News, Events and Press Releases

06-12-2010 | BEE’s Regulatory and Industry Update November 2010

The following are Legal Notices that have been issued recently in Malta and which may be pertinent to the financial services industry:-

  • Temporary Agency Workers Regulations, 2010 (L.N. 461/2010)
  • Air Navigation (Amendment) Order, 2010 (L.N. 462/2010)
  • Confiscation Orders (Execution in the European Union) Regulations, 2010 (L.N. 464/2010)
  • Directive by the Minister of Finance, the Economy and Investment for the issue of Euro 100,000,000 Malta Government Stocks. (L.N. 465/2010)
  • Deduction (Childcare Fees) Rules, 2010 (L.N. 466/2010)
  • Freezing Orders (Execution in the European Union) (Amendment) (No. 2) Regulations, 2010 (L.N. 467/2010)
  • Financial Penalties (Execution in the European Union) (Amendment) Regulations, 2010 (L.N. 468/2010).

Furthermore, the following Bills have been issued for consideration by the Parliament in Malta:

Bill entitled “An Act to implement Budget measures for the financial year 2011 and other administrative measures.” Details of the Budget Speech 2011 (as read on Monday 25 October 2010) are being provided hereunder.

Budget Speech 2011 highlights:-

  • Deficit for 2010 will be close to 3.9%. Government aims at decrease to below 3% during 2011. Strategy to decrease Government’s arrears by 10%. Where possible, a decrease in the number of new employees, with the termination of one out of every two employees. Training programme using EU funds for workers in the public sector to implement better regulation.
  • Benefits from the MicroInvest scheme can be absorbed until 2013 while the MicroCredit scheme is being introduced. Launching of the ‘Gateway to Export’ Programme, that provides assistance and training to companies, with an investment of €1m to give these the opportunity to export to foreign markets.
  • Continuation of the programme to improve industrial zones, with an investment of €16 million. This includes the rebuilding of the three Childcare Centres and the construction of the Life Sciences Centre. Investment of €6 million in Assistance schemes for the Manufacturing Industry. Investment of €3.3 million in assistance schemes for sustainable energy. SME Micro Business Park in Gozo - €8 million. €9 million for Malta Enterprise to execute incentive schemes for industry.
  • Empowerment campaign for the consumer and launching of a publication, containing information for Maltese and Gozitan consumers about their rights and the products on the market.
  • An increase in VAT on accommodation from 5% to 7%. Allocation of €35 million, an increase of €4 million in marketing and international activities. A fund of €10 million, that will assist businesses in the tourism sector to develop themselves as well as their product.
  • An increase in supplementary assistance up to a maximum of €4.57 per week for single persons, and up to €8.13 per week for married couples. This measure will cost €800,000 per year. Pensioners will receive the full COLA increase, which will be €1.16 using the same mechanism for calculation as previous years.
  • No changes to income tax bands.
  • Continued focus on anti-abuse tax measures.

News from the EU Commission

Solvency II Timeline

  • End October 2010 – Deadline for submissions from solo firms (incl. those that form part of a group)
  • Mid-November 2010 – Deadline for aggregated submissions from groups
  • 10.12.2010 – The Internal Market and Services Directorate General of the European Commission will be hosting a Public Hearing on the revision of the Insurance Mediation Directive (IMD) on 10 December 2010, in Brussels. The public hearing will provide a unique opportunity to hear the views of a range of stakeholders on the key issues relating to the revision of the IMD. [Background: How the Directive is actually applied varies considerably between EU countries. This has lead to fragmented insurance markets in the EU, with significant gaps and inconsistencies, in particular regarding the information requirements imposed on sellers of insurance products. This has increased the problem of customers having a poor understanding of the risks, costs and features of insurance products. The collapse in consumer confidence during the financial crisis has also given new prominence to level-playing field and consumer protection issues. A request for advice on solving these issues was sent to the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) early in 2010.]
  • 11.11.2010 – European Commission statement at the occasion of the Parliament’s vote on the directive on hedge funds and private equity (MEMO/10/573)
  • 10.11.2010 – Preparation for the Competitiveness Council of Ministers. An extraordinary session of the EU's Competitiveness Council met in Brussels on 11 November under the chairmanship of the Belgian Presidency: Mr Vincent Van Quickenborne (Minister for Enterprise and Streamlining Policy). The Ministers revisited the issue of an improved EU Patent system. On 1 July 2010, the Commission launched a proposal on translation arrangements for a future EU Patent, which is the final element needed for a single EU Patent to become a reality. Obtaining a patent in Europe currently costs ten times more than in the US. This situation discourages research, development and innovation, and undermines Europe's competitiveness. The Commission believes that Europe needs to act so that innovators can protect their inventions at an affordable cost with a single patent covering the entire EU territory with minimum translation costs and without needing to validate that patent at national level as they currently have to do. The draft regulation seeks to ensure translation arrangements for the EU patent are costeffective, simplified and ensure legal certainty. The new proposal is an extension of the European Patent Office's (EPO) successful trilingual system and, if adopted, would drastically reduce existing translation costs.
  • 05.11.2010 – The European Commission consults on further policy in the field of credit rating agencies (IP/10/1471). Whilst credit rating agencies are important actors in the financial markets, recent developments during the euro debt crisis have shown that there may be a need to re-examine certain aspects of the current regulatory framework. There are growing concerns that financial institutions and institutional investors may be relying too much on external ratings and do not carry out sufficient internal credit risk assessments, which may lead to volatile markets and instability of the financial system. The purpose of this consultation is to open a wider debate and get input from all stakeholders in order to calibrate the scope and ambition of any possible future legislative initiative in the field of credit rating agencies. These issues are similar to those raised at a global level in the recent Financial Stability Report. The deadline for replies is 7 January 2011.
  • 29.10.2010 – Equivalence under Solvency II: Letter to CEIOPS by the Director- General Jonathan Faull.
  • 27.10.2010 – Making the single market work for growth and social progress: the ‘Single Market Act’. Key Priorities:
  • o For businesses: Capital for SMEs: Access to finance for SMEs is tough. Europe's smallest businesses are hardly visible to potential investors and the requirements for being listed on capital markets are complex. The Commission will make proposals to change this. The Commission will also reduce costs for SMEs by simplifying accounting rules and improving their access to public procurement contracts. The Commission will look at introducing a common tax base for businesses operating cross-border, leading to further cost savings. o For businesses: Social Business and long term investment: Europe has enormous potential for developing social entrepreneurship. In recent years, many initiatives have been taken by individuals, foundations and companies to improve access to food, housing, health care, jobs and banking services for those in need. To foster more cross-border action, the Commission will propose European statutes for such organisations to serve and promote the social economy. The Commission will also encourage longer term investments, including ethical investments, exploring options for a specific labelling regime. o For consumers: Online commerce: Young Europeans cannot understand why they cannot always buy their music on any website. Today, the online market is seriously under-performing. That is why the Commission will propose rules in 2011 aimed at ensuring that creators and artists can sell their work throughout Europe with a one-stop shop for authorisation allowing them to reap the rewards of their work. Full implementation of the Services Directive and updated rules for e-commerce will also make a difference. o Workers: professional qualifications: 4600 professions are today regulated differently in member states. A thorough revision of the professional qualifications directive is therefore overdue. The Commission believes introduction of professional I.D. card or “cartes professionnelles” would reduce remaining red tape.
  • 26.10.2010 – Commission services launch public consultation on financial reporting on a country-by-country basis by multinational companies. Country-by-country reporting is a concept that would require multinational companies to disclose financial information-on their operations in third countries in their annual financial statements.
  • 13.10.2010 – The European Commission consults on how the European audit market can be improved (IP/10/1325). “In the wake of the financial crisis, we need to ask the question whether the role of auditors can be enhanced to mitigate any new financial risk in the future. The crisis also highlighted certain weaknesses in the audit sector which need to be explored further. This work on audit is part of our effort to learn the lessons from the crisis and reform the financial sector. In particular, the Commission is keen to discuss whether audits provide the right information to all financial actors, whether there are issues around the independence of audit firms, whether there are risks linked to a concentrated market, whether supervision at a European level might be useful and how best the specific needs of small and medium sized businesses may be met. The deadline for responses to the consultation is 8 December 2010.”

News from CEIOPS (Committee of European Insurance and Occupational Pensions Supervisors)

  • 30.11.2010 – CEIOPS is currently collecting data to review the calibration of the premium and reserve risk factors in the non-life underwriting risk module of the SCR standard formula. The data should be submitted to national supervisors by 30 November 2010 using the template provided by CEIOPS and will be used to provide the European Commission with recommendations on the calibration of these factors for finalising Level 2 implementing measures.
  • 12.11.2010 – CEIOPS published its Report on Management Oversight and Internal Control Rules applicable to IORPs. The report maps out and analyses the various approaches and practices adopted by Member States. It reveals a wide spectrum of rules, requirements and supervisory practices which mainly reflect the different stages of development due to the varying importance attached to second pillar pensions and the legal frameworks under which institutions for occupational retirement provision (IORPs) operate.
  • 12.11.2010 – Following formal approval by Members, CEIOPS published “The methodology for equivalence assessments by CEIOPS under Solvency II”. (CEIOPSDOC- 94-10) “This methodology has been developed for use in respect of assessments undertaken by CEIOPS, and in the future by EIOPA. CEIOPS notes that the Solvency II Directive also anticipates that in circumstances where the Commission has not taken a decision on the equivalence of a particular third country then under Article 227 the group supervisor shall carry out any verification of the equivalence of the third country regime for the purpose of the group solvency calculation on its own initiative or at the request of the participating undertaking.”
  • 11.11.2010 – CEIOPS submitted to the European Commission its Advice on the revision of Directive 2002/92/EC – the Insurance Mediation Directive (IMD). CEIOPS' Advice is the result of in-depth discussions amongst CEIOPS Members and represents its initial views on the revision of the IMD. It is structured along the lines of the seven issues which the Commission asked CEIOPS to consider and contains 39 recommendations. The Commission requested that CEIOPS provide technical advice on the following seven issues: Legal framework of the IMD23; Scope; International dimension of insurance intermediation; Professional requirements; Cross-border aspects of insurance intermediation; Management of conflicts of interest and transparency; and Reduction of administrative burden.
  • 11.11.2010 – CEIOPS Members are actively developing group supervision and cooperation in colleges. CEIOPS published the findings of its 2010 survey on the functioning of colleges of supervisors. According to the survey the main strengths of college work are cooperation and contact between authorities, comprehensive view of the group and high-quality discussions between the authorities. Furthermore, CEIOPS found that all the respondents participating in the survey follow the Helsinki Protocol and that colleges are generally performing their tasks according the CEIOPS guidelines.
  • 04.11.2010 – Publication of the latest version of the Quantitative Impact Study 5 Questions & Answers. QIS5 - List of Methodological Issues Raised by participants and supervisors – 220 items included.

News from CEA (Comité Européen des Assurances/European insurance and reinsurance federation)

  • 08.11.2010 – CEA set out European insurance industry views ahead of G-20 Seoul Summit. In a letter, the CEA called on the leading governments, their regulators and their central banks to give due and proper consideration to the differentiated nature of insurance when deciding on any measures to address systemic risks. “We call on the G-20 governments, their regulators and their central banks to give due and proper consideration to the differentiated nature of insurance when deciding on any measures to address systemic risks. Based on the criteria for the identification of systemic risk drawn up by the FSB and the IAIS, the CEA strongly believes that the core insurance business model does not generate systemic risk that is directly transmitted to the economy. There is far lower contagion risk, higher substitutability and lower financial vulnerability than in banking.” “An adequate level of policyholder protection is assured in the European insurance regulatory framework. To ensure that they are able to meet their obligations to policyholders, insurers match expected future policyholder claims (technical provision) with sufficient and securely invested assets that have similar characteristics to the underlying insurance liabilities (for example in terms of duration, liquidity and currency).”
  • 03.11.2010 – CEA Guidance to Insurance Undertakings completing CEIOPS Data Requirements for Non-Life and Non-SLT Health Calibration. This note sets out guidance for insurance undertakings providing net financial data to the CEIOPS nonlife and non-SLT health calibration. It provides guiding principles and practical examples. The main issues arising are:
  • - Allocating recoveries for non-proportional, cross-class reinsurance to individual lines of business - Allocating recoveries to the appropriate accident year - Allocating recoveries by accident year for multi-year reinsurance - Estimating future recoveries against IBNR (booked or best estimate) and allocating these to line of business and accident year with separate consideration of: attritional and large claims; IBNR; catastrophe claims; IBNER on known claims; Pure IBNR for unknown claims; Layering of reinsurance: i.e. the order in which different reinsurance contracts trigger; Adjusting the data for commutations; Data constraints around reinsurance such as the use of bordereaux
  • 28.10.2010 – CEA set out concerns over EC tax proposals to European Council. CEA wrote to the European Council of heads of state and government to set out its concerns over the inclusion of insurers in recent proposals from the European Commission for new tax instruments.
  • 25.10.2010 – Joint statement criticises Japan Post reform. In a joint statement with the American Council of Life Insurers and the Canadian Life and Health Insurance Association, the CEA has expressed disappointment with the approval of the Japanese government’s proposal to restructure Japan Post, giving the company a competitive advantage over private sector insurance companies.
  • 22.10.2010 – CEA co-signs industry letter to G-20. The CEA and 16 other insurance associations and federations have written to the leaders of the G-20 ahead of their summit next month in Seoul to stress issues that are of importance to the insurance industry. The letter covers issues such as global trade, accounting, regulation, capital requirements, levies and taxes.

Below is a list of International warnings issued by various Financial Services Regulators (particularly pertinent to Customer Due Diligence procedures):-

  • BaFin – Warning against “TERP – The Equity Research Partnership” does not hold a licence pursuant to the German Banking Act to conduct banking business or provide financial services. The company is not supervised by BaFin
  • BaFin – Warning against “Frankfurt Financial Supervisory Authority”. Despite the name, BaFin alone is responsible for the licensing and supervision of banks, financial service providers, insurance companies and securities trading
  • Finanstilsynet – Warning against Osaka Futures and Options Exchange
  • Finanstilsynet - Warning against Rothman Global
  • FI (Sweden) – Warning against Strategic Private Equity Group
  • FI (Sweden) – Warning against Northern Pegasus LLC
  • FI (Sweden) – Warning against Antek International
  • FI (Sweden) – Warning against Greentree Financial Advisors Inc
  • FI (Sweden) – Warning against Campbell Cummings Associates
  • FI (Sweden) – Warning against Dynamic Wealth Management, DWM
  • FI (Sweden) – Warning against - Wilshire Park
  • FI (Sweden) – Warning against - Morgan Investment Management Group
  • FI (Sweden) – Warning against - Boston Capital Management, Inc
  • FI (Sweden) – Warning against - Warren Hill, LLC
  • Commission de Surveillance du Secteur Financier – Warning against Fake CSSF Website
  • DFSA (Denmark) – Warning against Satori Group
  • FSA – Warning against Atlantic Administration
  • FSA – Warning against Shaw Capital Management
  • IOSCO – Warning against Mclandish Offshore Bank

Details of the warnings are available upon request.

Lists of the names of some firms and/or individuals who are not approved or authorised by the UK FSA to conduct regulated activities or of unauthorised overseas firms known to be, or to have been, targeting UK investors may be obtained from the following webpage: http://www.fsa.gov.uk/Pages/Doing/Regulated/Law/Alerts/index.shtml

DEVELOPMENTS TO WATCH:-

House of Lords to debate piracy - 11 November 2010

The UK House of Lords debated Somali Piracy in the light of EU Committee Report “Operation Atalanta” which examined the effectiveness of the operation set up by the EU to combat piracy in the Gulf of Aden and Indian Ocean. Subjects discussed included capability shortfalls of the operation such as airborne surveillance and tanker support, methods used by pirates in the Gulf of Aden and Indian Ocean, and resources deployed to steward ships chartered by the World Food Programme, who the Committee recommended should be actively encouraged to charter faster, larger vessels in order to release resources to carry out anti-piracy activity elsewhere in the region. The April 2010 report criticised the insurance industry for not accepting greater responsibility for promoting adherence to best practice by shipping companies to deter pirates. The Committee also urged the Government to oppose efforts from the UN to make the payment of ransoms difficult, and endorsed the position in the UK that paying a ransom to pirates is not a criminal offence. The Committee strongly recommended that Atalanta’s mandate should be renewed in December 2010 in order to make further progress in combating piracy.

Iran sanctions – MFSA Notice 8 November 2010

MFSA informed all licence holders of the recent coming into force of the EU Council regulation No 961/2010, published 27/10/2010. the Regulations imposes restrictive measures against Iran and amends the lists of designated persons under the asset freezing measures contained in regulation No. 423/2007. The new Regulation implements additional restrictive measures against Iran as set out in Decision 2010/413/CFSP of 26 July 2010 while repealing Regulation No. 423/2007. This new Regulation has immediate effect at Maltese Law and requires no implementation measures. The measures include, inter alia, additional restrictions on trade in dualuse goods; restrictions on transfers of funds to and from Iran, with requirements for notification for any transfer above €10,000 and prior authorisation for transfers above €40,000; restrictions concerning the Iranian Banking sector, with a prohibition to establish new correspondent banking relationships with EU banks; restrictions on Iran’s access to the insurance and bonds markets of the Union; and restrictions on providing certain services to Iranian ships and cargo aircraft. MFSA reminds licence holders to exercise vigilance and verify their records on an on-going basis to ensure that they do not support activities or entities subject to the sanctions.

MFSA signatory to IAIS Multilateral Memorandum of Understanding on Cooperation and Information Exchange – MFSA Release 4 November 2010

MFSA issued a media release announcing that the International Association of Insurance Supervisors (IAIS) has accepted its application for accession to the Multilateral Memorandum of Understanding (MMoU) on co-operation and information exchange. The MFSA officially signed the MMoU on the 26th October 2010, after a lengthy application process which involved a thorough screening and scrutiny of Malta’s legislative and regulatory framework. This was carried out in order to ensure Malta’s compliance with the high standards expected by the IAIS. The assessment focused special attention on the MFSA’s ability to co-operate and exchange information with overseas regulatory agencies under strict conditions of confidentiality. Membership of the IAIS and accession to the MMoU shall strengthen the MFSA’s position in the international network of supervisory agencies in the sector.

FATF documents – FIAU Circular 22 October 2010

The first document is a public statement, which once again features Iran and the Democratic People's Republic of Korea due to serious deficiencies in their AML/CFT regime (further details in attached document).

The second document was issued as part of the International Co-operation Review Group's (ICRG) on-going process to ensure members' and other countries' compliance with AML/CFT standards. This list features those countries which have strategic AML/CFT deficiencies for which they have developed an action plan with the FATF (further details in attached document).

OTHER NEWS ITEMS:-

New (Insurance) Licences issued by MFSA in September/October 2010:-

  • Authorisation issued to Ocado Cell as a cell of Atlas Insurance PCC Limited.
  • Authorisation issued to Cafina Assurances Limited to carry on general business of insurance in class 16 – miscellaneous financial loss.
  • Authorisation issued to St. Julians Insurance Company Limited to carry on general business of insurance in class 12 – general liability.
  • Authorisation issued to Ortolan Reinsurance Company Limited to carry on business of insurance in 10 classes of general insurance business.
  • MAX Insurance Brokers Limited has been registered in the brokers register

10 Insurers Release Q3 Results

[Posted November 11, 2010 by Alex Vorro, Insurance Networking News]

  • (i) AEGON announced its financial results for Q3 2010, where its underlying earnings before tax increased by 21% to EUR 473 million during the quarter and its net income improved to EUR 657 million, which AEGON said was driven mainly by underlying earnings, fair value items and lower impairments. The company’s return on equity improved to 10.0% New life sales rose 7% to EUR 527 million, spurred by increased sales in the U.S., UK and new markets. The company’s gross deposits rose 38% to EUR 9.4 billion as a result of strong third-party asset management inflows, while the value of new business declined to EUR 120 million, mainly due to a change in business mix.
  • (ii) AXA S.A. reported a 4.4% increase in Q3 sales on higher property/casualty premiums, while outflows at the insurer’s asset-management business continued. Zurich Financial Services A.G. said on November 4 that Q3 profit dropped 22% after the firm settled a U.S. class action lawsuit. Allianz’ so-called solvency ratio, a measure of its ability to absorb losses, fell to 168% in the third quarter from 170% at the end of June. That’s within the company’s target range of 150% to 170%. Allianz shares have gained 6.1% this year in Frankfurt trading.
  • (iii) CNP Assurances announced its quarterly indicators for the first nine months of 2010. “In the current low-interest rate environment, personal risk and loan insurance are the growth drivers,” said CEO Gilles Benoist. “CNP Assurances has solid positions in these businesses in France and abroad. The launch of a structural partnership with MFPrevoyance during the summer will strengthen our positioning in these segments.” CNP announced that its consolidated premium income rose by 2.5% to EUR24.6 billion under IFRS (by 4.2% to EUR25.6 billion under French GAAP). Revenues were boosted by a 24.7% positive currency effect, reflecting Brazilian Real's appreciation against the Euro, the contributions of BVP Spain and Portugal, consolidated in September 1, 2009, and BVP Italy, consolidated in January 1 2010.
  • (iv) Fremont Michigan InsuraCorp Inc. announced its financial results for Q3, reporting revenues of $17.0 million for the quarter, an increase of 18.9% from Q3 2009, reflecting strength in net premiums earned from its product offerings, as well as a significant increase in realized gains on investments during the quarter. “The third quarter marked a continuation of soft market conditions, dominated by increased price competition,” said Richard Dunning, president and CEO. “Despite the current soft market, we remain committed to our disciplined underwriting philosophy of only accepting risks which we feel are appropriately priced. In this more competitive market, we managed to grow direct premiums written across all major lines […].”
  • (v) Global Indemnity plc reported net income for the three months ended September 30, 2010 of $19.8 million or $0.65 per share and for the nine months of $63.2 million or $2.09 per share. As of September 30, book value per share increased to $30.01 or by 12.3% on an annualized basis from $27.48 per share at December 31, 2009. Global Indemnity also announced an initiative to enhance profitability and earnings through reducing its U.S. based census by approximately 25%, closing underperforming U.S. facilities, and supplementing staffing in Bermuda and Ireland. For the three months ended September 30, the calendar year loss ratio decreased by 10.9 points to 42.5 in 2010 from 53.4 in 2009, Global Indemnity said. The current accident year loss ratio increased by 8.4 points to 64.0 in 2010 from 55.6 in 2009.
  • (vi) Hannover Re reported robust premium growth and better than expected group net income as of Sept. 30 2010. This was driven by strong demand in non-life and life/health reinsurance, healthy investment income and a positive tax effect, according to a statement. Gross written premium in total business surged by an appreciable 11.5% as of Sept. 30 to reach EUR 8.6 billion, the reinsurer said. At constant exchange rates, especially against the US dollar, growth would have come in at 7.7%. The retention decreased to 91.0% (92.3%). Net premium earned climbed by 11.1% to EUR 7.5 billion (EUR 6.7 billion).
  • (vii) Marsh & McLennan Cos. Inc. reported financial results for the third quarter ended Sept. 30, 2010. MMC's consolidated revenue in Q3 2010 rose 7% to $2.5 billion from Q3 2009, or 4% on an underlying basis. Underlying revenue measures the change in revenue before the impact of acquisitions and dispositions, using consistent currency exchange rates. For the nine months ended September 30, 2010, MMC's consolidated revenue was $7.8 billion, an increase of 7%, or 2% on an underlying basis. “We are pleased with the progress our company has made, not only in the third quarter but throughout the year,” said Brian Duperreault, MMC president and CEO. “In the quarter, all four of our Operating Companies produced strong underlying revenue growth, the first time this has occurred since 2007. The Risk and Insurance Services segment grew revenue in an environment of continued soft market conditions in the property and casualty marketplace.”
  • (viii) Sino Assurance Inc. reported solid Q3 2010 financial results highlighted by strong earnings growth, an increase of 75% in revenues and 162.7% in net income attributable with 83% gross profit margin. Sino said that as of Q3 2010, it recorded a revenue increase of 75% to $3,034,904 versus the same quarter last year. The net income attributable to Sino this quarter increased 162.7% to $1,362,141 compared to Q3 2009 which was $518,601, and diluted earnings per share totaled $0.02 versus $0.01 last year. Gross profit margin was 83%, increased from 76% in Q3 2009. The results were driven by significant year-over-year growth of our customer base in the tender and surety guarantee business and market share in China.
  • (ix) Willis Group Holdings plc reported results for the quarter and nine months ended September 30, 2010. “Our results this quarter reflect the strength of the Willis culture, with great teamwork and cooperation across the businesses, a commitment to growth and focus on cost control,” said Joe Plumeri, Chairman and CEO. Willis reported net income from continuing operations for the quarter ended Sept. 30 was $64 million, or $0.37 per diluted share, compared with $78 million, or $0.46 per diluted share, in the same period a year ago. Excluding certain items, adjusted net income per diluted share from continuing operations was $64 million, or $0.37 per diluted share, in Q3 2010 compared with $90 million, or $0.53 per diluted share in Q3 2009. Foreign currency movements favorably impacted earnings by $0.02 per diluted share compared with the third quarter of 2009.
  • (x) Zurich Financial Services Group reported a business operating profit of USD 1.2 billion and net income of USD 751 million for Q3 as part of a solid operating performance for the nine months ended September 30, 2010. Global Life and Farmers supported the Zurich's profitability by delivering ongoing top-line growth coupled with strong profit margins. Zurich said that General Insurance benefited from past rate increases earning in and managed to successfully continue targeted rate increases into the third quarter. However, it was impacted by a high occurrence of catastrophe- and weather-driven events particularly in the first half of 2010. Zurich's business operating profit for the nine months includes the impact of increased banking loan loss provisions of USD 330 million, before tax, as reported at the half year. Net income takes into account a previously announced third-quarter charge of USD 295 million related to the proposed comprehensive settlement agreement in the matter of Fogel vs. Farmers Group, Inc.

First retirement schemes licensed as all sectors grow

The Economic Update, Third Quarter 2010, November 2010]

Following developments on the regulatory front, four occupational retirement schemes, the first of such schemes under the Special Funds Act, have been authorised since the beginning of this year. Retirement scheme certificates of registration have been issued to MCT Malta Private Retirement Scheme, Melita International Retirement Scheme Trust, the Dominion Malta Retirement Plan, and the Expatriate Retirement Plan. All four schemes are administered locally following the issue of four scheme administrator certificates to Custom House Global Fund Services, Dominion Fiduciary Services, MC Trustees, and Blevins Franks Trustees. Collins Stewart (CI), Lombard Bank Malta plc, and Blevins Franks Financial Management have been authorised as asset managers for retirement schemes.

FSA wants to see firms change auditors more frequently

[Posted 11 November 2010 by Claire Robin, compliancy-services.co.uk]

The Financial Services Authority (FSA) has said it would like to explore measures to get firms in the industry to use a greater variety of auditors. At a meeting of the House of Lords' economic affairs committee, it was claimed that getting firms to swap auditors on a regular basis would help dilute the dominance of the 'big four', reports the Financial Times. Sally Dewar, the FSA's head of risk, said the organisation feels that increased auditor rotation would strengthen competition to Deloitte, Ernst & Young, KPMG and PwC, who currently monopolise auditing services for larger firms. “We think that is an area worth pursuing,” the news provider quotes her telling the committee, which is currently reviewing the audit market. It is feared that, with the big four accountancy firms providing auditing services to 99 companies in the FTSE 100, markets could be severely disrupted if one were to collapse. Speaking at the same committee, Baroness Hogg chairman of the Financial Reporting Council, said she would like to see all auditors licensed by the council in order to improve regulation of the industry.

FSA seeking greater disclosure on salaries and bonuses

[Posted 11 November 2010 by Tony Miller, compliancy-services.co.uk]

Financial services firms may soon have to become compliant with proposed rules that will require them to provide greater disclosure of salaries and bonuses. The Financial Services Authority has released a consultation paper on new remuneration disclosure requirements. It outlines how the regulator intends to implement the EU's Capital Requirements Directive (CRD3), part of Basel III, which requires firms to disclose information on their remuneration policies and pay-outs on an annual basis. The FSA says firms will need to make their first annual disclosure as early as practicable and no later than 31 December 2011. They can do this in a stand-alone report or as part of an annual report and accounts. It proposes splitting firms into four tiers, each requiring different levels of disclosure, with around 26 of the biggest firm making up Tier 1 which will entail full disclosure of all items under CRD3. At the other end of the scale, around 2,000 firms with limited regulatory licences or permissions will make up Tier 4 and these will be expected to supply only basic qualitative and quantitative information on remuneration. Basel III will introduce a raft of major regulatory changes to the EU finance industry, including requiring firms to have a large degree of capital in reserve as a buffer to future economic downturns.

City firms taking on more compliance specialists as FSA regulations get tougher Posted 10 November 2010 by Claire Robin, compliancy-services.co.uk] More stringent regulation and a greater threat of fines by the Financial Services Authority (FSA) is leading London firms to recruit more compliance specialists, it has been claimed. According to recruitment firm Astbury Marsden, 14 per cent of all new jobs created in the City in October were in compliance, control and risk, representing 700 of the 5,231 new staff hired. Chief operating officer at the firm Mark Cameron said that, as per the usual seasonal trend, there has been a slowdown in the hiring of front office staff like traders. “Compliance and risk has been a hot sector for two years and new jobs keep being created by each new regulatory initiative. The whole field is getting more heated with Basle III and Solvency II work starting in real earnest.” So far in 2010, the FSA has fined firms a total of £84,257,536, the biggest being a £33,320,000 penalty levied against JP Morgan Securities Ltd in June.

Munich Re raises profit guidance

[Posted 9 November, 2010, insuranceday.com]

German reinsurer Munich Re has raised its full-year profit prediction, following a ninemonth gain of €1.955bn ($2.71bn) for the first nine months, up from €1.78bn in the same period last year. The reinsurer now expects a consolidated result of about €2.4bn for the year as a whole, up from its previous guidance of €2bn. Chief Financial Officer Jörg Schneider said that “particularly the figures for the third quarter are very pleasing”. The company posted a profit of €761m for the third quarter. Gross written premiums for the year to date were €34.1bn, up 9% year on year. In primary insurance, the operating result for the first nine months rose to €923m from €500m, generating a consolidated result of €432m, up from €95m. Munich Re’s main primary operation, Ergo, recorded a nine-month gain of €301m. The combined ratio in primary propertycasualty business was 95.6% for the first nine months, up from 94.3% in the same period last year. In the reinsurance sector premium income rose 6.6% year on year to €17.6bn. The operating result fell to €2.51bn from €2.93bn. Reinsurance contributed €1.66bn to the Group’s overall profit in the first nine months. The combined ratio for the first nine months in reinsurance was 102.1%, up from 96.3%. Gross premiums written for the full year in reinsurance are likely to be between €23bn and €24bn, while primary insurance will add another €17bn to €18bn. Munich Health is expected to contribute about €5bn. The company is targeting a combined ratio of just under 100% in reinsurance and of about 95% for primary p/c business.

FSA to extend pension rules to cover group pension scheme

[Posted 09 November 2010 by Tony Miller, compliancy-services.co.uk]

The Financial Services Authority has announced details of proposals to change its regulations following the government's pension reforms. Recently announced workplace pension reforms by the Department for Work and Pensions (DWP) revealed that, from 2012, all employees will automatically be enrolled in a group personal pension (GPP) scheme. As such, the FSA has released a consultation paper that proposes changes to its handbook to accommodate the reforms. This will include extending current rules in place to mitigate the risk of poor advice being given in relation to occupational pension opt-outs to all workplace schemes, including GPPs. It also proposes changes to the handbook that make it clear that automatic enrolment does not fall within the scope of the Distance Marketing Directive and that that FSA and DWP rules for cancelling and opting out are interchangeable and that only one process needs to be followed.

Guernsey signs MoU with Shanghai

[Posted 04/11/2010 by Press Release Guernsey International Financial Centre]

The Guernsey Government has signed a Memorandum of Understanding (MoU) with the Shanghai Municipal Financial Services Office. Guernsey’s Chief Minister, Lyndon Trott and Fan Yongjin, Deputy Director General of the Shanghai Municipal Financial Services Office, yesterday signed an agreement which establishes a framework for exchange and cooperation between the two jurisdictions. The Chief Minister said: “This Memorandum of Understanding establishes a very important framework for exchange and cooperation between our two jurisdictions and I believe lays the foundations for business growth between Shanghai and Guernsey. “This agreement represents the strengthening of a broader relationship which we have been building between China and Guernsey over the last three years to the benefit of both of our jurisdictions.”

FSA fines mortgage lender for compliancy failings

[Posted 04 November 2010 by Tony Miller, compliancy-services.co.uk]

A mortgage lender and its director have been fined for failing to comply with Financial Service Authority (FSA) rules. Bridging Loans Ltd has been ordered to pay £42,000 by the regulator, while its director Joseph Cummings has been fined £70,000. The action was taken in response to a series of failures relating to lending practices and for failing to treat customers fairly in arrears. Mr. Cummings has also received a ban from the FSA while Bridging Loans Ltd has agreed not to conduct new FSA regulated mortgage business. A number of failings have been attributed to Mr. Cummings, including failing to lend responsibly, failing to ensure charges and interest were attributed accurately and attempting to deter customers from complaining or seeking redress. It was also found that he had appointed three family members to the firm, all of whom became approved persons holding significant influence functions at the company despite having no meaningful involvement in the business. This resulted in customers being lent to irresponsibly and the unfair treatment of customers in arrears. Margaret Cole, the FSA's director of enforcement and financial crime, said: "Joseph Cummings showed total disregard for the interests of Bridging Loans Ltd's customers, basing his decisions and subsequent treatment of a customer on whether or not he liked or trusted them, rather than on any proper assessment of their circumstances." It follows the banning of three mortgage brokers for fraud by the FSA last month.

Solvency II Rules Discipline Reinsurers, Guy Carpenter Says

[Posted October 26, 2010 by Oliver Suess, Bloomberg.com]

Proposed new regulation for the insurance industry in Europe is disciplining reinsurers, helping to prevent price fluctuations seen in the past, according to reinsurance broker Guy Carpenter & Co. “Solvency II and the better risk management and greater transparency coming along with it help avoid irresponsible behavior in the reinsurance market,” Nick Frankland, European head of Guy Carpenter, a unit of Marsh & McLennan Cos., said in an interview in Baden-Baden, Germany. “Going forward, we will see ebbs and flows rather than peaks and troughs.” European regulators are testing the proposed Solvency II directive across the region’s industry in a fifth quantitative impact study, named QIS5. The rules are designed to align insurers’ risks with the capital they hold to protect policyholders and are scheduled to come into effect in 2013. “Solvency II is embedded into most businesses to some extent by now and underwriting is far more sophisticated than it has been in the past,” Frankland said. “Supply and demand are probably much better matched.” Munich Re and Hannover Re said they expect prices for property and casualty reinsurance to remain unchanged in the January round of renewals. Reinsurers help primary insurers such as Allianz SE and Axa SA shoulder risks for clients.

New Captive Insurance Institute Focuses on Middle Market

[Posted Thursday, October 21, 2010 Houston, TX (Press Release - sfgate.com)]

Capstone Associated Services, Ltd. announced the founding of The Institute for Captive Insurance Planning (ICIP), a not-for-profit organization, whose mission is to set the highest standards of professional excellence for advisers providing alternative risk/captive insurance planning services. ICIP is the premier association for advisers providing captive insurance services to middle market companies. ICIP's membership consists of experts involved in the various aspects of alternative risk planning. More specifically, Institute members include risk management and insurance professionals, regulatory, tax, insurance and financing lawyers, resident domicile managers, CPAs specializing in insurance accounting, domicile regulators and other alternative risk professionals who are exchange ideas and share solutions with captive owners and prospective owners. Members pledge objectivity in their analysis and in connection with delivering their services. Membership is limited to those organizations and persons with the highest professional abilities to design implement and operate alternative risk planning free from conflicts of interest, such as are seen with money management firms or brokers of commercially available insurance. ICIP promotes the highest professional standards and offers a range of educational opportunities online and around the country. Capstone joins a group of founding members committed to the highest standard of alternative risk planning. Other founding members include Liptz & Associates, Inc., Certified Public Accountants, Irvine, California; McNeil, Levy & Friedman, Houston, Texas; Mercury Financial, Dallas/Houston, Texas; and Capstone Insurance Management, Ltd., Wilmington, Delaware; and CIMA, The Valley, Anguilla, British West Indies (www.CaptiveInsuranceOnline.org).

LOCAL EVENTS:-

The Malta International Risk and Insurance Congress at Hilton Hotel, St. Julian’s, Malta on the 25th & 26th November 2010 A gathering of leading European risk and insurance professionals in the insurance and onshore financial centre of Malta to discuss the fast changing risk and insurance landscape in Europe and identify the best strategic and tactical response. Key speakers include: Gabriel Bernardino, Chairman, CEIOPS and the man responsible for delivering Solvency II to the European Commission (invited); Peter den Dekker, FERMA; Axel Theis, Allianz Global Corporate & Specialty; Eileen McCusker, International Property & Casualty, XL Insurance; Lex Baugh, Chartis Europe; Daniel San Millan, Ferrovial; Carl Leeman, BELRIM and Katoen Naatle

Notice:-

The above information is based on sources we believe to be official sources, which we believe to be reliable, but we do not guarantee its accuracy. It is true as at 15 November (a.m.). Readers should consult BEE Insurance Management or their own insurance/legal advisors regarding specific coverage and other issues. No intellectual property right is being claimed on the material being used or quoted.