Annual Gibraltar Insurance Seminar

Transcription

1 Annual Gibraltar Insurance Seminar 29 September 2016

2 Agenda 9.00am Welcome and Introduction Pepe Caruana, Deloitte Gibraltar The Right Hon. Mr. Albert Isola, Minister for Financial Services and Gaming 9.10am Update on market developments Mike Ashton, Senior Finance Centre Executive 9.40am Update on Solvency II Joe Perdoni, Gibraltar Financial Services Commission 10.00am UK and Gibraltar Motor market update Laura Scarpa and Chloe Paillot, Deloitte UK 10.45am Coffee 11.05am Corporate Finance update: Dynamics across an evolving sector Peter Carter and Aneela Mather-Khan, Deloitte UK 11.40am Innovation and the Motor Market Rhodri Richards and Pete Allchorne, DAC Beachcroft 12.05pm Tax a changing landscape Tim Lightfoot and Thomas Jacobs, Deloitte UK 12.35pm Panel discussion and questions Chaired by Pepe Caruana, Deloitte Gibraltar 1.00pm Drinks and canapes 2

3 Update on Market Developments Mike Ashton 3

4 Deloitte Gibraltar Insurance Seminar 29 September 2016 Regulatory Operations Gibraltar Financial Services Commission

5 BAU - Solvency II Pillar 1 Capital Net Premiums QA Pillar 2 ORSA (FSC website: EU Directives/solvency II/Our approach/july 2016) Business Plans Key Function Holders (FSC website: EU Directives/Solvency II/FAQ) Pillar 3 QRTs Annual QRT FSC Website: EU Directives/Solvency II/Reporting/Workshop: Solvency II Reporting Procedures and Common Errors Gibraltar Financial Services Commission

6 Other matters Reserving Investments Insurance Managers Thematic Review Statistical Returns Gibraltar Financial Services Commission

7 UK and Gibraltar Motor Market Update Laura Scarpa and Chloe Paillot

8 Agenda 1. Introduction 2. Current market size and profitability 3. UK and Gibraltar benchmarking 4. Future performance 8

9 Introduction 9

10 Deloitte motor insurance seminar 2016 Registration survey responses the motor insurance industry in one word Source: Deloitte motor insurance seminar 2016 survey results 10

11 Deloitte motor insurance seminar 2016 Registration survey responses motor insurance industry in one word Source: Deloitte motor insurance seminar 2016 survey results 11

12 Deloitte motor insurance seminar 2015 Registration survey responses top 3 issues Source: Deloitte motor insurance seminar 2016 survey results 12

13 Current market size and profitability 13

14 Benchmarking of Individual Insurers Definitions The UK ratios in presentation are based on data submitted by insurers in Form 20 of the PRA Returns. This data represents approximately 75% of 2015 UK motor insurance market gross written premium shown on slide 14. The data does not include Gibraltar based insurers, overseas insurers writing business in the UK, and the Lloyd s of London syndicates. There is an exception in slide 35, where we have included combined ratio data on 3 of the largest Gibraltar based insurers based on group reports and accounts. The net combined ratio is a measure of underwriting profitability and is equal to the claims ratio plus the expense ratio. The claims ratio is calculated as the total claim amounts incurred during the year (net of reinsurance), as a percentage of the net earned premium. This result includes the impact of reserve releases or reserve strengthening for prior accident years. The expense ratio is calculated as the cost of net operating expenses and claims management costs incurred during the year, as a percentage of the earned premium. The net operating expenses include commissions, other acquisition expenses and administrative expenses but are net of reinsurance commissions and profit participations. The 2015 results quoted are for the 2015 financial year. Our estimates do not include the following items: Increase in provision for unexpired risks Other technical income or charges Allocated investment return Balance from underwriting year accounting 14

15 Billions Current market size Gross written premiums 16 Personal Commercial Financial year Source: ABI data 15

16 Net CR (%) Current profitability Historical net combined ratios Total Motor Financial Year Source: Deloitte Analytics based on AM Best data 16

17 Net RR (%) Current profitability Reserve release Total Motor Financial Year Source: Deloitte Analytics based on AM Best data 17

18 Net CR (%) Current profitability Historical net combined ratios: headline vs current year for total motor Headline NCR Current Year NCR Financial Year Source: Deloitte Analytics based on AM Best data 18

19 Net CR (%) Current profitability Historical net combined ratios: commercial vs personal Total Motor Commercial Lines Personal Lines Financial Year Source: Deloitte Analytics based on AM Best data 19

20 Net RR (%) Current profitability Reserve releases: commercial vs personal Total Motor Commercial Lines 2 Personal Lines Financial Year Source: Deloitte Analytics based on AM Best data 20

21 Net CR (%) Current profitability Current year net combined ratios: commercial vs personal Total Motor Commercial Lines Personal Lines Financial Year Source: Deloitte Analytics based on AM Best data 21

22 Net CR (%) Current profitability Historical net combined ratios Total Motor Financial Year Source: Deloitte Analytics based on AM Best data 22

23 UK and Gibraltar benchmarking 23

24 Gross Market Share 2015 (%) UK benchmarking Total market overview % % Net Combined Ratio (%) Source: Deloitte Analytics based on AM Best data 24

25 Gross Market Share 2015 (%) Current profitability and benchmarking Total market overview % 12 Aviva Insurance 10 UKI % - China Taiping 198.4% -Travelers CIS 130 AIOI Pinnacle 120 RSA Allianz esure Tesco Underwriting AIG 110 Tradex AXA Insurance UK Ageas Liverpool Victoria Highway Chubb Cornish Mutual Covea NFU Mutual USAA 80 Sabre % Net Combined Ratio (%) Source: Deloitte Analytics based on AM Best data 25

26 Gross Market Share 2015 (%) UK benchmarking Market 2015 big & beautiful % UKI AXA Insurance UK 6 5 Ageas 100 Liverpool Victoria % Net Combined Ratio (%) Source: Deloitte Analytics based on AM Best data 26

27 Gross Market Share 2015 (%) UK benchmarking Market 2015 big & not so beautiful % 13 Aviva Insurance RSA % Net Combined Ratio (%) Source: Deloitte Analytics based on AM Best data 27

28 Gross Market Share 2015 (%) UK benchmarking Market 2015 interesting quadrant % 5 Allianz 5.3% 4 esure 3 Tesco Underwriting 2 CIS AIG Highway % - China Taiping 198.4% -Travelers AIOI Pinnacle Tradex Net Combined Ratio (%) Source: Deloitte Analytics based on AM Best data 28

29 Gross Market Share 2015 (%) UK benchmarking Market 2015 little gems % 5 5.3% 4 NFU Mutual 3 2 Covea 1 0 Chubb Cornish Mutual USAA 80 Sabre Net Combined Ratio (%) Source: Deloitte Analytics based on AM Best data 29

30 Gross Market Share 2015 (%) UK benchmarking Total market loss ratio % 12 Aviva Insurance 10 UKI AXA Insurance UK Allianz Ageas Liverpool Victoria esure NFU Mutual Tesco Underwriting AIG Highway 150.4% -Travelers CIS Covea AIOI Tradex China Taiping Pinnacle Cornish Mutual Chubb RSA Sabre 50 USAA % Net Loss Ratio (%) Source: Deloitte Analytics based on AM Best data 30

31 Gross Market Share 2015 (%) UK benchmarking Total market reserve release Aviva Insurance 10.8% 10 UKI 8 AXA Insurance UK RSA 6 Ageas Liverpool Victoria 5.3% Allianz 4 NFU Mutual -45.5% - Travelers Tesco Underwriting esure Highway AIG 2 USAA AIOI CIS Covea Chubb Sabre Pinnacle 50.4% - Tradex China Taiping Cornish Mutual Net Reserve Release (%) Source: Deloitte Analytics based on AM Best data 31

32 Gross Market Share 2015 (%) UK benchmarking Total market expense ratio % 12 Aviva Insurance 10 UKI CIS 0 55 Liverpool Victoria Allianz AXA Insurance UK NFU Mutual 67.1% - China Taiping esure AIG Highway Tesco Underwriting AIOI Covea Sabre Tradex USAA Travelers Chubb Cornish Mutual Pinnacle Net Expense Ratio (%) 30 RSA Ageas % Source: Deloitte Analytics based on AM Best data 32

33 Gross Market Share 2015 (%) UK benchmarking Personal lines overview % 12 Aviva Insurance UKI 10 8 Liverpool Victoria 6 AXA Insurance UK Ageas % - China Taiping Allianz esure Tesco Underwriting 4.1% CIS 130 AIOI AIG Pinnacle 120 RSA Cornish Mutual 110 NFU Mutual Highway Chubb Covea USAA 80 Sabre 70 Tradex Net Combined Ratio (%) Source: Deloitte Analytics based on AM Best data 33

34 Gross Market Share 2015 (%) UK benchmarking Commercial lines overview % 18 RSA Aviva Insurance 10 8 Allianz AXA Insurance UK NFU Mutual 9.9% % - Travelers Tradex Highway 110 UKI AIG Ageas Covea Cornish Mutual Liverpool Victoria Sabre Net Combined Ratio (%) Source: Deloitte Analytics based on AM Best data 34

35 Gross Market Share 2015 (%) UK and Gibraltar benchmarking Combined group market overview % 12 Aviva 10 DLG Admiral 8 Liverpool Victoria Co-Op Allianz 177.4% - China Taiping 198.4% - Travelers esure Tesco Underwriting AIG 130 AIOI Pinnacle 120 RSA Tradex 110 Axa Ageas Hastings Chubb Cornish Mutual NFU Covea USAA 80 Saga Sabre % Net Combined Ratio (%) Source: Deloitte Analytics based on AM Best data, Group reports and accounts 35

36 Gross Market Share 2015 Gibraltar Benchmarking Net Combined Ratio % 105.6% 100.2%* Admiral 25% 20% Advantage 15% 10% Acromas 5% 0% Southern Rock GM: 3.2% NCR: 304.4% C&G 180% 170% Octagon 160% * NCR excluding Southern Rock Skyfire Haven Calpe Evolution MCE Tradewise Alwyn Nelson Service 150% 140% 130% 120% 110% 100% Preserve Quick-sure Mulsanne Carraig Net Combined Ratio (%) Collingwood 90% 80% Premier 36

37 Gross Market Share 2015 Gibraltar Benchmarking NCR v. Technical Ratio 5% 4% 3% Southern Rock Octagon 2% Tradewise 1% C&G MCE Quick-sure 0% 180% 170% 160% 150% 140% 130% 120% 110% 100% 90% 80% NCR / Technical Ratio (%) 37

38 Gross Market Share 2015 Gibraltar Benchmarking Technical ratio (including OTI and OTC) 30% 96.6% Admiral 25% Advantage 20% 15% 10% Skyfire 5% 0% 140% C&G Southern Rock GM: 3.2% Tech: 160.3% Service 130% Haven Acromas Quick-sure Octagon Evolution MCE Calpe Preserve Collingwood Nelson Carraig 120% 110% 100% 90% Premier Alwyn Mulsanne Technical Ratio (%) 80% 38

39 Income 2015 ( m) Gibraltar Benchmarking Contribution of other income NEP RI commission OTI

40 Proportion of income 2015 Gibraltar Benchmarking Contribution of other income 100% NEP RI commission OTI 80% 60% 40% 20% 0% -20% -40% 40

41 Gibraltar Benchmarking Proportion of current year claims paid by reinsurers Tradewise Southern Rock Skyfire Service Quick-sure Preserve Premier Octagon Nelson Mulsanne MCE Haven Evolution Casualty Carraig Collingwood Calpe Alwyn Advantage Acromas Admiral n/a 0% 0% n/a 0% 0% n/a n/a 10% 14% 40% 44% 42% 50% 50% 50% 52% 60% 69% 75% 85% 41

42 Gross Market Share 2015 Gibraltar Benchmarking Loss Ratio % 85.5%* 72.5% Admiral 25% 20% Advantage 15% 10% Acromas 5% 0% 150% Southern Rock MCE 140% 130% Skyfire Octagon Service 120% 110% Haven Evolution Quick-sure C&G 100% Tradewise Calpe Nelson Carraig 90% 80% 70% Preserve AlwynPremier Mulsanne Collingwood 60% 50% 40% 30% * NCR excluding Admiral Net Loss Ratio 42

43 Gross Market Share 2015 Gibraltar Benchmarking Expense Ratio % Admiral 33.2% 24.1%* 25% Advantage 20% 15% 10% Acromas 5% 0% 70% Octagon Tradewise 60% 50% Collingwood Quick-sure Alwyn Mulsanne Calpe Carraig Nelson 40% Service 30% Preserve 20% Haven Skyfire Evolution MCE Premier 10% 0% Southern Rock GM: 3.2% ER: 159.5% * NCR excluding Admiral Expense Ratio 43

44 Future performance 44

45 Net CR (%) Future performance Net combined ratio - last year s scenarios Total Motor Base Optimisitc Pessimisitic Financial Year Source: Deloitte Analytics based on AM Best data 45

46 Net CR (%) Future performance Net combined ratio scenarios - what happens next? Total Motor ? Financial Year Source: Deloitte Analytics based on AM Best data 46

47 Future performance Changes in claims environment - no retreat on personal injury reform Lord Faulks George Osborne Autumn Statement Whiplash General Damage: moving towards a rehabilitation culture Small Claims Track limit to be increased from 1k to 5k 47

48 Percentage of Respondents Future performance 2016 market premium predictions - the survey says 18% 16% 25% 14% 75% 12% 10% Mean 8% 6% 4% 2% 0% Estimated Change in Motor Premiums (%) Source: Deloitte motor insurance seminar 2016 survey results 48

49 Average Premium ( ) Percentage Change (%) Future performance 2016 market premium predictions - ABI premium data Private Car Comprehensive Average Gross Written Premium 15% % % 200 0% 100-5% 0-10% Quarter Source: ABI Average Premium ( ) - Historical YoY Change % - Historical 49

50 Average Premium ( ) Percentage Change (%) Future performance 2016 market premium predictions - ABI premium data - forecast Private Car Comprehensive Average Gross Written Premium 15% % % 200 0% 100-5% 0-10% Quarter Average Premium ( ) - Historical YoY Change % - Historical Source: ABI, Deloitte Interpretation & Forecast Average Premium ( ) - Forecast YoY Change % - Forecast 50

51 Number of vehicles registered (000s) Number of casualties Future performance 2016 claims inflation predictions - Number of accidents Number of casualties from police accident data, against cars registered in Great Britain 30, ,000 29, ,000 28, ,000 27, ,000 26, ,000 25, ,000 24,000 50,000 23, Cars registered in the UK Slight Serious Fatal Total casualties 0 Source: Department of Transport,

52 % of age group population Future performance People are increasingly holding onto their driving licences as they get older Full car driving licence holders -% of population (England) All aged Source: Department of Transport,

53 Future performance Changes in claims environment - trends observed LASPO Different indicators on frequency improvement Claims inflation Large injury (frequency & severity) AD and TPD going up (frequency & severity) Medco early days with question marks Ogden discount rate Waiting for the conclusions from the panel of experts Road and vehicle safety Mixed effect on frequency Higher costs Fraud Fraud detection continues to increase albeit at a slower pace My License PPOs Propensity has reduced, but Dramatic change GI Balance Sheets 53

54 Future performance Premiums and claims scenarios - What happens next? Earned Premium Increases * Claims Increases * Base 8.8% 5.0% Optimistic 8.8% 2.9% Pessimistic 8.0% 9.8% Source: Deloitte Analytics based on AM Best data * Includes impact of injury reforms 54

55 2014 Net Reserve Release (%) Current profitability and benchmarking Total market reserve release 2014 vs UKI 25 esure 20 Sabre Cornish Mutual Covea 15 USAA CIS Highway Aviva Insurance 10 Liverpool Victoria RSA NFU Mutual 5 AIOI Ageas AXA Insurance UK AIG Tesco Underwriting Allianz Pinnacle Chubb Source: Deloitte Analytics based on AM Best data 2015 Net Reserve Release (%) 55

56 Net RR (%) Future performance Reserve release scenarios - what happens next? Total Motor 16 Base 14 Pessimistic 12 Optimistic Financial Year Source: Deloitte Analytics based on AM Best data 56

57 Net RR (%) Future performance Reserve release scenarios - what happens next? Total Motor 16 Base 14 Pessimistic 12 Optimistic Financial Year Source: Deloitte Analytics based on AM Best data 57

58 Percentage of Respondents Future performance 2016 motor market Net CR predictions - the survey says 16% 14% 25% 75% 12% Mean 10% 8% 6% 4% 2% 0% Net CR 2016 (%) Source: Deloitte motor insurance seminar 2016 survey results 58

59 Future performance Deloitte projections base scenario Current Year Net Loss Ratio 82.7% 80.3% 78.5% Expense Ratio 30.1% 28.8% 27.7% Impact of Reserve Release 10.8% 5.0% 4.5% Headline Net Combined Ratio Current Year Net Combined Ratio 102.0% 104.0% 101.7% 112.8% 109.0% 106.2% 59

60 Net CR (%) Future performance Net combined ratio scenarios - what happens next? Headline NCR Headline Base Current Year NCR Current Year Base Financial Year Source: Deloitte Analytics based on AM Best data 60

61 Net CR (%) Future performance Net combined ratio scenarios - what happens next? Total Motor Base Optimistic Pessimistic Financial Year Source: Deloitte Analytics based on AM Best data 61

62 Net CR (%) Future performance Net combined ratio scenarios - what happens next? Total Motor Base Optimistic Pessimistic Financial Year Source: Deloitte motor insurance seminar 2016 survey results, Deloitte Analytics based on AM Best data 62

63 Where next? It is all about customers Technology enabled Product tailored to evolving needs Which brand matters? CUSTOMERS 63

64 Coffee break 64

65 Corporate Finance update Dynamics across an evolving sector Peter Carter and Aneela Mather-Khan

66 A moving market Tailwinds and headwinds affecting the sector Tailwinds Headwinds Market rates Brexit Recent market pricing Stabilisation of broker / underwriter channel shift Distribution and underwriting M&A Capital Operational efficiencies Competitive environment Regulations Regulatory relationship Claims experience incl. PPOS Regulations Regulatory scrutiny Claims development obligations 66

67 EV/EBITDA Valuation trends Continued growth in transaction values 20.0x 18.0x 16.0x 14.0x 12.0x 10.0x 8.0x 6.0x 4.0x 2.0x 0.0x Source: Deloitte analysis of UK insurance intermediary transactions 67

68 Brexit Short-term uncertainty Short-term market response Implications for Gibraltar Increased volatility reflecting uncertainty Growth prospects Focus Gibraltar GWP by country Other 8% Single market access? UK 92% Currency fluctuations Growth Capital SII equivalent not SII Investment return Data sharing Operational disruption 68

69 Brexit Short-term volatility /05/ /05/ /05/ /05/ /05/ /06/ /06/ /06/ /06/201 Insurers Brokers Source: Deloitte analysis - Indexed to 1 May, basket of insurers contains Admiral, Hastings, Saga, Aviva, Direct Line, RSA and esure, basket of brokers contains Marsh, Willis, Aon, JLT and AJ Gallagher 69

70 Brexit Medium-term stability Insurers Brokers Source: Deloitte analysis - Indexed to 1 May, basket of insurers contains Admiral, Hastings, Saga, Aviva, Direct Line, RSA and esure, basket of brokers contains Marsh, Willis, Aon, JLT and AJ Gallagher 70

71 Brexit Impact on transaction Process implication Investor implications focal point Timing accommodate uncertainty Process cheap pound but political risk Preparations Business planning scenarios Trade intermediaries Trade insurers Source of funds Sustainability of distribution GWP sustainability Investment risk/return Capital impacts Buyers no immediate signs of change Financial investors Source of funds Currency Political risk and business expansion Growth 71

72 Brexit UK growth a recovery in expectations Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q2 2019Q3 Feb-16 Aug-16 Source: Comparison of Growth projections Bank of England 72

73 Brexit Deal impact to date Slight slowing of overall M&A activity prereferendum Mid-market relatively unaffected Source decision makers in a wait and see mode question of timing Potential incremental value opportunities Slight extensions to some processes Deal makers cautious, but not gone away 73

74 Capital Purpose of capital Provide a buffer which delivers an acceptable level of risk associated with the stability of the insurer The appropriate level of capital is therefore about both the level of risk which is acceptable in relation to the business and the appropriate level of return Impact of Solvency II 150% SI 200% SI c.300% SI Competition For scale / scale economies Market pricing Perfect storm in run up to SII SII implementation Increasing capital requirements Claims costs 74

75 Capital Operating capital position Capital efficiency Assessing capital adequacy An owners perspective Level of return Strategy and skill sets Committed capital and source Return on Equity should drive value multiple Ability to extract capital But insurance is inherently uncertain Industry crosschecks A buyers perspective Expect an appropriate level of capital Nature of reserves Base their expectations on regulatory requirements AND market practice Intrinsically a business which is poorly capitalized or has poor regulatory relationships gets penalized P&L and Balance Sheet Credit ratings 75

76 Capital What is a rating? What is a rating? Benefits of obtaining a rating Independent, objective and forward looking assessment of a company s financial strength; Breaks down barriers to entry It reflects an analysis of a company s business profile, balance sheet strength, operating performance and risk management in the context of its operating environment; and The rating certification has become engrained into financial and insurance contracts, investment processes and the regulatory framework. Provide companies with a risk management tool Offers comparison between peers Benefits of obtaining a good rating Increases attractiveness to investors, reinsurers and policyholders Provides access to funding Improves credibility with the regulator 76

77 The ratings process How are insurers rated? Timeframe for an initial rating: 4 to 6 months 1. Annual Credit Rating Process 2. Information Request 6. Communication of Rating Outcome 3. Management Meeting 5. Rating Committee 4. Detailed Analysis 77

78 Rating characteristics The rating is a holistic view of the financial strength of a company, depending on the nature and complexity of the organisation the rating characteristics can vary in importance Typical characteristics of an A rated entity What could impact the rating? Change in business strategy Robust level of risk adjusted capital Change in management Change in funding structure Good business profile Stable profits and good technical performance Impact Capital expenditure Mergers and Acquisitions Financial market changes Strong management expertise Developed enterprise risk management Corporate governance issues Liabilities 78

79 Innovation and the Motor Market Rhod Richards Head of Business Development Pete Allchorne Head of Business Innovation 79

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85 Motor Liability and Product Liability A Conflict of Laws? Features Compulsory Motor Liability Product Liability Potential Impact Insurance Mandatory Not mandatory Manufacturers may not choose to insure adequately for TP liabilities. Impact on damages for personal injury Impact on damages for vehicle repairs / PAV Policy Breaches by Insured Limitation period Application of EU Law Injured driver in AVT, caused by product liability Mandatory Unlimited Can set limited liability Impact on injured party dictated by insurance type rather than by severity of losses Mandatory unlimited cover for TP claims Third Party paid in full regardless of the breach, with subsidiary rights against the insured 3 years from date of accident (personal injury) "Any use of a vehicle that is consistent with the normal functioning of that vehicle" Normal function must include self-driving Addition to motor insurance policy for 1 st party damage/injury Damage to the thing itself is not covered, pursuant to s5(2) CPA 1987 Can void policy 10 years from date product goes into circulation (even if injury) Requirement does not point to product liability being a necessary requirement Consumer Protection Act does not allow for recovery by innocent AVT driver Impact on innocent third party with no insurance cover Impact on innocent third party with no insurance cover Claims arising from product liability for AVT statute barred Breach of EU directives No protection for "not at fault" AVT driver 85

86 Some questions for motor insurers Over the next 5 years, we can expect to see considerable advances in ADAS technology how will the market price this? How will an insurer know what ADAS technology a car has been fitted with, both pre and post manufacture? Where will the liability fall for highly autonomous vehicles when there is a switch from car control back to driver control? How disengaged is a driver allowed to be? What will the duty of care be to maintain the vehicle and to what degree does this go to? 86

87 Some questions for motor insurers Will the cost of motor insurance for AVT be significant? How will the market deal with Insureds who circumvent the AVT systems? What is the inherent risk of hacking and the impact? What will the future provision of motor insurance look like? 87

88 The Future of Civil Justice... The Next 5 Years? April 2010 MOJ portal process April 2013 Jackson costs reforms (LASPO) March 2015 CMA Report on Credit hire November 2015 Chancellor s Autumn Statement announcement on whiplash reform June 2016 Accreditation of MedCo experts 23 June 2016 Brexit July 2016 Briggs final report re on-line court 2017/18 Increase in SCT limit? 2017/18 Removal of compensation for minor STI claims? 2017/18 Credit Hire Reform & Future of GTA? July 2013 MOJ portal process extended to 25k April 2015 MedCo randomised allocation goes live April 2015 Criminal Justice & Courts Act July 2016 Hayward v Zurich Insurance 18 October 2016 ABI Motor conference Autumn 2016 Consultation on whiplash reform? April 2020 Briggs Online Solution Court to go live for claims to 25k? July 2013 Fixed costs for litigated cases to 25k January 2016 Jackson LJ announces plans to extend fixed costs to 250k January 2016 Insurance task force reports 2018 Regulation of CMCs to FCA? 2018 Extension of Fixed Costs to 250k? 88

89 are you ready to innovate? 89

90 Tax A changing landscape Tim Lightfoot and Tom Jacobs

91 Tax A changing landscape There have been a large number of tax developments over the past 12 months both in the UK and abroad. Tax authorities are increasingly focused on transparency and working with other territories to address tax issues on a multinational level. FATCA Audit independence Loss restrictions Solvency II Automatic exchange of information Interest restrictions Country by Country reporting Tax strategy Permanent establishment Diverted profits tax 91

92 Where is your business established? Very topical debate for the Gibraltar insurance industry who can enjoy VAT benefits. HMRC actively looking to challenge the substance and residency of Gibraltar insurers. Important principles established in the Upper Tribunal decision of Ocean Finance. Specifically, it confirms: i. What a company might need to form a VAT establishment. Has confirmed that a business can outsource a large proportion of its fulfilment activity and still form an overseas establishment for VAT purposes. ii. That it is not contrary to EU/UK Law to establish a business outside the UK solely for tax purposes. This is on the basis that a person should have a fundamental right to establish itself in other territories if they so wish. The issue is ongoing and will be explored further in a number of upcoming cases which are being taken to the Tribunal. Evidence to suggest a positive outcome will be reached. 92

93 No VAT on fulfilment services? Use and enjoyment insurance - What is likely impact on the insurance sector? - Suggestion that the new rules are technically flawed and could be challenged - Is there a limit to the definition of a repair that could also be questioned? Use and enjoyment marketing - Consultation? Is this still happening post-brexit? - Will rules distinguish between brand and product marketing? - Do use and enjoyment mean the same thing? - Once again, seems to be scope to challenge any implementation 93

94 Supply chain efficiencies Potential change in VAT treatment of claims handling provides opportunity for Gibraltar insurers? What are implications of the Westinsure decision and does it limit innovation in the insurance sector? How do business need to adapt to new technologies (e.g. telematics) to ensure VAT efficiency in supply chain? Can commissions be paid to brokers and other intermediaries in a more efficient manner in order to reduce IPT costs? 94

95 HMRC approach to the insurance market To what extent have businesses seen an increase in HMRC actively on indirect taxes? - Significantly more information requests on cross-border relationships and launch of KYC programme. - Agreeing a partial exemption special method becoming extremely difficult. - Strict application of penalties following period of light touch - Criminal penalties for intermediaries facilitating evasion of IPT/VAT - Publication of tax strategy and political focus on tax avoidance Possible increase in IPT resource at HMRC given rate rises? Early indications that HMRC are becoming more active. A need to ensure that all taxpayers can prove they have taken reasonable care in respect of tax affairs. 95

96 Brexit: a journey into the unknown 1 2 Potential scenarios 3 Review current business model European Economic Area (NO) Bi-lateral agreements (CH) Free trade agreement (CA) MFN under WTO (RoW) Other scenarios? Plan and consider actions What are the current dependencies on EU law (rulings, filing positions and disputes/litigation)? What are the potential trade outcomes? Need to protect Gibraltar economy What are the options to mitigate potential negative impacts or capture potential positive impacts? If/when to make representations to Government? 96

97 Panel Session Chairman: Pepe Caruana Participants: Daniel Delgado Mike Ashton (Gibraltar Finance Centre) Rhod Richards (DAC Beachcroft) Peter Carter 97

98 Closing remarks 98

99 Your Deloitte contacts Pepe Caruana, Senior Partner Tel: Mob: Peter Carter, M&A Director Tel: Mob: Daniel Delgado, Audit Partner Tel: Mob: Tim Lightfoot, Tax Director Tel: Mob: Stephen Reyes, Tax Partner Tel: Mob Tom Jacobs, Tax Associate Director Tel: Chloe Paillot, Actuarial Senior Manager Tel: Mob: Aneela Mather-Khan, Insurance Regulation and Strategy Manager Tel: Laura Scarpa, Insurance Regulation and Strategy Senior Manager Tel: Mob: Gibraltar Insurance seminar

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