Insurance Jottings
UK and EU on Track to Agree on Financial Services Cooperation – but Trust Must Be Built
Britain and the European Union are on course to agree a deal on regulatory cooperation in financial services this month, but the UK’s actions in Northern Ireland makes it harder to build trust, the bloc’s financial services chief said on the 4th March.
“We are on track,” Mairead McGuinness told a Politico event
The British government unilaterally extended a grace period for checks on food imports to Northern Ireland, a move Brussels said violated terms of Britain’s divorce deal. “Things like that don’t help build trust,” Ms McGuinness added.
Britain’s trade deal with the EU from January does not cover financial services, leaving the City of London largely adrift from what had been its biggest export customer.
Swathes of trading in euro shares and swaps have left London for the continent, with Brussels now targeting clearing of euro trades, raising hackles at the Bank of England.
Brussels has granted only limited direct access for the City of London under its “equivalence” system.
“It’s really important to say that when we sit down with the United Kingdom following an agreement on the memorandum, it’s not to do a package deal within a short space of time which might recreate access to the single market,” Ms McGuinness said.
“There isn’t a bundle of equivalence possibilities that are suddenly on the table…We will rather look at each one when it requires us to do so.”
There were still gaps in information provided by Britain on its intentions to diverge from EU rules, she said.
Britain has just announced plans to ease its listings rules and to make itself more attractive for fintech firms to compete better with the EU, United States and Asia.
“Clearly anything like that would feed into our decision making,” Ms McGuinness said. “If we grant equivalence, we have to make sure it’s future proof.”
Britain’s finance minister, Rishi Sunak, told the Bank of England on the 3rd March to be creative in keeping the City of London competitive after Brexit.
“I wouldn’t like to see the United Kingdom ripping up regulation,” Ms McGuinness said.
UK brokers welcome Sunak’s freeze on “regressive” IPT
UK brokers have welcomed Chancellor Rishi Sunak’s move to spare the UK insurance industry a feared rise in insurance premium tax (IPT), noting that the decision will make it easier for policyholders and businesses to access insurance. The British Insurance Brokers Association (BIBA) said it had been lobbying HM Treasury to freeze the tax which it described as a “major barrier to resilience”.
In the trade body’s 2021 manifesto – launched by CEO Steve White last month – BIBA said IPT is a “regressive tax” that falls on consumers and businesses alike and “acts as a major disincentive to the purchase of adequate insurance protection”.
The UK Chancellor of the Exchequer, who presented his economic plans to MPs in the Commons on the 3rd March, was silent on any changes to IPT – the tax levied on UK general insurance policies as opposed to London market and international business.
In his 2021 budget, Mr Sunak made no mention of the IPT – which has been raised substantially by successive governments, most recently hiked by two points in June 2017 to 12 percent.
This came on the back of an increase from 6 to 9.5 percent in November 2015 then climbing by another half-point in October 2016.
Last year, the members’ body called on government to freeze the standard 12 percent IPT and said the “staggering” £6.2 billion (US$7.92 billion) the government raises on insurance policy premiums “compromises in the amount of protection sought by individuals and businesses.
In its explanation, BIBA cited research from insurer Zurich which highlights the difficulties insurance buyers could face when the tax rate must be calculated into their premium, with the public and voluntary sectors particularly vulnerable.
The body also welcomed the Chancellor’s confirmation that HM Treasury would extend the film and TV Restart Scheme to the end of December 2021 and the state-backed trade credit reinsurance scheme to the 30th June 2021.
“Government intends to continue to monitor the Trade Credit Reinsurance Scheme to check whether further intervention is needed beyond the 30th June 2021,” it said.
Up to £190 billion of cover on around half a million businesses has been provided under the scheme. Had the government not launched the backstop, it is estimated up to £50 billion of crucial cover on around 155,000 business would have been at risk, Treasury disclosed within its budget document.
While BIBA welcomed the budget announcement, the Association of British Insurers (ABI) hit out at the Chancellor’s plans to increase UK corporation tax from 19 percent to 25 percent by 2023 for UK companies with annual profits of over £250,000.
“No business ever welcomes tax rises but we understand the huge challenges the government faces in restoring the health of public finances and appreciate the predictability provided by the advanced announcement on rates,” ABI assistant director and head of taxation Mervyn Skeet stated on the 3rd March.
“We urge the Government to stick to a clear strategy, including a detailed corporate tax roadmap, so that business has a simpler, stable and predictable tax regime, which supports the UK’s competitiveness.”
Standard Club News: Singapore deploys new maritime security vessels as rise reported in armed robbery attacks in Asia during 2020
3rd March 2021
The latest annual report from the Regional Cooperation Agreement on Combating Piracy and Armed Robbery against Ships in Asia (ReCAAP) was recently published.
It notes that there were a total of 97 incidents (comprising 95 actual incidents and two attempted incidents) of piracy and armed robbery against ships in Asia in 2020. This accounted for a 17% increase in the total number of incidents, and a 32% increase in actual incidents reported in 2020 compared with 2019.
The report goes onto say that there was an increase in incidents in the past year in Bangladesh, India, the Philippines, Vietnam, South China Sea and Singapore Straits.
The report highlights an increase in the number of incidents on board ships while underway in the Singapore Strait in 2020 with 34 incidents, compared with 31 incidents in 2019.
ReCAAP recommends ship masters and crew exercise vigilance and maintain constant lookout for suspicious boats in the vicinity. They also advise reporting all incidents immediately to the nearest coastal State as well as implementing preventive measures recommended in the previously published Regional Guide to Counter Piracy and Armed Robbery Against Ships in Asia.
The rise in the number of incidents over the past few years has seemingly prompted the Singapore government to take action. The Ministry of Defence has previously acknowledged that its maritime security capability, including its security vessels, play an important part in Singapore’s ability to deal with attacks (such as those reported by the ReCAAP report).
Its commitment to combatting the rise in attacks was demonstrated in early 2020 when it announced its intention of a restructure to its maritime security arrangements and in January 2021 when it launched its new maritime and security response flotilla. This is said to include four sentinel class maritime security and response vessels and two maritime security and
response tugboats. The former include an array of technical equipment including a ballistics protection system and a visual and audio warning system. They will also include side fenders to allow swift access to vessels suspected of being involved in attacks.
Whilst some of the vessels are already in operation, the remainder will be ready in the coming months. In line with other international maritime security agencies, the vessels operating as part of the flotilla will bear red stripes on their bow.
By 2026, the intention of the Ministry of Defence is to operate new purpose-built vessels. Although these ships are still in early stages of concept design, they are expected to operate at sea for up to a few weeks and are to be designed for minimal manning with flexible capabilities.
The Republic of Singapore Navy has also announced that autonomous unmanned vessels are currently undergoing sea trials and could be deployed by the end of the year for security patrols and missions. Each vessel is said to be equipped with various security features and will be operated by a limited number of shore based crew.
Aviva issues an ESG call to action as it unveils bold net zero strategy
UK insurer Aviva has unveiled plans to become a net zero carbon emissions company by 2040, with the London-listed carrier announcing a series of plans to measure its progress on its journey towards the goal.
The insurer has cast itself as an industry ESG leader with a bold series of targets which includes developing a methodology for net zero underwriting which it claims will represent an “important and significant move for the global insurance industry”.
Lloyd’s Underwriting Room to stay closed until the 17th May
Lloyd’s is set to reopen the Underwriting Room on the 17th May, with the Corporation offices scheduled to partially reopen on the 12th April.