It is often said that people overestimate the amount of change in the long term but underestimate the amount of change in the short term. I think it can be said that we all underestimated the amount of change during 2020, especially noting that my 2019 report contained not one mention of an emerging virus or the potential impact on businesses.
If a reminder were needed that our world is volatile, uncertain, complex and ambiguous (VUCA), then 2020 gave us just that, and just in case we did not understand previously, we have all been reminded of the difficulties of strategizing into the VUCA World.
I start this year with the subject that has dominated most of our attentions in 2020, and is possible will continue to dominate through 2021 as well. COVID-19 has provided a huge challenge for all of us in one way or another, whether it financially through lower business activity or in certain lines through increased claims activity, or more widely through operational challenges.
The New Year’s Eve agreement in relation to Gibraltar provided clarity on the political will for Gibraltar to join the Schengen Acquis. Furthermore, there are ongoing talks in relation to customs arrangements between Gibraltar and the EU although no political agreement on this at this stage. The GIA, in conjunction with the GFCC, has contributed to the Government’s Treaty Liaison and Advisory Committee (TLAC) to input into the needs of the sector in negotiating this treaty, and are tentatively supportive of the Government’s intentions to agree a treaty between the UK and the EU in respect of Gibraltar. However, as with all such things the key test will be on the reading of the eventual treaty and the understanding of the full implications for Gibraltar and our sector.
For something that is supposedly ‘done’, Brexit still continues to provide significant uncertainty and is likely to continue to do so for a number of years yet.
The initial impact of the pandemic slowed down the industry’s regular dialogue with the regulator, as the GFSC sought to give licensees room to manage the impacts and focus on policyholder outcomes first and foremost. This approach was welcomed by the GIA. The Executive and the GFSC have since fallen back into a quarterly meeting rhythm.
The pipeline for new busines remains strong, with the GFSC seeing a number of new applications. Unfortunately there has been some negative headlines, particularly early in 2021, with the announcement that an administrator had been appointed at Prometheus Insurance Company Limited. As noted in my 2019 report, such negative press can be ill afforded at any time, but particularly now and going forward as the trading relationship with the UK becomes even more critical.
On the trading relationship with the UK, the Gibraltar Authorisation Regime (GAR), as part of the Financial Services Bill, continues its passage through the UK legislative system and is expected to pass in the latter half of 2021 and become effective from 1 January 2022. Locally, the Government published MGA legislation allowing MGAs to be managed by insurance managers, and this was accompanied by the GFSC’s Managing General Agents Expectations Paper – which should be noted by all members, not just MGAs, in particular the sections on corporate governance and substance.
The GFSC has highlighted that it is placing an emphasis on close relationships between insurance carriers and intermediaries, and in particular the financial links between them. Further, there is to be a focus on the role of internal audit during the course of 2021.
Many intermediaries have faced a difficult year as a result of the pandemic, with premium volumes in many sectors under challenge. For some this has been especially marked since the financial services sector was excluded from the Government’s BEAT COVID measures – while this was the right approach in the main due to the strength of the financial services sector in general, some exceptions needed to be considered (not least those intermediaries in the travel sector), and the GIA sought to represent their interests through the GFSC at the outset of the pandemic. As a result, the Government was open to BEAT COVID type assistance to financial services in specific circumstances on a one-by-one basis.