Insurance Jottings
Lloyd’s to write fac, non-proportional XoL treaty reinsurance from Brussels
Specialist re/insurance market Lloyd’s of London has revealed that it will write facultative reinsurance and non-proportional excess of loss (XoL) treaty reinsurance on Lloyd’s Brussels paper from the 1st January 2019 across all markets in the EEA.
It also announced that in the unlikely event that the UK does not secure Solvency II reinsurance equivalence in 2019, it will be ready to process the remaining treaty reinsurance business through Lloyd’s Brussels from the 1st January 2020.
In May 2018, Lloyd’s received licence approval from the National Bank of Belgium to set up a new European insurance company in Brussels to secure access to the EU market after Brexit.
Vincent Vandendael, Lloyd’s chief commercial officer and Lloyd’s Brussels CEO, said: “We expect that, following Brexit, the UK will apply for and receive Solvency II reinsurance equivalence. However, we are working to ensure that our reinsurance customers can continue to access the market’s specialist policies in the event that the UK leaves the EU without a transitional agreement or equivalence.”
Lloyd’s said the market can continue to write reinsurance in the EEA states until the 29th March 2019 with the confidence that all valid claims will be paid.
After this date, if transitional arrangements or equivalence are in place, the market can continue to do business via syndicate paper as it does today.
However, even without transitional arrangements or equivalence, Lloyd’s Brussels will be able to write facultative reinsurance and non-proportional excess of loss treaty reinsurance from the 1st January 2019 across all markets in the EEA. The remainder of the treaty reinsurance business can be written as cross-border business on syndicate paper from EEA States under World Trade Organisation (WTO) terms, with the exception of Germany and Poland.
Lloyd’s added that in the unlikely event that the UK doesn’t secure equivalence in 2019, it will be ready to process the remaining treaty reinsurance business through Lloyd’s Brussels from the 1st January 2020.
In addition, Lloyd’s is investigating a bespoke solution for Lloyd’s Brussels to process proportional treaty reinsurance business in 2019, which could also apply to non-proportional treaty.
Mr Vandendael said: “Along with other London Market partners, we continue to make the case strongly that an EU equivalence decision with respect to the UK’s reinsurance framework should be secured as soon as possible and by no later than the end of the
transition period.
“ It is clear from the UK Government White Paper that the UK Government aims to achieve Solvency II equivalence of UK reinsurance regime.
“We will know before the 29th March 2019 whether we have transitional arrangements. This, alongside the solutions we are working on, the market’s strong customer relationships and the commitment to pay all valid claims, will all help us maintain and grow our business partnerships across the EEA.”
Jersey seeks to avoid EU blacklist through economic substance bill
Jersey’s government has introduced a bill requiring businesses which operate on the island to be able to demonstrate adequate economic substance, as it aims to avoid the EU’s blacklist of uncooperative tax jurisdictions.
The bill has been designed to address concerns of the EU Code of Conduct Group on Business Taxation about the need for relevant businesses to demonstrate adequate economic activity.
Jersey was placed on the EU’s so called ‘grey list’, which means while it has been deemed a cooperative jurisdiction, it will have to demonstrate that it has addressed certain concerns surrounding tax matters, in this case with regard to having ‘real economic activity’ before December 2018.
Senator Ian Gorst lodged the bill, ‘Taxation Companies Economic Substance Law’ for debate by the Jersey States Assembly at its sitting.
Law firm Ogier stated that the law sets out to test that companies are carrying on “relevant activities” to demonstrate that they are “directed and managed” in Jersey, and that their “core income generating activities” take place in Jersey.
“I am delighted that Jersey is the first jurisdiction to lodge new legislation to meet the concerns on economic substance expressed by the EU Code of Conduct Group on Business Taxation,” Mr Gorst said.
“As well as meeting the commitment made in 2017, the lodging of this legislation demonstrates Jersey’s well-deserved reputation as a jurisdiction of substance that is committed to the development of new international standards in fair taxation and to the maintenance of a good neighbour policy with the EU.”
Other domiciles which have been required by the EU to demonstrate economic substance include Bermuda, the Cayman Islands, Guernsey and Isle of Man. All of these jurisdictions have agreed to modify their tax regimes to comply with the rules set by the EU Code of Conduct Group, lest they be deemed a non-cooperative jurisdiction and placed on the blacklist.
UK’s Ed Broking to Be Acquired by BGC Partners
Ed, the London-based reinsurance, wholesale and specialty broker, announced that it would be acquired by a subsidiary of BGC Partners, Inc (BGC), a global brokerage and financial technology company.
Financial details of the deal, which is subject to a number of conditions including regulatory approval, were not released in the announcement.
Under the terms of the agreement, the BGC subsidiary will acquire 100 percent of Ed which includes broking operations under the Ed brand in UK, Singapore, Hong Kong, Dubai, Miami and China, as well as its German marine broking arm, Junge.
The acquisition also includes Ed’s MGA operations: UK-based Globe Underwriting in the UK, Epsilon with offices in Australia, and Cooper Gay France, based in Paris.
The agreement expands BGC’s insurance division, established in 2017, when it acquired Besso Insurance Group Ltd, a Lloyd’s broker with operations in the UK, Brazil, Dubai and Brazil.
“We are delighted to reach an agreement to purchase Ed, a leading independent Lloyd’s of London broker with a global footprint,” commented Shaun Lynn, president of BGC Partners, which is headquartered in London.
“It will be an important acquisition with respect to our strategy of building the insurance brokerage division within the company,” he added.
“To be able to announce the agreement with BGC is tremendously satisfying, given their ambition and appetite for growth,” said Steve Hearn, group CEO of Ed.
“We feel that the best fit and the strongest future for us is with BGC, one of the leading brokerage firms in the world. With them, we are poised to make the next leap forward to redefine insurance broking.”
A representative of Ed said the broker would maintain its brand as “Ed.”
UK Heading for ‘Acrimonious and Disruptive’ No-Deal Brexit: Fitch
Ratings agency Fitch said on the 26th October that it no longer assumed that Britain would leave the European Union in a smooth transition and said a “no deal” Brexit could lead to a further downgrade of its sovereign credit rating.
“In Fitch’s view, an intensification of political divisions within the UK … has increased the likelihood of an acrimonious and disruptive ‘no deal’ Brexit.
“Such an outcome would substantially disrupt customs, trade and economic activity, and has led Fitch to abandon its base case on which the ratings were previously predicated.”
Previously Fitch had assumed Britain would leave the EU in March next year with a transition deal in place and the outline of a future trade deal with the bloc.
But Prime Minister Theresa May has struggled to agree a deal which can secure the backing of Brussels and her own lawmakers in the Conservative Party.
Fitch currently rates British government debt at AA with a negative outlook, which means a further lowering of the rating is possible. Fitch cut its top-notch AAA rating on Britain in 2013, citing the outlook for weaker public finances.
S&P Global Ratings separately affirmed its ratings on the UK, with a negative outlook.
“The ratings are constrained by the uncertainty regarding the UK’s exit from and future relationship with the EU, which in our opinion will have important implications for its economy, its ability to attract inflows of capital and labour over time, and its public and external finances,” S&P said.
Ratings downgrades up to now have had little impact on investors’ appetite for British government debt, which is still seen as a safe asset at times of political or economic turmoil.
But downgrades are embarrassing for Mrs May’s Conservative government, which emphasised preserving the country’s AAA rating when it embarked on an austerity programme in 2010.
Fidelis Sets Up Re/Insurer in Dublin to Prepare for Brexit; Senior Leaders Appointed
Fidelis Insurance Holdings Ltd has announced it has established a regulated re/insurer in Ireland, called Fidelis Insurance Ireland DAC (FIID), to take advantage of opportunities in the European Economic Area (EEA) after Brexit.
On the 22nd October the Central Bank of Ireland approved Fidelis’ application to write bespoke and specialty insurance and reinsurance, the company said in a statement.
Apollo launches new £130 million Lloyd’s SPA Syndicate
Independent Lloyd’s managing agency Apollo Syndicate Management Ltd has received “in principle” approval to launch a £130mn SPA Syndicate 1971 to operate alongside its existing Syndicate 1969.