Monthly Archives: April 2013

Captive insurers are moving away from the British Virgin Islands

The British Virgin Islands is one of the world’s most popular places for captive insurance companies. However, a new report form Timetric implies a move away from the Islands.

By the end of the third-quarter of 2012, the British Virgin Islands had 156 captive insurers and 34 domestic insurers. Although the British Virgin Islands is still a popular captive insurance hub, the number of captive insurers has declined from 88.8% in 2008 to 86% in 2011, following a long downward trend.

In the 1990’s, 2,000 captive insurance companies operated on the British Virgin Islands with only 156 present in 2012. The main reason for the large number of captive insurance companies during the 1990’s was the nation’s low capitalisation requirements. Due to the emergence of other offshore and onshore insurance jurisdictions, the volume of captive companies was knocked down. Another key to the decline was the revised financial service laws, made by the British Virgin Islands to comply with international standards.

Introduction of a new insurance law

The Financial Services Commission (FSC) introduced the Insurance Act 2008, which was a revision of the 1994 act. The new act came into force on February 1st 2010 and was intended to provide a more transparent and cost-effective industry framework. The new act, alongside the Insurance Regulations 2009 and Regulatory Code 2009, provides more clarity than the previous system. It was formulated to meet the principles of the International Association of Insurance Supervisors (IAIS) and the EU’s Solvency II legislation.

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Pilgrims drive tourism in Saudi Arabia

Each year millions of pilgrims from all around the world visit Saudi Arabia to perform the rituals of Hajj and Umrah at the country’s two major Islamic sites; Mecca and Medina. Last year 43.9% of country’s domestic trips were made to Mecca – making religious tourism the backbone of the travel industry in Saudi Arabia. 

Reflecting on the popularity of religious tourism, the government of Saudi Arabia has decided to invest in tourism as a means to reduce the economic dependence on oil. In recent years there have been investments in infrastructural improvements such as airports, railways and roads. In August 2012 the government announced its plans to improve the transport system in Mecca. The plan includes the construction of a metro system and a bus network and will comprise a total investment of SAR62 billion over a 10 year period.

The government has also recognised the need to look beyond religious tourism by investing in other domestic tourism facilities. Fronted by the Saudi Commission for Tourism and Antiquitites (SCTA), the government has authorised the development of 40 private museums, new roads to heritage sites and new airports. According to SCTA forecasts, domestic trips will grow to 128 million by 2019.

The latest figure from Timetric reveals a decline in inbound and domestic tourism, whereas total tourism expenditure increased. In 2011 the travel and tourism sector formed 2.3% of the nation’s GDP. The total number of domestic trips taken by residents decreased from 28.5 million in 2007 to 23.6 million in 2011 with a CAGR of -4.6%. While outbound trips increased at a CAGR of 16%, inbound tourism registered decline and posted a CAGR of 0.8%. The key reason for the decline in inbound tourism has been the effects of the Arab Spring, as visitors from North Africa and Middle East regions, who form a key component of the Haj pilgrims, took fewer trips. Despite a decline in both domestic and inbound tourism in 2011, total spending by inbound tourists increased with a CAGR of 23.08% due to a growing economy and higher disposable income.

Captive insurance in Guernsey is thriving after opting out of Solvency II

Guernsey’s decision not to be a part of EU’s Solvency II has strengthened the country’s captive insurance sector – making it the largest in Europe today. 

In January 2011 the Guernsey government and the GFSC issued a joint statement that they would not be applying for Solvency II equivalency. This provided a new form of clarity regarding the regulation of insurance business in the country and, as a result, 72 new insurance providers entered the industry in 2011, and 97 new overseas insurers licensed in 2012, bringing the number of international insurers to 737 at the end of 2012.

According to a new report from Timetric, Guernsey has the largest captive insurance industry in Europe and the fourth-largest in the world. Overall the Guernsey insurance industry grew in terms of written premium value from US$7.3 billion in 2008 to US7.7 billion in 2012, at a CARG of 5.5%. The industry is projected to grow to value US$9.6 billion in 2017, at a CARG of 4.6%, supported by an increasing number of market participants and improving economic growth.

Favourable regulation drives growth for Guernsey’s insurance industry

The government of Guernsey applies no tax on corporate income, capital gains and payroll for insurers operating in Guernsey. As a consequence the number of overseas insurers entering the industry is increasing. At the end of 2012, Guernsey had over 737 overseas insurance providers, compared to 687 at the end of December 2011. Many of these are captive providers, but also the conventional insurance industry recorded stable growth from 2008 – 2012, generating revenues from motor, property damage, life insurance, business interruption, transport, employers, public liability and material damage insurance.

Guernsey’s insurance industry remains relatively unaffected by global developments

It has been some difficult years for the global insurance industry, due to the global financial crisis, dept crisis in the EU and massive catastrophe losses in 2011. The global insurance industry lost approximately US$350-380 billion in 2011 due to various natural disasters such as earthquakes in New Zealand, the tsunami in Japan, and the eurozone crisis. These events have had little impact on the Guernsey insurance industry, which is dominated by captive insurance and focus more on the UK than the eurozone. However, the Guernsey insurance industry is not free from facing external risk. According to Timetric, the ongoing debt crisis in the EU and struggling economic development in the US might influence the growth of the captive insurance industry to 2017.

Medical tourists flock to Spain

Each year Spain attracts a huge number of medical tourists due to low treatment costs and cheap airfares.

Spain’s healthcare system – ranked as the 7th best in the world by the World Health Organization – attracts an increasing number of medical tourists due to its advanced medical technology, low treatment costs and improved healthcare infrastructure. The country is particularly popular for cosmetic surgery, obesity surgery, eye surgery, dental care, organ transplants and neurosurgery. According to a new report from Timetric, medical tourism in Spain is expected to grow significantly towards 2016. The main drivers for the growth in medical tourism are the broad range of low cost yet efficient medical services, combined with the ease of obtaining a visa for medical treatment in the country. According to the report, Spain will emerge as a leading medical tourist destination, providing various options and alternatives for medical tourists in the future.

 Even though the economic instability in Europe has affected the country’s inbound tourism, Spain continues to be a popular tourist destination. According to Timetric the volume of domestic tourists is expected to increase at a CAGR of 2.87% by 2016. This trend is driven by the growth of low-cost airlines offering affordable flying options, discounts offered by tour operators, as well as the popularity of festivals such as La Tomatina and San Fermin. The most popular tourist destinations in the country include Barcelona, Madrid, Seville, Ibiza and the Costa Brava, which are known for their natural beauty, architectural masterpieces, museums, festivals, events, beaches and nightlife. Besides medical tourism, other popular tourist markets on the rise include wine and culinary tourism as well as health and wellness tourism.

Investments paid off as tourism thrives in the United Arab Emirates

Tourism has been a key pillar in the UAE’s strategy to reduce its dependency on oil revenue in recent years. Due to investments in architecture and cultural events, tourism now forms 13.5% of the GDP.

The country’s tourism strategy works in partnership with its plan to develop cities, primarily Dubai and Abu Dhabi, as major airline hubs. As the UAE does not have an old history of cultural sights, tourism has been built around luxury living, shopping, exhibitions, sports and major architectural projects such as the Jumeirah Palm – an artificial palm-shaped archipelago.

Major events drive inbound tourism

In 2012 arrivals to the UAE rose to 11 million which confirms that the UAE continues to be a popular tourist destination. Growth in tourism has been fuelled by events such as the Formula 1, the Grand Prix in Abu Dhabi, the Dubai Shopping Festival and the Dubai World Cup – the world’s most expensive horse race. Most people come from Europe, followed by Asia and the Middle East. To boost tourism further the country plans a number of big architectural projects. These include the MohammedBinRashidCity, which consists of 100 hotels, the world’s biggest shopping mall and a Universal Studios theme park, as well as the Jebel Ali complex, which will feature five theme parks and a replica of the Taj Mahal.

Domestic tourism on decline

According to new research from Timetric, domestic tourism fell from 6.7 million domestic trips in 2008 to 5.5 million in 2012, at a CAGR of -4.8%. This is due to a number of reasons. First, the UAE is home to a large expat population and many prefer to travel to their home country when they are on vacation. Secondly, most UAE citizens travel abroad to escape the heat during summer, which is also when schools are closed. Finally travel costs within the UAE are rising, due to high tolls and lack of budget accommodation.

Outbound tourism records marginal growth

Outbound tourism increased at a marginal CAGR of 0.7% from 2008 to 2012. The main reason is the continued economic uncertainty in Europe. As people from the UAE tend to spend more money when traveling abroad, outbound tourism expenditure rose at a CAGR of 2.45%, again making it much higher than inbound tourism expenditure in 2012.

Innovation drives the Malawian insurance industry

While the Malawian insurance industry is highly regulated – insurers have successfully customised new insurance products to the non-life segment. 

Innovation is one of the key drivers for growth in Malawi’s small and growing insurance industry. According to new research from Timetric, the key segment driving the industry is the non-life insurance segment, which accounted for a 67.0% share of the total insurance value in 2012. The Malawian insurance industry is highly regulated by the registrar of Reserve Bank of Malawi (RBM), which is responsible for exerting control over the insurance and allied activities, including insurance companies, reinsurance companies, insurance brokers, loss adjusters and intermediaries.

In July 2012, NICO General Insurance introduced Cellsure – a product specifically developed to target users of expensive mobile phones. Cellsure is just one example of how Malawian insurers have been using the growing economy and new consumer trends to develop more customised insurance products.

Over the forecast period (2013 – 2017) the insurance industry is expected to be driven by the growing economy. However, the falling profitability and low penetration rate will be the major challenges faced by Malawian insurers.

Group life category increased due to a pension act in 2011

The performance of the group life insurance category in the life insurance segment was exceptional in 2011, with a rise in the number of group life insurance policies from 67 in 2010 to 371 in 2011. This increase in number is due to the Pension Act in 2011. This act mandates every employer in Malawi to provide life insurance cover to its employees. The Pension Bill was enacted by Parliament in early 2011 and came into force on June 1, 2011. The group life category is expected to drive the life insurance segment over the forecast period.

Rising tobacco exports to drive the non-life segment

The agricultural sector continues to be the main driver of the Malawian economy. The main export item of Malawi is tobacco, accounting for 55% of the total number of exports. Tobacco production in Malawi grew by 7.7% in 2011 and stood at 237.2 million kilograms, compared to 220.2 million kilograms in 2010. The growing tobacco production will further increase the exports figure in Malawi over the forecast period, resulting in positive growth in the insurance industry, supported by the promotion of marine and transit insurance.

The Isle of Man; a hub for offshore life insurance

With an aging population the demand for life and health insurance products is expected to increase in the Isle of Man.

Due to a rising and aging population, the Isle of Man has emerged as a hub for captive insurance and offshore life insurance businesses. The population aged above 65 years as a percentage of the total population increased from 17.2% in 2007 to 18.2% in 2011.

The Isle of Man is one of the leading offshore financial centers in the world. Business-friendly and transparent regulations coupled with excellent infrastructure have created a thriving business environment in the island. The insurance industry is an integral part of the Isle of Man’s financial sector and accounted for 13.0 % of its GDP in 2011.

The Manx insurance industry is well diversified with 213 licensed insurance entities at end of 2012, including insurers, insurance management companies and insurance intermediaries. According to new research from Timetric, stable economic growth, a favourable regulatory environment, the availability of an experienced workforce and the tax advantages of running a business on the island will drive the growth of the insurance industry towards 2017.