Insurance Jottings

London’s Brexit-Related Job Losses May Not Be as High as Initially Feared

British banking, insurance and asset management job losses to the European Union due to Brexit might not be as heavy as initially feared, the City of London financial district said on the 8th January.

 

Jeremy Browne, the city’s EU envoy, said UK-based firms opening hubs in the bloc after Britain leaves next year are looking for the least disruption possible. “It may end up for quite a lot of them being a bit less dramatic than it might appear,” he said as Britain embarks on a new phase of talks with the EU over its exit.

 

“I don’t think they are saying ‘Shall we abandon London?’,” Mr Browne told a press briefing as he began a five-month trip around EU states to meet policymakers.

 

Financial services in Britain raise over £70 billion (US$95 billion) in taxes annually, but Mr Browne said new hubs will likely be staffed by hundreds rather than thousands.

 

The city expects 5,000 to 13,000 job losses among the 1.1 million people employed in the sector across Britain. This chimes with 10,000 losses the Bank of England said is plausible on Brexit Day in March 2019.

 

Consultants like Oliver Wyman have forecast losses of 75,000 or far higher, though over several years.

 

Mr Browne, a former junior UK foreign minister, said France sees winning UK financial jobs as a “national endeavour” led by French President Emmanuel Macron. Germany is also courting financial jobs, but in a less “emotionally attached” way.

 

Unoccupied Ground

In December Britain and the EU agreed to open talks on a transition period and final trading terms. Mr Browne said transition should ideally not depart dramatically from the UK’s current links with the bloc, though some “tweaks” were inevitable. “Speed is of the essence,” he said.

 

The city wants an imaginative trade deal which is more comprehensive than the one negotiated by the bloc with Canada, but stopping short of joining Norway in the European Economic Area (EEA), he said.

 

Mr Browne refers to this as “unoccupied ground,” meaning no such trade deal on financial services has been done with the EU before.

 

Norway pays into the bloc’s budget and accepts free movement of EU citizens within its borders, conditions which pro-Brexit lawmakers in Britain reject on sovereignty grounds.

 

“There is a lot of space between Canada and being in the EEA,” Mr Browne said.

 

Adopting the EU’s “one-way” system of equivalence, whereby the EU grants market access to foreign banks if they operate under similar rules to those of the bloc, is a non-starter for most in the city, Mr Browne said.

 

“People are quite hard-line about not having equivalence as the final state,” Mr Browne said.

The city wants a trade deal which would allow the UK and EU to accept each other’s financial rules, with a mechanism to resolve any disputes, a more partnership-based approach than equivalence.

 

The EU is, however, very worried about how non-EU countries like Switzerland or the United States would react if it gave preferential treatment to the city, Mr Browne said.

 

The Bank of England said in December it would spare EU banks in London from having to find costly capital to convert from branches to subsidiaries after Brexit if EU regulators reciprocated.

 

Financial lawyers have chipped in, saying that some form of equivalence may be Britain’s most realistic bet in the immediate term given the time it takes to negotiate trade deals.

 

AXIS receives Lloyd’s approval to manage Novae and SPS syndicates

AXIS Capital Holdings has received authorisation to create a single managing agent structure for its operations at Lloyd’s.

 

Following the Lloyd’s authorisation, which became effective on the 1st January, AXIS Managing Agency assumed the oversight of Novae Syndicate 2007 and SPS 6129.

 

Syndicate 2007 and SPS 6129 will operate alongside AXIS Syndicate 1686, which it currently manages. AXIS has also initiated plans to consolidate its Lloyd’s business into AXIS Syndicate 1686, under management of AXIS Managing Agency, and anticipates completing that process from the 1st January 2019.

 

“This marks an important milestone in our continued integration of AXIS’ international specialty insurance business with Novae,” said Mark Gregory, CEO, AXIS Managing Agency, and CEO, AXIS Insurance international division. “We look forward to continuing to provide our customers with a diversified and balanced portfolio of specialist classes.”

 

AXIS Syndicate 1686 and Novae Syndicate 2007 underwrite specialist classes which include marine, cyber, energy, aviation, terrorism, construction, property, casualty, political risk and political violence, professional indemnity, and reinsurance, among others.

 

SPS 6129 is a Lloyd’s special purpose syndicate which underwrites US facilities business. It launched in January 2016 as a collaboration between Novae and Securis Investment Partners, an insurance linked securities fund manager.

 

Maritime London to merge with International Maritime Industries Forum

UK maritime trade promotional body Maritime London is to incorporate the activities of the International Maritime Industries Forum (IMIF) during 2018.

 

Maritime London CEO Jos Standerwick said that, given the overlap in objectives and members, Maritime London was a natural partner when IMIF began to consider its future last year. “I believe that this merger will benefit greatly the members of both Maritime London and IMIF, providing a wider platform and creating a stronger voice for the members of both organisations, not least in ensuring that the UK and London remain the leading international maritime professional services centre”, he said.

 

Separately, four new Directors were approved to join the Maritime London Board at the Annual General Meeting on the 18th December: Ian Gaunt; Richard Greiner; Mark Jackson; and Britt Pickering.

 

Ian Gaunt is President of the London Maritime Arbitrators Association (LMAA) and has been a full-time arbitrator since 2008.

 

Richard Greiner is a Partner at Moore Stephens and has more than 30 years’ experience in providing assurance and advisory services to the shipping industry.

 

Mark Jackson is CEO of the Baltic Exchange. He served as Chairman of the Baltic between 2009 and 2012 and previously worked as a broker at Gibsons and latterly was Chief Commercial Officer at AM Nomikos.

 

Britt Pickering is Legal and Claims Director of at The Shipowners’ Club.

 

Rodney Lenthall, David Moorhouse and Jeremy Penn have stepped down from the Board.

 

Industry needs a marine investigation code

A marine investigation code needs to be created which will would accelerate and simplify the process of managing a marine casualty, according to Captain Jon Walker Regional Director of Asia & Australia LOC IUMI Professional Partner at www.loc-group.com

 

In the latest newsletter from IUMI, Captain Walker said that local jurisdictions were often unprepared, lacking in understanding and unwilling to cooperate, thus lengthening the investigation process and having a negative impact on the environment, the vessel’s crew and/or the damaged ship.

 

Captain Walker said that problems arose when a local authority did not know the limit of its jurisdiction, and assumed authority of a casualty when they had no right so to do. He said that there had been too many examples of where the recovery of a grounded or damaged vessel had continued for many years, where the investigative and wreck removal process was flawed, or where the master ended up in jail or otherwise detained.

 

Captain Walker believed this issue could be addressed through a marine investigation code, driven by the IMO. This code would compel sovereign states to clarify their jurisdictions with their governments prior to any incident.

 

This in turn would mean that, in the immediate aftermath of an incident, first responders would know who to deal with and what were the limits of their authority. He said that a marine investigation code “could establish transparent, consistent procedures across national borders ensuring the best response from all parties”. Responders would be able to coordinate with an authority that understood the maritime sector and the implications of a shipping casualty.

 

Instance of “no premium paid, no cover” causes Greek government concerns

The Greek government is considering legislation to formalise the obligations of vessel insurers, according to local reports.

 

A minor cargo spill off the coast of Mykonos late last year led to difficulties when the insurer stated that the owners had not paid their premiums, and therefore the vessel was uninsured.

 

1980-built, Panama-flagged 2,466 gt Little Seyma (IMO 7832804), owned by Dona Line Shipping care of manager M&M Marine Shipping of Istanbul, had been en route from Tuzla in Turkey to Cyprus’s Famagusta port. It started its journey in Russia, with a load of 2,700 tons of animal feed, but on the 22nd December it ran aground off the islet of Tragonissi, near Mykonos, in the Aegean Sea. Some of its cargo leaked as a result.

 

On learning about the incident, the vessel’s insurer, reportedly VSK Insurance Company of Russia, informed the Greek Shipping Ministry that it had not been paid the insurance premium and that, therefore, the vessel was not covered for the damages it caused.

 

VSK is understood to have agreed to cover the damage “on a voluntary basis”, but not without challenging a proposal by the head of Greece’s state port authority that vessels which could not prove they had paid their insurance should be prevented from sailing.

 

Legislation being prepared by the government would seek to enshrine the obligations of insurance companies, even in the case of foreign vessels transiting Greek waters, local reports claimed.

 

India enables offshore insurance business in new financial hub

The Insurance Regulatory Development Authority of India (IRDAI) has issued enabling regulations for undertaking offshore insurance business in Gujarat International Finance Tec-City (GIFT), India’s only operational International Financial Services Centre (IFSC).

 

GIFT is being developed as a global financial and IT services hub, a first of its kind in India, designed to be at or above par with globally benchmarked financial centres.

 

Under the regulations, for the first time in the country, foreign insurers are permitted to open IFSC Insurance Office (IIO) at GIFT IFSC. As GIFT IFSC has been notified as foreign territory by the Government of India, foreign direct insurers (life, non-life & general) and foreign re-insurers are now permitted to open offices and undertake dollar denominated business there.

 

Ajay Pandey, MD & Group CEO, GIFT City, said “The vision of the Honourable Prime Minister of India of making India a Hub for International Financial Services can be achieved with business friendly regulations and competitive tax regime. We are thankful to Department of Financial Services & IRDAI for issuing business regulations for IFSC which would go long way in making GIFT IFSC a hub for Offshore Insurance business.

 

“GIFT IFSC already hosts three major insurance players, GIC Re, New India and ECGC, and five insurance broking entities. With the business guidelines in place, we are now hopeful that foreign and domestic insurance companies would participate in making GIFT IFSC a hub for International Insurance business.”

 

The Government of India has provided competitive tax regime for the IFSC units and thereby units are provided ten year tax holiday (of which the first five years is a complete tax holiday and for next five years there’s a tax reduction of 50 percent),which is applicable for all insurers operating within GIFT IFSC. For export of services, insurance companies operating from IFSC are exempted from GST.

 

GIFT IFSC, being a foreign territory mainly conducts offshore business. Thus, the restriction on shareholding does not apply in IFSC and thereby a foreign direct insurer has option to set up operations directly without any local partner.

 

The move would also help Indian Insurers to set up their offshore office in GIFT SEZ IFSC to undertake dollar business which otherwise was restricted in India. This would become a big enabler for Indian direct and re-insurance players as it provides them a foreign branch in close proximity which would be operationally cost effective.