Pecuniary loss insurance : an operational, financial and legal evaluation of the Malta export credit insurance Co. Ltd

Abstract

The Malta Export Credit Insurance Co. Ltd. is currently the only licensed insurance principal in Malta that otters Export Credit Insurance. As a matter of fact this is the only class of insurance business transacted by the company. Set up in 1990 by the Government of Malta, the Malta Export Credit Insurance Co. Ltd. was meant to be an additional stimulus to the export industry. Considering the dependence of the Maltese Islands on its external trade, and the various requests put forth to it by the export oriented industry, Government sought to provide a set up which would provide assistance to exporting companies by securing their receivables. The company, albeit being a Government owned company, was to be run on commercial lines. The research and interviews carried out during the preparation of this dissertation suggest that notwithstanding the efforts made by the company, market penetration has been limited. This may be due to a large extent to the prevailing mentality that associates insurance to an added expenditure as opposed to more peace of mind. In view of this limited market penetration and the fact that the company has been setup through public funds, the Dissertation analyses the performance of the company on two main fronts, these being its operations and its financials. Operationally, the company has the opportunity to expand and increase not only its present lines of business, but it can as well venture into new albeit ancillary activities. Credit Information and Domestic Credit Insurance are but two of the possible market niches that are supplementary to its core operations and which represent great business potential. Moreover, following an analysis of the company's financial situation, it transpired that the company is financially sound. The positive performance of its investment portfolio offsets the underwriting losses that have been registered by the company whereas its statutory reserves are in line with the requirements of the Insurance Business Act. Finally, an analysis of the legal requirements in relation to proposed new areas of activity is undertaken. In addition, and in view of Malta's application for full membership of the European Union, an attempt has been made to analyse the impact, if any, of the European Union directives concerning export credit insurance on the operations of the Malta Export Credit Insurance Co. Ltd