By Derren Vincent, Executive Director, Willis Management (Gibraltar) Limited

As part of the preparatory  phase for the new  ‘Solvency II’ regulatory regime effective on 1st January 2016, insurers were required to submit their Forward Looking Assessment of Own Risks (FLAOR) by the end of 2014.

The FLAOR is essentially an embedded and documented risk management process whereby firms continually identify, assess, and (re)evaluate risk with reference to their defined risk appetite and tolerance.

Some of those risks identified, not least the underwriting and reserving risk, will be specific to the companies business models. Others that arise are reflective of wider industry risks and challenges.

Here we highlight just a few of the identified risks which are common to all  firms, often interlinked, and relevant to the challenges facing the Insurance industry today:

• Regulation

• Capital and Reinsurance

• Human Resource

• Reputation

Regulation

The Financial Services Commission (FSC) launched their three year Strategic Plan at the end of 2014. Their Vision of  “being the model international financial services regulator” resonates well with our marketing objective of attracting to Gibraltar a greater level of investment  and diversity of  business model. There is also evidence that the key messages were well received outside of Gibraltar.

Key for licensees and prospective licence holders is the FSC’s Mission of “providing regulation in an effective and efficient manner”. Their Strategic Plan advises that organisational re-structuring is underway with further strengthening of their senior team and sector specialisms planned. Recent ‘Authorisation Workshops’ have been held with industry to explain the ‘stream-lined and un-bureaucratic risk based authorisation process.

We have seen a deliberate increase in this type of ‘active’ communication on a variety of topics with industry which is both welcome and essential to steering a course through the biggest regulatory challenge ever to have hit the European insurance industry.

Solvency II becomes ‘live’ on 1st January 2016 bringing with it numerous challenges for both the regulator and regulated alike, not least due to the release of guidelines and guidance by Europe at a relatively late stage in the process. As such, much clarification and work remains in 2015 which will consume a large amount of resource in order to ensure that Gibraltar remains a compliant jurisdiction.

Continued partnership with the FSC will ensure that we achieve our required outcome and thus preserve our reputation for EU compliance. Evidence emerging from other EU jurisdictions suggests that despite the best of EU intention, the playing field remains less than level elsewhere in terms of requirements relating to the preparedness towards Solvency II compliance. Gibraltar intends to remain safely on the compliant side of the playing field.

Capital and Reinsurance

According to recent commentary from the reinsurance broking fraternity, the 1st April renewal season continues to follow the current trend of the market favouring the buyer. As such, reinsurance markets are seeking to implement major changes in their strategies and business models. Joint ventures accessing lower-cost capital and M&A activity is evident which may prolong the soft market. Diversification of portfolio and speed of execution is becoming a key competitive advantage.

Insurance Linked Securities (ILS) funds and managers are also affected with some smaller stand alone business models under duress. Experts observe that they are evolving into a more traditional reinsurer model at the expense of diluting the differentiation of their offering which has been so attractive to
primary buyers to date.

Against this background the UK Government have announced that it will work with the (re)insurance industry to develop a competitive tax structure to attract more ILS business to the UK. This is a reminder of the increasingly sustainable role of ILS within the wider global industry. Cat Bond investors are keen to take more risk and competition is healthy to avoid syndication of risks

Whilst the short  term looks good for our Gibraltar insurers in terms of the cost of their treaties, we might speculate that with an ever changing global reinsurance market, Gibraltar is now positioned well as a jurisdiction of choice for locating a reinsurance vehicle. In this regard, the FSC has specifically issued clear ILS Guidelines in consultation with leading ILS practitioners. It is also pleasing to see that the Gibraltar Stock Exchange (gsx) has recently announced the listing of its first fund. This low fee, fast to market offering complements the Gibraltar ILS proposition.

Under Solvency II insurance regulations, the quantity of regulatory capital required to support insurance businesses has generally become greater. This is not a challenge unique to Gibraltar and will no doubt herald a period of merger and acquisition activity across Europe including the raising of additional capital in different shapes and forms.

Regardless, anecdotal evidence suggests that these new capital levels  are not a barrier to Gibraltar doing new business. Established insurance groups seeking speed to market for additional capacity, or simply a foothold in the EU insurance market, continue to show genuine interest in establishing their vehicles in Gibraltar. Capital Market commentators for example, suggest that Asian investors also continue to be highly active in searching for insurance investment opportunities in developed insurance economies.

So, for companies with access to capital, the Gibraltar proposition of ‘speed to licence’ and accessibility of the regulator continue to be attractive.

Human Resource

A professionally qualified workforce is fundamental to underpinning reputation, market confidence and consumer protection.

The FSC have already made reference to strengthening their own senior team and sector expertise. The recent report issued by the Gibraltar Insurance Institute (GII) confirms that our Industry are also upholding their part in the bargain.

During the last term of office the technical seminars and professional examin-ation courses organised by the GII have been extremely well attended. Membership of the institute also exceeds 350 representing over 80% market penetration.

Government and Employers are demonstrably supporting professional development in the insurance sector and importantly more and more employees are attaining professional qualifications. The advent of our on-line examination facility has been a huge success with 143 exams sat using this new technology since July 2014, providing our Members with a fast-track to professional qualification.   

Reputation

Reputation Risk is strategic, behavioural, intangible, and consequential in nature. It cannot be measured and manifests as an erosion of trust. However, it can be managed but importantly management of reputational risk is a shared responsibility.

Reputation is the basis for trust of our Insurance industry, whether that be investor or consumer trust. Stakeholders include regulators, media, consumers, firms, employees and investors. The level of loss of  trust will determine if the damage to reputation is retrievable which in turn will depend on existing good will, the nature of the threat, and how one responds to the threat.

Everyone has a role to play to establish enough goodwill amongst stakeholders in order to ensure that should a threat event arise, trust and confidence will return with time and with the appropriate corrective response.

Conclusion

As an industry we share a collective responsibility for the:

• Promotion of market confidence and public awareness

• Protection of Consumers and of Gibraltar’s reputation

• Reduction of systemic risk and financial crime

Although these are word for word, the regulatory outcomes set by statute as outlined in the FSC Strategic Plan, evidence suggests, not least through the FLAOR process at individual company level as well as through collective discussion at industry body level, that the insurance industry is completely aligned with these objectives.

The challenges facing the Gibraltar Insurance Industry in 2015 and into 2016 are not unique to Gibraltar. It is imperative that Industry and Regulator together do all they can to demonstrate to stakeholders that they are addressing these risks and in doing so, are ensuring that these issues continue to be seen as ones that are faced by many other EEA states.

We are seeing with our own eyes that ‘Change brings opportunity’ and whilst there are challenges ahead, the general regulatory change across Europe is also providing opportunities. In the past 12 months we have seen capital providers and major insurance players actively looking at Gibraltar more often than not because of its ability to do business quickly.

The post Insurance Industry appeared first on Gibraltar International Magazine.

The Financial Services Commission (FSC) published in September its EU Solvency II compliant ILS regulatory Guidelines, after the Government established a working group to provide expertise and feedback from ILS experts around the world.

Gibraltar plans to offer a new EU domicile for catastrophe (CAT) bonds, ‘sidecars’ and collateralised reinsurance-based ILS transactions, broadly defined as financial instruments – typically to cover hurricanes, windstorms or earthquakes – and the result of a convergence between capital markets and the insurance industry.

Although concentrating on listing of over 100 open-ended funds in its first year, the new Gibraltar Stock Exchange (GSX) – a private sector venture that received an FSC license in October – aims to include ILS structures from 2016, before going on to be a trading exchange.

One of the largest independent ILS managers, Horseshoe Group, with $US 8bn assets under management in Bermuda, Cayman Islands and Ireland, gained an FSC license to operate in mid-October. Top investment bankers and lawyers in the New York and London capital markets historically put ILS offerings together.

Bullish on potential

Horseshoe Management (Gibraltar) was attracted to the jurisdiction following meetings with the Finance Centre, FSC and industry representatives in New York; with publication of the FSC Guidelines, Gibraltar has demonstrated its “collective willingness to make ILS a success”, Andre Perez, Horseshoe chief executive, remarked.

US wind and earthquake perils dominate the ILS market, but it is necessary “not only to expand the perils, but also the geographical regions it covers”. Perez added: “My sentiment is that a good percentage of the growth is going to come from Europe. This is why I am quite bullish about Gibraltar’s potential for ILS.”

He concluded: “Traditionally, ILS transactions in Europe have been done in Ireland as it was the only EU jurisdiction available. The problem is that the Irish regulatory system is viewed by some market participants as too cumbersome and antiquated for ILS transactions, where speed to market and flexibility are essential. This is where I think Gibraltar is going to shine…”

Still further good news came from Mark Byrne, Bermuda-based Haverford Group founder & chairman. “In my life I have created seven ILS structures and if Gibraltar had had the facility to list those, I would have moved them all from Cayman so we could get access to the EU,” he told me. “The last ILS I formed was in New York and had $US 1bn capital, so I am able to get together quite a few investors who will join me in what I am doing.”

And he emphasised: “Gibraltar will be able to compete with Cayman. There will be some who will question why Gibraltar is doing that and the stock exchange will need to demonstrate that there is support for such trade.

“I am happy to invest in Gibraltar so that it forms a cornerstone of what we are doing – for example, something in the order of $US 50m equity would not be a problem. I am very bullish about this jurisdiction”, Byrne said. The FSC was “highly responsive” and “the best amongst regulators I have dealt with in 30 countries”, he declared.

Byrne has already invested €10m initial capital in Gibraltar by forming two years ago St Bernard Assure, a reinsurance and insurance operation, “but this easily could be €30m if needed and still more capital is available to meet any demand”.

Developing skills

Aon is the leading global provider of risk management, insurance and reinsurance brokerage, operating in 120 countries including Aon Insurance Managers (Gibraltar) Ltd, which “is recognised as a world-class financial services provider, managing nearly 30 insurance company facilities for some of the biggest companies in the world”.

AON globally is said to have introduced more ILS business than any other firm, and also is an ILS administrator. A company spokesman confirmed: “AON’s Gibraltar Office is actively developing the skills to be able to support the wider AON Group in transacting ILS business from Gibraltar.”

Mike Ashton, Gibraltar Finance insurance specialist, explained: “Over the last six months we have learnt that there is an appetite for choice within the EU for a new jurisdiction to structure and administer these insurance products. The capital markets are looking for very transparent regulatory processes and clear time lines in progressing their applications, which we can provide in Gibraltar.”

The FSC’s tailored ILS regulatory framework incorporates consultation before and during the application process, with a standard time to license of 4 weeks or, for a premium, a fast-track scheme in two weeks.

Local businesses attended the Monte Carlo Rendez-Vous in September and found “strong interest” in the Gibraltar ILS offering. “We believe that the implementation of Solvency II will bring new opportunities for an expanding European ILS market. Dublin has been involved with ILS transactions for some years and Malta has recently published its guidelines. Now, with our quality product, Gibraltar can quickly become a jurisdiction of choice within the EU for ILS transactions”, Ashton noted.

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Insurance Linked Securities (ILS) have been proven to be one of the most successful manifestations of the convergence of the insurance industry with capital markets. ILS provide a mechanism for insurance related risk to be transferred to capital market investors and Gibraltar has developed a secure but competitive regime to become a key European hub in the ILS space.

If we define ILS as an asset class, we might say that they are characterised as a pooling of insurance related cash flows which are transformed into tradable securities, typically done by utilising securitisation techniques with the underlying assets and associated income then serving as collateral.

Risk securitisation is a product of the 1990’s when traditional reinsurance markets reached capacity limits as a result of a number of ‘catastrophe events’. Since the 2005 losses of hurricanes Katrina, Rita and Wilma, the ILS market and the market for catastrophe bonds (cat bonds) witnessed significant growth, primarily because losses sustained created a capital shortfall (with the resulting risk transfer prices skyrocketing). The sector then evolved and accepted that capital markets were not only there to offer protection in the ‘vacuum’ of traditional capacity, but also as a valuable source of significant amounts of high quality risk transfer capacity.

A significant portion of the ILS market is the reinsurance of high severity, low probability events through cat bonds. A cat bond allows the transfer of risk relating to, for example, earthquake risk, from an insurance or re-insurance undertaking to an investor.

A typical cat bond structure begins with the formation of an SPV, which issues bonds to investors. The proceeds are invested in safe, short term securities which are held in a trust account. The cat bond will have an embedded call option that is triggered by a defined catastrophic event. If the event, such as an earthquake, occurs, the proceeds are released from the SPV to assist claims payments. The release of funds can be proportional to the event size rather than being completely binary. However, in most cat bonds the principal is fully at risk which means that investors could lose their entire principal investment. In return for the option, the insurer pays a premium to the investors. The fixed returns on the securities held in the trust are swapped for floating returns based on the LIBOR rate (or another widely accepted index), and this in turn immunizes the insurer from the interest rate and default risks. Ultimately investors receive the LIBOR rate plus the risk premium in return for their capital and if no contingent event occurs the principal is returned to the investors at the end of the bond term. The SPV acts to isolate the investment risk made by an investor from the general business and credit risk of the insurer. As such, the investment exposes the investor to the catastrophe risk only.

The Gibraltar proposition

Gibraltar has tremendous potential to establish itself in the ILS space, particularly the growing European segment of the market which is expected to continue to develop and grow along with the increasing number of perils that have been modelled for capital market transactions. In a European environment ILS is expected to complement reinsurance with the development of Solvency II and with the total return from the cat bond market measured at 10.9% over 2013 (Swiss Re Global Cat Bond Performance Total Return Index) a continued interest is expected from institutional investors seeking returns largely uncorrelated to financial markets. Gibraltar’s position as being fully EU compliant is key. In 2009, the Committee of European Insurance and Occupational Pension Supervisors (CEIOPS, (which was subsequently superseded by EIOPA in 2010)) published the Insurance Linked Securities Report which outlines the importance of Solvency II for the ILS market. This report proposed that the new principles based Solvency II framework would be a major development for the ILS market and that Solvency II would recognise securitisation and derivatives as effective risk mitigation techniques.

While some jurisdictions are taking a view as to the legislative framework required to provide the legal infrastructure for ILS business, Gibraltar has its existing Insurance Companies (Special Purpose Vehicles) Regulations which were adopted in 2009, along with Protected Cell Company legislation enacted in 2001, which provide an ideal framework for ILS offerings. Gibraltar also has a vibrant existing insurance sector (with gross premium income in 2012 of £3.8bn).

The initiative to develop and diversify the insurance sector in Gibraltar has been driven conceptually by Gibraltar Finance, and in particular their insurance specialist Mike Ashton. What we have seen is a coming together of a Government initiative, supported by the Financial Services Commission (FSC) and by the industry locally, to put Gibraltar into a position that it is ready to do business. The Gibraltar ILS Guidelines, generated in large part by the FSC, have been constructed with the input of an international and expert working group to ensure that they work from both a practical and legal angle. From that perspective we can be confident that as well as being Solvency II compliant based on the most up to date EIOPA position, the Guidelines also meet with the approval of the international practitioners who offered their input throughout the process. Critically, both in terms of pricing but even more importantly in terms of timing and time to market, the Guidelines and the processes set out therein have already been met with approval of the industry.

Initial momentum

ISOLAS is delighted to act for the Horseshoe Group- one of the largest ILS managers – in its Insurance Manager’s application in Gibraltar. Andre Perez, CEO of Horseshoe sees a good percentage of growth in the sector coming from Europe and is ‘quite bullish about Gibraltar’s potential for ILS.’

This is positive news and we expect this to send a strong message to the sector. There will be other Insurance Managers looking at developing operations in Gibraltar, and there are also managers already in Gibraltar with ILS business currently existing outside of Gibraltar that we would hope to develop locally. I am confident that Gibraltar will have a good choice of service providers to support the ILS sector as it develops, and the future looks very positive.

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Personal motor rates should start rising again in the second half of 2014 as the recent round of price cutting starts to hit insurers’ results.

That is the message from industry experts and market commentators after a difficult year for motor insurers.

The talk comes despite the UK personal motor market as a whole returning to underwriting profitability in 2013 after at least a decade of losses. Figures from accounting firm Deloitte show that the market reported a combined operating ratio (COR) of 99.4% for the year.

But underlying profitability, excluding prior-year reserve releases, worsened because of the price war.

Online broker IGO4 commercial director Karen Hogg says: “It is hard for me to see how, when the premiums have dropped so significantly, insurers can still expect to achieve the same results in what is already a very difficult market to make money.”

Lloyd’s motor insurer ERS commercial director Sam Hudson adds: “Everyone has reported rates coming down. You only have to look at most companies’ CORs to see that it can’t last forever.”

No big fall in claims

Rates fell sharply in the past year as insurers anticipated the effects of legal reforms as well as anti-fraud and pricing technology. The Towers Watson/Confused motor price index shows that rates fell by 27% since the Legal Aid, Sentencing and Punishment of Offenders Act 2012 (Laspo) was introduced in April 2013.

Although insurers used the reforms and technology improvements to justify the cuts, there is little evidence of a big reduction in motor claims.

The average cost of settling a personal motor claim in Q1 2014 was £2,701, according to the ABI, compared with £2,605 in the same quarter last year.

And there were 731,000 claims in the first quarter of 2014, compared with 790,000 in last year’s first quarter. There have been casualties already. RSA plans to drop 800 personal motor brokers to restore profitability to its book after 2013’s 111.7% personal motor COR.

Ageas UK, one of the few UK-based insurers to give a breakdown, saw its motor COR worsen to 101.6% in the first quarter of 2014 from 99.6% in the first quarter of 2013.

Some companies are taking action. Motor insurance group Hastings chief executive Gary Hoffman says his firm has made “selective small price increases”. But most expect concerted efforts in the second half of the year.

Deloitte insurance partner James Rakow says: “If the industry doesn’t start to increase premiums, the overall results that we will see in 2014 and beyond could decline.

“We would see the likelihood of premiums going up being quite strong at some point in the latter half of the year.” Deloitte’s figures show why action is needed. The 2013 underwriting profit was caused by reserve releases, which cut the COR by 9.9 points.

Without the releases, the COR would have been a much less flattering 109.3% – in turn 0.8 points worse than 2012’s underlying COR of 108.5%.

Rakow adds: “The direction is now pointing towards a challenge for the industry to maintain profitability.”

The post Motor rates to harden amid insurer woes appeared first on Gibraltar International Magazine.

Gibraltar’s insurance sector has seen huge success in recent years; 56 firms are licensed and, with some 450 staff locally, reported a combined gross premium income of £3.8bn in 2012 (the latest available figures). Of that, £50m was life business, £795m captive insurance and £2.99bn constituted the non-life sector – up 11% on a year earlier.

Minister for Financial Services, Albert Isola, revealed at the launch of the ‘Gibraltar Finance Business development Plan 2014’ in March that the jurisdiction’s marketing agenda includes targets such as insurance and pension markets in Bermuda (June), Johannesburg (July) and Hong Kong (September).

South Africa has a well-developed insurance sector as Michael Ashton, the Finance Centre department’s insurance specialist, found in November, when he attended the country’s Insurance Conference in Sun City. He felt then that many there had generally low awareness of Gibraltar’s depth of insurance expertise compared with Dublin, Luxembourg and Malta.

However, Gibraltar already has three South African-owned insurance businesses – two under the Red Sands banner (life and non-life – motor focusing on Eastern Europe) and Euroguard, a Protected Cell Company (PCC), used in conjunction with passporting of insurance products throughout Europe.

The first annual survey of members of the Gibraltar Insurance Association (GIA) published in April shows the majority of industry professionals is optimistic about the future, but believe that “while the emerging markets will play a significant role in the future growth of Gibraltar, the UK and Europe are likely to remain the primary markets for Gibraltar insurers”.

Getting to grips quickly with new EU rules to ensure insurers have sufficient capital to withstand unexpected problems – the Solvency II Directive – is at present a major issue for local firms.

Some, such as Enterprise Insurance chairman Andrew Flowers, see it as “an opportunity and not a threat”, by introducing new disciplines into the business. Formed a decade ago, the Gibraltar-based firm employs 45 staff and says it is among the jurisdiction’s largest insurance underwriters with gross premiums of over £150m last year.

“Solid regulation and oversight of insurance is a good thing,” he maintained, and Enterprise, a niche market wholesale insurer providing warranty protection for AA and Argos clients amongst others, is “in a very good state of preparedness, but I’m not sure how much of Solvency II is really necessary.”

In particular, he is concerned by capitalisation requirements, “which should be proportionate as to the type of business being underwritten. We are making sure we are fully capitalised, but it’s difficult to say for certain at this stage how much will be required”.

That feeling is echoed by Quest Group founder, Steve Quinn, who said: “The logic of Solvency II is there to provide a level playing field, but the implementation has to be proportionate to the size of each operation.”

Wake up call needed

In just over 18 months’ time, insurers will have to be fully compliant with Solvency II, and meet various corporate governance issues by the end of this year, including documenting management policies toward risk, and thereafter meeting capital requirements based on a standard model of calculation to deal with unforeseen issues.

Quinn fears that the timescale to achieve all Solvency II requirements will be taxing for smaller firms and that “some people in the industry need to have a wake-up call.”

It was good that large firms such as Transalantic Reinsurance Group (TRG) and Arch, a Bermudan-based reinsurance company, have been established in the territory to sit alongside existing insurers. But he was concerned that “if an insurer is writing, say, £30m of business with the help of small, unrated reinsurance or co-insurance partners, they may be less able to deal with problems that could arise, because there is insufficient core capital in the business to support the insurance book – and that in turn could lead to a domino knock-on effect.”

The new Financial Services Commission (FSC) chief executive, Samantha Barrass, agrees the EU Directive will have a big impact on firms, “with a ton of guidance and things coming out from EIOPA [the European Insurance and Occupational Pensions Authority], and we have to get on top of it”.

The FSC already had extensive background material and Barrass wants to move swiftly. “It’s really important for Gibraltar and for the reputation of our regulation that we are seen to be on top of European requirements; there is so much to deliver, but I want to do this in a way that manages the impact.

“It is not going to be easy, but I want to minimize the difficulty. The only way we can do this is a shared programme with industry and with government involvement,” the Regulator declared.

According to Chris Johnson, GIA chairman, the FSC is encouraging companies that are considered relatively low in uncommitted capital to increase the amount in stages.

Capital challenges

“The issue applies to Europe as a whole, of course: the level of capital that must be within the business is driven by the amount of insurance that is underwritten and one alternative is to reduce the amount of business that they are writing; it depends on the cost of capital and the desired return on equity,” Johnson suggested.

It is estimated that over £100m of fresh capital already has been pumped into Gibraltar insurers to help meet expected Solvency II requirements. However, reaching the required levels of capital could be a challenge for some companies, particularly for small independent firms.

Within the motor market, there is concern that some companies’ reserves to cover accident claims between 2007-2010, for example, are proving less profitable, because of a rise in personal injury claims, which in turn may require those insurers to recapitalise.

Gibraltar accounted for 16% of all UK motor business in 2012, much more than Lloyds and up from 10% a year earlier, “but we have to question how much larger we can get in this respect – maybe 25% of the UK market, but I don’t know”, Ashton feels.

Gibraltar’s four largest motor insurers – Admiral, Advantage (Hastings), Acromas (SAGA and AA) and Zenith – together wrote £1.83bn in 2012, and each of those companies is licensed to write across a range of classes.

“Geographically, the vast majority of Gibraltar’s gross premiums arise from the UK – 80% or more – so I am talking to existing insurance businesses and potential new entrants and asking them to think about what Gibraltar can offer on a pan-European basis given the opportunity of EU passporting rights,” Ashton explained.

Opportunities exist for motor insurers throughout Europe, he maintained. Last year, Bermuda-based St Bernard Assurance established a Gibraltar operation and, as an initial step, applied to the Swiss regulator for a branch licence to utilise passporting rights for vehicle and property insurance. If successful as expected, the firm will look to set up similar operations elsewhere in the EU.

Two other Gibraltar insurers, MCE – specialising in motorcycle cover – and Nelson, operating in motors, are understood to be similarly looking to extend into Europe.

The jurisdiction has also set its sights on gaining a share of the $US 7.5bn a year insurance linked securities (ILS) market, broadly defined as financial instruments – typically hurricanes, windstorms or earthquakes – and are the result of the process of convergence between capital markets and the insurance industry. ILS has developed rapidly in recent years with investors attracted by returns that are largely uncorrelated with the general financial markets.

Bruno Callaghan, of Callaghan Insurance and Willis (Gibraltar), joined Ashton last September on “a fishing trip to Bermuda to gauge the extent of appetite for making Gibraltar a European hub, as an alternative to Dublin and Malta, for example”.

In March, they and others locally attended a specialist ILS conference in New York, considered the global centre where such risks are assembled. “The interest there was huge and as a result, we have one licence application in progress with the FSC – not a huge one, but the first for Gibraltar and still interesting,” Callaghan declared.

New money coming

As Ashton explained: “Over the last four years, Bermuda has become the major location for ILS fund offerings, taking over from the Cayman Islands. Within the EU, Ireland has been the location for ILS offerings and Malta has recently published its regulations. Gibraltar has had special purpose vehicle regulations for insurance companies in place since 2009 and the FSC will be publishing its ILS Guidelines in the next few weeks. There is a need for some choice in Europe and Gibraltar is an ideal centre for this.”

The advantage from ILS is that new money will come into Gibraltar and businesses locally can be involved in the offering; lawyers and accountants, for example – would pick up extra work from this and the jurisdiction’s PCC approach is ideal for this business.

“The major players in the ILS market are global financial services organisations. If Gibraltar can successful enter the ILS market, the opportunity to raise Gibraltar’s profile amongst these businesses is significant and in other areas of financial services, for example. asset management and funds,” Ashton said.

The Robus Group, which has a Gibraltar operation, claims more than 50% of new Guernsey ILS structures this year, having gained a major market share in 2013 from its office in the Channel Islands – but it is outside of the EU.

Chris Le Conte, the Group’s chief executive, revealed: “Gibraltar and Guernsey complement each other very well as EU/ non-EU participants and we are actively exploring developing a Gibraltar ILS product to enhance our offering.

“While we and our clients are very satisfied with a Guernsey operating model at present, it may be that Solvency II brings opportunities to EU domiciles such as Gibraltar”.

Ray Spencer

The post Insurance growth looking to cover Europe appeared first on Gibraltar International Magazine.

The case for Gibraltar as a great place to do business, is made time and time again by industry professionals, as well as Gibraltar Finance and the Gibraltar Insurance Association.

Most of us know the script off by heart; we can talk confidently about the merits of Gibraltar in terms of EU passporting rights, regulatory efficiency and corporate taxation. But what we rarely do is talk about Gibraltar as a great place to develop one’s career. Promoting Gibraltar as a ‘career domicile’, and not just a corporate domicile, is vitally important to the future of our industry.

In the UK there are likely to be hundreds of industry professionals who would seriously consider a move to Gibraltar, if only they knew about it. Many employees in the industry in the UK would love to work abroad, but feel hampered by their inability to speak a foreign language.

That’s why, for example, a lot of them talk about the US, Canada, Australia and a few other international centres, such as Dubai and Singapore, where English is the de facto business language. Europe is generally ruled out in its entirety due to perceived language difficulties.

Only Ireland is a realistic option, but its climate and lifestyle is quite similar to the UK. Gibraltar however, offers a great opportunity for a positive lifestyle change without leaving Europe and without learning another language. So what are the opportunities in Gibraltar?

Opportunities for insurance professionals

Gibraltar has a well-developed insurance industry with insurers, reinsurers, insurance managers, brokers and of course, a regulator. Some insurers and brokers focus on the local market, whereas others are more focused on other European markets, particularly the UK. Lines of business vary widely. Motor insurance remains a dominant class, but Gibraltar companies also underwrite property, liability, personal accident, financial lines, health, surety, marine and most other major classes of general insurance.

In anticipation of the forthcoming Solvency II regulations, regulators are renewing their focus on corporate governance. The concept of “mind and management” is particularly relevant because it means Gibraltar insurers must demonstrate they have the expertise to manage their businesses here in Gibraltar.

In practical terms, this should mean increasing demand (and therefore opportunity) for specialist underwriters, managers and directors.

The close-knit nature of the Gibraltar insurance industry means that it’s possible to gain exposure to areas of the industry which, in the UK or elsewhere, would be far less accessible. An insurance underwriter in Manchester, for example, is unlikely to have any sort of interaction with their regulator or have the opportunity to sit on their employer’s Underwriting Committee.

Similarly, in Gibraltar there is far more interaction with business owners and entrepreneurs. This level of exposure can significantly accelerate personal development and lead to new opportunities in unexpected areas.

Gibraltar also provides opportunities for more formal continuing professional development. The Gibraltar Insurance Institute (GII) is, among the more active local insurance institutes and hosts regular seminars on a range of topics. They also offer support for those studying for professional insurance qualifications with the Chartered Insurance Institute (CII).

Developing local talent

Currently around 50% of the Gibraltar insurance industry was born in Gibraltar. In its efforts to attract expertise from outside, the industry must not ignore the huge potential of local graduates and school leavers. Over the past two years, the GII has done an outstanding job of raising awareness of the insurance industry among 16 and 18-year olds. I am certain this will continue over the next few years and hopefully we will see more local young people attracted to the industry.

This will not be easy, as other sectors, particularly the accountancy and legal professions, continue to have a very high profile among local graduates seeking a professional career.

Promoting Gibraltar as a ‘career domicile’ is vital for Gibraltar’s future. It has long been my view that one of the critical risks to the Gibraltar insurance industry is a potential shortage of skilled professionals. In many respects, this is inevitable in a territory the size of Gibraltar. With only 30,000 people living here, to find a specialist underwriter in a new line of business is not always easy.

There are simply not enough people outside the industry trying to get in. By raising awareness of the Gibraltar insurance industry, both inside and outside Gibraltar, we can hopefully encourage more people to think of it as a career option.

www.robus-risk.com

www.gia.gi

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