Enemalta and Alfred Mifsud’s insurance company
Alfred Mifsud with his former Crystal Finance employee, the prime minister Joseph Muscat, at a Labour Party campaign event
Alfred Mifsud’s insurance brokerage company, Allcare Insurance Brokers Ltd, this year took Enemalta Corporation’s brokerage business for the interconnector cable.
But more pertinently, his actual insurance company, Allcare Insurance Ltd, has taken a full 25% of Enemalta Corporation’s total insurance business.
This means that Enemalta Corporation is one-quarter insured directly with Allcare Insurance.
This is a disproportionately large share when the insured risks are so great (think power station explosion or fire) and when Allcare Insurance is so small.
Allcare Insurance has capital and reserves of just Eur3.4 million. A power station explosion would wipe out its capital and reserves overnight, and beyond that, Enemalta Corporation is not its only client. Allcare Insurance Ltd has insured several other large government entities and a tranche of private clients, including the prime minister and Mrs Muscat’s home in Burmarrad.
Besides its low capitalisation and the fact that it is a new company, there is another pressing problem. Allcare Insurance Ltd registered losses of almost a million euros last year – and that was its first year of operation.
Its abridged financial statement for 2013, published in the newspapers (as required by law for insurance companies) last June, show that Allcare Insurance Ltd lost Eur880,000 in that year alone.
Allcare Insurance Ltd has virtually no track record to speak of, having been set up less than two years ago, in December 2012. The shareholders, Eric Schembri (who is chairman) and Alfred Mifsud then waited another six months to have the office ‘inaugurated’ by incoming Labour prime minister Joseph Muscat, in June 2013.
Here we have a situation in which Malta’s smallest and newest insurance company, with low capitalisation, which lost almost a million euros in its first year of operation (this is its second year), has been permitted to take on 25% of the insured risk at Enemalta Corporation. Presumably, Alfred Mifsud and his chairman Eric Schembri are only looking at the premiums rolling in while keeping their fingers crossed and a candle lit in front of the Madonna ta’ Pinu that the power station doesn’t blow up.
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This is no basic 3.5 per mille scenario.
Who cares? I’ve got my 58 cents to play with.
His ex-boss.
I believe Muscat had been quizzed whether he ever left the job when elected MEP.
No answer.
Your concerns do not come into it. Cash gluttony to the “friends” by a government with no direction and no scruples. Grab and run….
OK, all insurance people on this blog, what about Solvency II thingy?
MFSA is obviously doing a fabulous job, keeping a close watch ‘n’ all.
Fenomenali!
Malta kollha taghna.
If you worked in and understood insurance, you would know that all insurance companies re-insure a percentage of every risk with international insurers so as to contain their exposure!
[Daphne – “If you worked in and understood insurance”. There will be a few people, who know who’s who, who will be reading that and laughing right now. But for the benefit of my readers: every insurance company SHOULD have reinsurance protection – but the extent and adequacy of that reinsurance protection in relation to the risks underwritten by Allcare Insurance is known only to Allcare Insurance itself.
Even so, the risk is ultimately underwritten by Allcare Insurance itself, and its clients ‘know’ only Allcare. They do not know how much of their risk Allcare Insurance has reinsured. If risk becomes reality, it is Allcare Insurance who clients will ask to shell out for claims.
Whether Allcare Insurance can then succeed in recovering part of its pay-outs from its reinsurers is another thing.
Also, there are different qualities of reinsurers, and beyond that, when taking out reinsurance an insurer generally retains a substantial part of the risk itself. Looking at Allcare Insurance’s dismal performance – almost a million euros lost in its first year of operations – you just have to wonder how the company’s cash flow will be able to take substantial pay-outs while waiting for reinsurance to kick in.
Even strong insurers have gone bankrupt despite reinsurance cover – they still went down.]
Daphne, whilst you are right in what you say, that the client knows Allcare and will expect payment upfront, an insurance company would not necessarily retain a large portion of the risk.
One can but assume, or hope in this case, that Allcare has reinsured this facultatively, ie that it has reinsured substantially all of the risk to the reinsurer.
Allcare’s earning on this deal would not be the premium but the commission it will receive from the reinsurer.
However having said that, it is a known fact that Allcare had had problems obtaining reinsurance in general because of the manner in which it is pricing. Whether they gave obtained reinsurance on this Enemalta risk and with whom is clearly an unknown at the moment.
This position will change come the introduction of the new capital requirements, when the capital Allcare will require will depend on the underwriting risks it takes and the quality of its reinsurers, amongst other things.
To the person who made reference to the MFSA, I am sorry but it is the responsibility of Enemalta to ensure that it has a solid insurer.
Enemalta is a business, and the sort of business that should have a risk manager, a risk committee and a responsible board, the fact that it does not is not the MFSA’s problem but the Minister’s problem. And we know the capabilities, or lack of, of this particular Minister.
Or (for all that matters), that the candle in front of the Madonna, does not blow out.
This is the credo of the present government: “Ahtaf, ahtaf, kompli ahtaf u li jifdal ahtfu wkoll !”
I am keeping a lighted candle myself, praying that no lighted candles come close to any gas-powered power stations.
It’s not only Eric Schembri who should light a candle in case his company burns up in flames but all Malta should light a massive candle too.
Unless Allcare Insurance have re-insured massively how will the money spent by taxpayers be reimbursed in case of a major claim?
I think the candle needs to be lit by all the clients of Allcare who are supposedly buying insurance for peace of mind.
How can you have peace of mind when you are insuring with a company that is sustaining such a loss?
I would like the prime minister to explain what he meant when he said repeatedly: Malta taghna lkoll.
An inflatable company, set up just for the years of great abundance.