The Mediterranean island of Malta is set to challenge Bermuda for its captive insurance crown.

The country is to launch a drive to attract the captive industry to its shores, instead of Bermuda.

But Robert Paton, president of the Bermuda Insurance Management Association (Bima) dismissed the Maltese bid to muscle in on the captive market.

He said: “I suspect the more we see with domiciles coming up with captive solutions, it justifies what we are doing here.

“To see other places such as Malta and other similar places going out with the correct message, and that’s the important thing, it’s helping us.”

The bid by Malta, a full member of the European Union, to snatch captive business from the Island, will kick off in New York with a one-day conference, scheduled for the first quarter of this year.

The seminar is to be run by Maltese company PKF Fiduciaries International and firm’s Danielle Hermansen said “the target sector is Bermuda with its 958 captives and reinsurance companies”.

Ms Hermansen added that Bermuda had met the requirements for full equivalency with the European Union’s Solvency II regulations, although captives were excluded.

She said: “The Solvency II requirements will likely see Europe-based captives based outside the EU to redomicile onshore in Europe.

“Bermuda, the leading captive domicile in terms of numbers, is looking to align its captive capital and solvency rules with those of the European Union in order to remain an attractive domicile for its reinsurance companies.

“However, since captives have been left out of the equivalence project, this could provide an edge to European domiciles at some point in the future.”

Ms Hermansen added: “Malta continues to enjoy a positive advantage for insurance and reinsurance companies seeking to establish themselves in Europe.

“This is because such companies do not suffer additional financial costs associated with both the establishing and running of a fronting insurance company, therefore remaining an attractive vehicle to explore investment opportunities.”

She added that the US is “the source of most of Bermuda’s capital, followed by Europe”.

Malta has at present just nine captives, while Bermuda has more than 800.

Mr Paton said: “We do somewhat dwarf Malta, which gives an understanding of the scale and experience both domiciles have.”

And he pointed out that, if US captives were to set up in Europe, their US risk would also be subject to the Solvency II regime.

He added: “It’s not as if they will be able to take the US risk out.”

And he said the “bifurcated approach” taken by the Bermuda Monetary Authority (BMA) is keeping captives separate from the Solvency II requirements was a masterstroke.

Mr Paton added: “I have enormous respect for Jeremy Cox of the BMA and his team. I think it’s been an excellent result for everyone.

“It was innovation to a certain extent because it did something some people did not think possible. I think we have the best of both worlds.”