation Directive.  The new Act also incorporates amendments to other financial services sector legislation as well as the Insurance Business Act.  These amendments are primarily necessary in the light of new EU regulation. 


In view of time constraints I propose to focus on two of the topical issues raised by the speakers before me – Bancassurance and Pensions.  As regards Bancassurance, in particular the involvement of banks in the selling of non-life insurance products, Government is fully appreciative that this issue has prompted some degree of apprehension in the indigenous insurance market, including the insurance intermediaries market.  Appreciative of this fact, late last year the Government approached the MFSA and asked it to draw up a report on this issue.  The report, which has been concluded, includes an assessment of the potential impact on the local market should the current policy be revised to allow banks to solicit non-life insurance products.  The report, together with the representations made by various financial services associations, is currently being examined, and the government will eventually determine future policy in this area. 


When the current administration came to power in 2004, it was fully aware that the pension time bomb had to be diffused.  As has been announced, our aim is to develop a system and strategy that will deliver what is needed to supply in terms of future provision.  Insurers are already providing savings products and, naturally, there is an expectation that the insurance industry will have a major role to play in the provision of pensions.  Certainly, the future provision of pensions is one of the greatest challenges the government faces, but it is still our intent to submit the framework law to Parliament before its summer recess.  Last month I announced the salient points of the proposed pension reform, but I take this opportunity to repeat that my Government will continue to listen attentively and debate the issues until Parliament votes on the new law. The proposed new insurance intermediary framework should result in new opportunities for the local insurance intermediary sector.  Firms such as FirstUnited Insurance Brokers Ltd will have a very important role to play.  Foreign investors are already attracted by the professionalism exercised by existing players operating in a well regulated, serious and flexible environment.  I am confident that not only will your newly merged operations continue to play an important role in the local insurance industry but the advantages which can be gained by the merger of the expertise, as well as the financial and administrative resources of both companies should prove to be of great advantage not only on the domestic scene but also in the international arena.


Thank you.  

   
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