Having taken the role as Chair at last year’s AGM, I look back at past Chair’s reports for inspiration and note a strange dichotomy whereby the changes seems stark yet the challenges seem almost identical over the years, which reflects the reality of the deep changes we have felt over the past few years and the profound impacts that we face and continue to address.
Solvency II, which has been live for over four years now, continues to challenge as we now find ourselves with the reporting timeframes squeezed while market participants and users of the reports we produce continue to evolve in how they read, interpret and judge these.
Companies should by now have their immediate Brexit mitigation plans either finalised or in full swing, but even the best laid plans will almost certainly have aspects that still need to be addressed during the transitional period and beyond. For many there will be plans to run off EU portfolios and firms should be engaging both with the GFSC and the host state regulators in respect of these run off portfolios. Local EU member states are likely to impose differing legislative regimes to manage run off portfolios and therefore companies will need to ensure that they are abreast of these in good time in order to ensure compliance from 1 January 2021 (or whenever the transition period ends).
For the majority of members whose business is in the UK, the position is somewhat simpler since Gibraltar is not part of the UK’s Temporary Permissions Regime and the single market between Gibraltar and the UK seems to be assured. Even in these simpler cases those, strategising into an uncertain Brexit world has significant challenges – issues around green cards seem to be well understood; but what for the potential for future impact of UK customs delays on getting motor vehicle parts to UK dealers, potential tariffs thereon increasing claim severity, impacts of potential exchange rates which are possibly going to be volatile?
Are there benefits to Brexit? Of course there will be (else what’s the point of Brexit?) and I’m sure 2020 will show us at least the direction of trade negotiations with other parts of the world, but agreement with the EU will be key to this since other countries are likely to be looking with interest to see if there are benefits to be gained from invoking mostfavourednation clauses in trade agreements before committing themselves to the UK (and Gibraltar).
I’m quite certain that the subject of Brexit will be very high on the Chair’s 2020 Report as well.
The key change during the year was the introduction of the Financial Services Act 2019, with all the supporting regulations resulting from the Legislative Reform Programme coming into effect on 15 January 2020. While the key areas of the reform programme have been available and consulted on for some time, Government remains mindful that this is a major changes and that there may be some areas of the legislation that needs refining, and therefore all members are urged to communicate any continuing concerns that they have with the Financial Services Act 2019 and related regulations.
The Industry’s engagement with the GFSC has been positive throughout the year, with a significant number of discussions and consultations taking place and the regular meetings with the GFSC executive teams being productive in highlighting and resolving any concerns that members have. One area of contention during the year was the GFSC proposal to sit in on board meetings of insurers, and after engagement with the GFCC and the Government on this matter, the GFSC listened to members concerns and we have since been working with the GFSC to ensure that they can meet their objectives via other means.
During the year, it will not be news to anyone that there have been two key events involving the GFSC. Firstly, the appointment of Kerry Blight as a replacement to Samantha Barrass in the Summer has changed the tone from the GFSC to one that is more empathetic with the challenges of the industry which has been welcomed by the GIA Executive. That being said, there has been a focus on the regulator maintaining its tough stance on seeking to prevent failures. Secondly, and as mentioned earlier, the GFSC announced its restructure in order to streamline the organisation, reduce costs, and widen the management team. This initiative is one that should be welcomed by the industry, not least since the growing cost base of the GFSC has been a concern for some while. While it is probably no secret that the loss of some of the GFSC staff may not be missed by a small fraction of our members, I would like to pay thanksparticularly to those senior members of staff whose engagement with the GIA has been positive throughout their time at the commission.
2019 saw the GFSC undertake a number of thematic reviews, including on corporate governance, internal audit and actuarial functions. Into 2020 and we see an ongoing focus on corporate governance more specifically in relation to solvency reporting. While as an industry I believe we should support the GFSC’s drive to understand and improve these areas, it is perhaps the latter which is lacking as many members have received little or no feedback on the 2019 Thematic Reviews. We shall push the GFSC to ensure that there is appropriate feedback on these.
The insurance manager model continues to remain an important aspect of the Gibraltar insurance market. During 2019 three new insurance licenses where issued in Gibraltar and all of these firms operate under a manager model. Several jurisdictions have published guidelines around economicsubstance and in Gibraltar a local process has started to establish a framework for what is referred to locally as ‘Head Office Requirements’. Members of the insurance manager segment and other industry participants look forward to continuing to work with the relevant stakeholders to ensure an appropriate head office framework is developed to allow the jurisdiction to continue to attract new firms with the appropriate governance structures.
Despite the uncertainties around Brexit, insurance managers have reported that they continue to receive enquiries from firms looking to establish an insurance entity in Gibraltar.