Best’s News & Research Service - November 21, 2018 07:41 AM (EST)
Best’s Market Segment Report: Gibraltar Insurance Market Enjoys Solid Performance but Brexit Creates Uncertainty
- November 21, 2018 07:41 AM (EST)
London //BestWire// - Gibraltar’s insurance market has experienced significant development over the past decade, with new entrants contributing to growth in the territory’s premium base, according to a new report by A.M. Best. Insurers have been attracted to the British overseas territory by the ability to write cross-border business into the United Kingdom and other European Union countries, as well as a favourable taxation system.
The Best’s Market Segment Report, titled, “Gibraltar Insurance Market Enjoys Solid Performance but Brexit Creates Uncertainty,” states Gibraltar is a member of the EU by virtue of U.K. membership, and when this is relinquished by the United Kingdom, it will also lose any benefits of EU membership, such as passporting rights.
Timothy Prince, director, said: “With over 90% of the market’s business coming from the United Kingdom, A.M. Best expects companies to be largely unaffected by the loss of EU passporting rights. However, those companies that do write business in the other 27 EU countries will have to make contingency plans or cease to underwrite this business.”
A.M. Best observes that overall earnings for Gibraltarian insurers are good and the market has consistently generated a return on equity (ROE) in the high single digits, helped by a relatively high level of underwriting leverage. Earnings have been supplemented by other income and modest investment returns. The ROE metrics suggest that companies are efficiently deploying resources to the benefit of their shareholders, especially during an extended period of low interest rates.
Catherine Thomas, senior director, said: “Although market conditions are challenging, there are some potential positives for earnings. Insurers writing U.K. motor business should benefit from proposed changes to the U.K. personal injury compensation system as outlined in the Civil Liability Bill. In particular, an increase in the discount rate would likely lead to reserve releases for Gibraltarian companies retaining bodily injury risks. Furthermore, with U.K. interest rates beginning to rise, insurers will begin to realise additional investment income on invested funds, which represents a key component of earnings for cash-flow underwriters.”
To access a complimentary copy of this report, please visit http://www3.ambest.com/bestweek/purchase.asp?record_code=280313 .
A.M. Best is a global rating agency and information provider with a unique focus on the insurance industry.