Interview with Jonathan Hall, General Manager of Friends Provident International Limited
By: Liz Corlett
30 November 2009
What are the main advantages for a life assurance company of locating on the Isle of Man?
Historically, the Isle of Man has been the centre for offshore life assurance. In the early days, this was because a large proportion of the business came from the UK.
Even though the market has moved on, some of the original attractions still apply.
These include:
- Political and economic independence and stability
- The tax regime which means that tax on any gains can either be avoided or deferred until the policy is surrendered
- Confidentiality
- A regulatory regime, which gives companies the freedom to flourish
- The Compensation scheme –The Manx scheme doesn’t have a cap. This has not been the case elsewhere.
Since the early days and because of the number of life companies which have established in the Island, there is now a skilled workforce, which could not be found elsewhere.
How does the Island compete with other jurisdictions in terms of products, services and expertise?
The Island’s main competitors are Dublin and Luxembourg. Generally, the companies in those jurisdictions are focused on Europe, including the UK, and a number of Manx companies have established sister companies to give them access to Europe. Many of those companies have replicated the models and products used by Manx companies.
The Isle of Man remains an excellent base to sell to countries outside of the EU.
Are there any aspects of insurance legislation/regulation which are unique or specific to the Isle of Man?
Apart from the compensation scheme, there a number of areas where companies based in the Island have an edge. A few years ago, at the request of the life companies, the need for an insurable interest was removed. This makes it easier to sell to trustees and companies.
Life companies also benefit from legislation passed in 2001 which means that rights in contracts can be passed on. This allows policyholders to withdraw money from the policy during their lifetime whilst nominating who should receive the benefits paid on the policyholder’s death. This is useful in countries where there are rules of forced heirship or the concept of a trust is not understood.
Can you sum up the relationship between life assurance companies and the IPA?
The life companies in the Island benefit from it being a close community. It is in all companies’ interests to be open with the IPA, to ensure there are no surprises. The IPA encourages and fosters a relationship where this can happen. This works both ways so there is usually consultation with the industry before any changes are introduced. Indeed, the expertise within companies is tapped to help frame developments.
An outside observer may take the view that the IPA adopts a laissez faire attitude. That would be to overlook the advantages of the IPA allowing the market to regulate itself. Rather than issue prescriptive rules, the IPA has allowed the industry to agree best practices in a number of areas such as the way companies manage their relationship with intermediaries. This light touch has enabled the industry to thrive.
The IPA has taken flak for its anti-money laundering principles. These are generally regarded as too onerous. I have no problem with the IPA expecting high standards. The reputation and integrity of the Island is an important part of our proposition.
A number of the companies have recently been seeking to establish branches in other jurisdictions. For example, within the past few years, Friends Provident International has established branches in Singapore and Dubai and we are currently in the process of applying for a licence in another jurisdiction. In each instance, the IPA has used whatever influence it has with the local regulator to ease the way for us.
What do you believe to be the changes and challenges facing this sector in the next 5-10 years?
The most immediate concern for a number of companies is the reliance they have on business from the UK. The UK chancellor seems intent on discriminating against life products as an investment vehicle so the companies which do most of their business in the UK will find it increasingly difficult and competitive.
Manx companies may find it difficult to obtain investment from parent companies if they are in competition with Dublin based sister companies which can access Europe. Manx companies have to look further afield.
Having said this, the World is a big place and there are plenty of opportunities for companies which are prepared to diversify in terms of product and new territories. A narrow offering of investment products may not be enough. For example, Friends Provident International has recently launched a group savings product which will enable us to reach previously untapped markets.
Whilst the sale of life assurance products has and will continue to be a face-to-face, the servicing of those policies will increasingly be reliant on on-line developments.
As a number of companies begin to write large volumes of business, the limited labour pool in the Island means that companies have no option other than to outsource some of the work. This is an option which Friends Provident International has adopted. By outsourcing some of the basic processing functions, it has allowed us to concentrate on more customer-focused roles based in the Island. These are more varied and interesting. Whilst we have a skilled workforce, we all know that the skills required are changing. It is up to the companies to ensure that their people are helped to develop the skills needed in the future.