An appetite for risk | Martin Galea

Has the country's insurance industry shown resilience in the face of the global economic downturn, and has it emerged with substantial growth?
"The insurance industry in Malta is well regulated and is prudent when assessing risk. This has served the industry well and bodes well for the future. There are also European legislative changes in the offing such as Solvency II which tightens up the regulations governing European insurance companies which give added protection to policyholders as they look at issues such as corporate governance, solvency as well as reporting requirements. In Malta the regulator, MFSA, is strict in its application of the law and conducts periodic detailed reviews which of course we support.
"Insurance companies in Malta have not escaped the recession which of course is still ongoing in much of Europe. The main effect has been the impact on insurance companies' investments, which include shares, bonds and property. These have tended not to perform well in recent years and have impacted on the financial results of most insurance companies including those in Malta.
"As far as the technical results are concerned, i.e. the results from insurance activities themselves, the industry has recorded growth in most areas, which is good compared to most sectors but which obviously has slowed in view of today's economic situation.
"It is also pertinent to say that Middlesea has benefited from a substantial investment from the Spanish giant's insurance company, Mapfre, who have injected over the years around 46 million into the company. Mapfre, who has enjoyed continuous growth, and is a major player in South America as well as Spain, is now the majority shareholder in Middlesea. Bank of Valletta has around a 30% share. No doubt this backing will benefit Middlesea, and policyholders, and investors can be assured of a dynamic yet prudent future which should reap dividends."
 
How has it survived the economic crisis?
"The company is in the business of taking over the risks of policyholders and ensuring that in the event of the risk occurring, then the company, as an insurer, can step in and cover them.
"This is the crux of the business, and policyholders must have peace of mind that they will be covered. This is the main fiduciary bond, the trust, policyholders will have with their insurers. With a sound track record as the main insurer in Malta for 30 years, I believe that is our main asset. People will continue to place business with us because we are covering their risks and allowing them to get on with their business or in the case of personal insurance - some peace of mind.
"The economic crises in Europe will be with us for some time and it is precisely the time for businesses and individuals to re-assess risk and for the company to act prudently."
 
Middlesea announced profits of €1.75 million. So it's highly unlikely the current economic turmoil affected the firm.  What strategy do you intend implementing to keep the firm's feet on the ground?
"The company's profits were low compared to the pre-2008 years, but the message to investors is that the company is strong, it has solvency in excess of 350% - well above the legal requirements, and that the future is bright.
"The company's strategy remains focused on providing proper insurance cover, both corporate and personal. It will seek to raise the awareness in Malta of the benefits on insurance cover in many areas where we feel that there is room for growth, be it on buildings, liability cover, for yachts, travel, businesses, and group life.
"It will also be innovative by rolling out new insurance packages, which will help provide assurance where currently the industry does not provide such cover.
"Finally, we would seek to provide added benefits to our customers in new programmes such as through Middlesea Assist which was launched this year which provides roadside cover and shortly, emergency assistance at homes for policyholders."
 
As time goes by and catastrophes increase, is one forced to rethink what types of coverage should be offered?
"It seems that catastrophes have in fact increased - certainly we are more aware of them and as more people protect themselves, the impact on the global insurance market has been profound. The company takes a prudent approach to risk and has a reinsurance policy which reduces the impact of claims on the company.
"People talk about a company's attitude to risk. I can state that Middlesea's attitude is based on long-term performance and a prudent approach to risk. We will take on an individual's (or a business's) risk for the  premium paid but will then reinsure part of that risk out. What risk company retains is regulated and also governed by best practice and indeed our retention is well below that required by regulation."
 
Do you think that insurance broking can help customers manage their way through tough global uncertainties?
"Brokers provide a good service to customers and can provide sound advice in ensuring one's business, as well as his/her personal risks, are properly covered.  They can help in ensuring that clients have adequate cover on all their risks.
"Middlesea has received a good proportion of its business through brokers, many of whom we have been working with for many years, reinforcing our reputation as giving sound cover and service at competitive rates."

Where is the insurance and brokerage business heading? What are its future prospects?
"With the slowdown of the world economy, people are looking for savings and revisit costs again and again. The insurance market is tight and as with almost every industry very competitive. 
"In some sectors, premiums have been falling and margins are tighter. In a small economy such as Malta the competition is no less intense. However, there is new business to be had, new products to be launched and the level of business and personal risks which can be taken over by insurance companies can be increased as people become more risk averse.
"Malta has some way to go before it reaches the insurance levels found in more developed economies and it's the industry's job to keep offering products which provide relevant and adequate coverage. I believe the industry will continue to grow."
 
What is the greatest threat which a company like Middlesea can have from the point of view of business risk?
"As I mentioned earlier the company is careful in its risk management and has solvency well in excess of legal requirements, as well as governance procedures to ensure that the cover it gives, is in line with the law, as well as the company's own procedures dictated by the board. When protecting policyholders from risk the company is necessarily taking on those risks but does so within well-defined parameters.
"Reinsurance plays a big part in reducing those risks especially when catastrophes occur. But ultimately the regulatory framework, the risk policies set by the board, as well as the level of qualifications and professionalism of the staff, ensure that the company is well protected.
"Middlesea places great emphasis on the training of its staff and I can state that we have a team, of well qualified, trained and dedicated professionals. 
"On top of our in-house expertise we can also rely on the support of our parent company Mapfre where specialist advice is required."

Martin Galea profile
Education and early career
After finishing his secondary education at St Edwards College in Malta, Martin Galea passed the Foundation Course in Accounting from the Polytechnic of North London. He then started his career with Coopers and Lybrand in London as an articled clerk where he qualified as a chartered accountant in the Institute of Chartered Accountants of England and Wales in 1983. During his articles he was involved in the audit of a number of international companies such as EMI, Performing Rights Society, Casenove (Brokers), Wilkinson's Sword and others. After four years with the London Office he returned to Malta to join the local representative office. After four years in the profession he joined a ferry company as financial controller and subsequently a start-up national newspaper - The Malta Independent - where he was Managing Director and Editor.

Managing Director - Joinwell
He joined his family business, Joinwell, a furniture manufacturing company in 1991, where he is currently the Managing Director. This was a time of great change for the manufacturing industry, when Malta joined the European Union and all protective levies were removed. This entailed a re-engineering of the company from producing standard mass produced furniture to one which imported and retailed furniture and which produced contract furniture for hotels as well as niche work such as bars, counters, presidential suites, and also a new line refitting interiors of super yachts. The company also reorganised its asset base building a new 3,000 square metre showroom and leasing spare property to maximise assets. This was done in a family business environment where change needs to be obtained by consensus.
Martin Galea is also a non-executive director in Printex Limited, a security printing company producing bond and share certificates, tickets, stamps for the Malta Government as well as general jobbing.

President Federation of Industry
He was recently Vice President of the Chamber of Commerce Enterprise and Industry and a Former President of the Malta Federation of Industries between 2007 and 2009. Of particular interest during this period was the merger of the Chamber of Commerce and The Federation of Industry - a very difficult negotiated process of two old and very proud institutions which also necessitated the passing of legislation. As one of the prime movers in the process it was particularly rewarding for him to see the merger through. The merger is successful and the business community is better served by having an enhanced resourced single entity with a single voice to lobby the interests of business and industry.

Other involvements
Martin Galea was also a director of Malta Enterprise, the principal government agency for inward investment, and was a council member of the Malta Council for Economic and Social Development, a board where the government, the main social partners and constituted bodies meet to discuss national issues affecting the economy. 
He was recently appointed to a special ad hoc commission for the reform of the Malta Environment and Planning Authority. The Commission recently presented its report to the Minister for the Environment.
Formerly he was a lecturer and examiner in auditing at the University of Malta and the Malta Institute of Accountants and is Chairman of the Malta Winemakers Association, an association composed of the main wine producers in Malta.