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The current dynamics in the reinsurance market

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Gerardo Garcia

Gerardo García, President & CEO of Barents Re Reinsurance Company, Inc., discusses the current dynamics in the reinsurance market and the rationale for the company’s decision to redomicile to the Cayman Islands earlier this year

Market Dynamics

Bonds and Energy have been core business lines for Barents Re for many years and we continue to look for new profitable growth opportunities. With regard to Bonds, we believe that the growing trend of reinsurers and banks collaborating on complex transactions will be an important facilitator for large-scale projects, notably in regions such as Latin America and MENA where we are especially strong.

Gerardo Garcia President & CEO Barents Re Reinsurance Company, Inc

Gerardo Garcia, President & CEO, Barents Re Reinsurance Company, Inc

Energy is an inherently hazardous industry with the added complication of geo-political issues to be grappled with at the same time. We are seeing an increase in the number of national oil companies becoming supra-national along with independent oil companies growing in scale. This has led to greater concentrations of risk and the potential for large, vertically integrated losses.  As a result, substantial responsive composite and specialist underwriting capacity continues to be in demand. Barents is in a position to provide such.

For Marine and Property, the key issue this year has been the response to the major catastrophe events of 2017. The multiple events of 2017, most notably Hurricane Maria, did not produce an upturn in Marine market pricing and a change in restrictions on terms and conditions as some may have expected. The impact on the yacht/pleasure craft book in the region has been considerable as it has been essentially wiped out for many years to come. That said, capacity in the Marine market appears largely unconcerned by the events of 2017. Property has remained relatively stable to date following the unprecedented windstorm and flooding events related to Hurricanes Harvey, Irma, and Maria coupled with the two Mexican earthquakes last year.

For longer tail business such as Financial Lines, the market conditions have been generally stable although there are pockets where the market remains extremely difficult. The market has witnessed rate increases in a number of Financial Lines sectors in the past year following year-on-year reductions, notably Professional Indemnity, Directors’& Officers’ liability and Crime. Furthermore, deductibles have also been on the increase with underwriters taking a more assertive approach in imposing coverage restrictions.

We see opportunity in Life and Accident & Health reinsurance not least due to the expected growth in the market forecast in the mid-single digits in the years ahead. Globally, this market is valued at USD 76 bn and, although considerably smaller than the non-Life reinsurance market, we believe that there are opportunities for a niche reinsurer such as ourselves to provide the Life reinsurance coverage which clients in specific regions are currently lacking. Foremost amongst these regions are Latin America and South East Asia. Population growth, improving mortality rates and changing regulatory regimes are all powerful drivers in the Life reinsurance market and we intend to take advantage of opportunities as they arise.

Redomicile to the Cayman Islands

We took the decision to redomicile the company to the Cayman Islands because it offers a range of benefits including a robust legal structure, a positive long-term credit outlook and a stable political environment. One of our main drivers was to build our reputation and credibility with clients, business partners, regulators and rating agencies. After extensive research of potential territories, the Board of Directors, shareholders and advisors concluded that the Cayman Islands was the best option to achieve our goals.

In summary, the principal advantages of the Cayman Islands are:

  • The Cayman Islands is an important financial centre, with good communications and general infrastructure that has helped the country become the world’s fifth largest banking centre and largest hedge and investment fund domicile with over 9,000 funds registered. As of 31st March 2018, over 720 insurance companies were registered in the Cayman Islands.
  • The Cayman Islands operates a similar legal and financial framework to the United Kingdom and Europe – a region that continues to form an important part of our growth strategy. Added to this, their official language is English, which is also the official language used by Barents Re Reinsurance Company, Inc.
  • The Cayman Islands is an autonomous British overseas territory which may prove to be beneficial as part of our Brexit planning.

The move also benefits our customers and business partners as they continue to receive the same high levels of expertise coupled with the reassurance which the Cayman Islands provides as a financial services jurisdiction. The reputation and credibility of the company’s new regulator, the Cayman Islands Monetary Authority, have also proven to be especially advantageous. We are now six months into the new regime and we have been delighted with the positive reaction from our clients, business partners and wider stakeholders.

From a ratings perspective, the move is particularly beneficial as the Cayman Islands maintain a Country Risk Tier of 2 (low) under A.M. Best. Given that the rating of a company is influenced by the jurisdiction where the company is established, the Cayman Islands’ long-term outlook is seen as a positive benefit in favour of the A.M. Best rating.

In conclusion, this move represents an important and positive step in the development of Barents Re and its relationships with all its clients and business partners.

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Sunak to use budget to expand apprenticeships in England

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Sunak to use budget to expand apprenticeships in England 1

LONDON (Reuters) – British finance minister Rishi Sunak will announce more funding for apprenticeships in England when he unveils his budget next week, the government said on Friday.

Employers taking part in the Apprenticeship Initiative Scheme will from April 1 receive 3,000 pounds ($4,179) for each apprentice hired, regardless of age – an increase on current grants of between 1,500 and 2,000 pounds depending on age.

The scheme will extended by six months until the end of September, the finance ministry said.

Sunak will also announce an extra 126 million pounds for traineeships for up to 43,000 placements.

Sunak’s March 3 budget will likely include a new round of spending to prop up the economy during what he hopes will be the last phase of lockdown, but he will also probably signal tax rises ahead to plug the huge hole in the public finances.

Sunak is also expected to announce a “flexi-job” apprenticeship scheme, whereby apprentices can join an agency and work for multiple employers in one sector, the finance ministry said.

“We know there’s more to do and it’s vital this continues throughout the next stage of our recovery, which is why I’m boosting support for these programmes, helping jobseekers and employers alike,” Sunak said in a statement.

(Reporting by Andy Bruce, editing by David Milliken)

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UK seeks G7 consensus on digital competition after Facebook blackout

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UK seeks G7 consensus on digital competition after Facebook blackout 2

LONDON (Reuters) – Britain is seeking to build a consensus among G7 nations on how to stop large technology companies exploiting their dominance, warning that there can be no repeat of Facebook’s one-week media blackout in Australia.

Facebook’s row with the Australian government over payment for local news, although now resolved, has increased international focus on the power wielded by tech corporations.

“We will hold these companies to account and bridge the gap between what they say they do and what happens in practice,” Britain’s digital minister Oliver Dowden said on Friday.

“We will prevent these firms from exploiting their dominance to the detriment of people and the businesses that rely on them.”

Dowden said recent events had strengthened his view that digital markets did not currently function properly.

He spoke after a meeting with Facebook’s Vice-President for Global Affairs, Nick Clegg, a former British deputy prime minister.

“I put these concerns to Facebook and set out our interest in levelling the playing field to enable proper commercial relationships to be formed. We must avoid such nuclear options being taken again,” Dowden said in a statement.

Facebook said in a statement that the call had been constructive, and that it had already struck commercial deals with most major publishers in Britain.

“Nick strongly agreed with the Secretary of State’s (Dowden’s) assertion that the government’s general preference is for companies to enter freely into proper commercial relationships with each other,” a Facebook spokesman said.

Britain will host a meeting of G7 leaders in June.

It is seeking to build consensus there for coordinated action toward “promoting competitive, innovative digital markets while protecting the free speech and journalism that underpin our democracy and precious liberties,” Dowden said.

The G7 comprises the United States, Japan, Britain, Germany, France, Italy and Canada, but Australia has also been invited.

Britain is working on a new competition regime aimed at giving consumers more control over their data, and introducing legislation that could regulate social media platforms to prevent the spread of illegal or extremist content and bullying.

(Reporting by William James; Editing by Gareth Jones and John Stonestreet)

 

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Britain to offer fast-track visas to bolster fintechs after Brexit

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Britain to offer fast-track visas to bolster fintechs after Brexit 3

By Huw Jones

LONDON (Reuters) – Britain said on Friday it would offer a fast-track visa scheme for jobs at high-growth companies after a government-backed review warned that financial technology firms will struggle with Brexit and tougher competition for global talent.

Finance minister Rishi Sunak said that now Britain has left the European Union, it wants to make sure its immigration system helps businesses attract the best hires.

“This new fast-track scale-up stream will make it easier for fintech firms to recruit innovators and job creators, who will help them grow,” Sunak said in a statement.

Over 40% of fintech staff in Britain come from overseas, and the new visa scheme, open to migrants with job offers at high-growth firms that are scaling up, will start in March 2022.

Brexit cut fintechs’ access to the EU single market and made it far harder to employ staff from the bloc, leaving Britain less attractive for the industry.

The review published on Friday and headed by Ron Kalifa, former CEO of payments fintech Worldpay, set out a “strategy and delivery model” that also includes a new 1 billion pound ($1.39 billion) start-up fund.

“It’s about underpinning financial services and our place in the world, and bringing innovation into mainstream banking,” Kalifa told Reuters.

Britain has a 10% share of the global fintech market, generating 11 billion pounds ($15.6 billion) in revenue.

The review said Brexit, heavy investment in fintech by Australia, Canada and Singapore, and the need to be nimbler as COVID-19 accelerates digitalisation of finance, all mean the sector’s future in Britain is not assured.

It also recommends more flexible listing rules for fintechs to catch up with New York.

“We recognise the need to make the UK attractive a more attractive location for IPOs,” said Britain’s financial services minister John Glen, adding that a separate review on listings rules would be published shortly.

“Those findings, along with Ron’s report today, should provide an excellent evidence base for further reform.”

SCALING UP

Britain pioneered “sandboxes” to allow fintechs to test products on real consumers under supervision, and the review says regulators should move to the next stage and set up “scale-boxes” to help fintechs navigate red tape to grow.

“It’s a question of knowing who to call when there’s a problem,” said Kay Swinburne, vice chair of financial services at consultants KPMG and a contributor to the review.

A UK fintech wanting to serve EU clients would have to open a hub in the bloc, an expensive undertaking for a start-up.

“Leaving the EU and access to the single market going away is a big deal, so the UK has to do something significant to make fintechs stay here,” Swinburne said.

The review seeks to join the dots on fintech policy across government departments and regulators, and marshal private sector efforts under a new Centre for Finance, Innovation and Technology (CFIT).

“There is no framework but bits of individual policies, and nowhere does it come together,” said Rachel Kent, a lawyer at Hogan Lovells and contributor to the review.

($1 = 0.7064 pounds)

(Reporting by Huw Jones; editing by Jane Merriman and John Stonestreet)

 

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