2015 Issue 1

Aon Risk Solutions
2015 Issue 1
Aon Insurance Managers
Guernsey Newsletter
A Message from our Managing Director
In this Issue
2
Technical Update
2
uernsey’s New Risk Based
G
Solvency Requirements
3
on partners with new rated
A
Guernsey reinsurer
3
irector General elected to
D
the Executive Committee
of IAIS
3
ew Guernsey Finance
N
Chief Executive
5
n interview with
A
Sir Bobby Charlton
6
on’s new Executive Director
A
listed as one to watch
7
Aon supports the RSPB
7
arriet receives Excellence
H
in Education award
8
on Guernsey hosts Captive
A
and Insurance Master Class
8
Introduction to
Captives Seminar
Risk. Reinsurance. Human Resources.
Welcome to the latest edition of our newsletter. There is much to report
on since last time, not least an update for you on the changes to UK GAAP,
as well as Guernsey’s new risk based solvency requirements. This issue
explores how these regulatory and accounting changes are likely to
impact the captive and insurance industry.
We also feature some exciting announcements, including the arrival of
Guernsey’s new rated reinsurer Kelvin Re, and the appointment of
Dominic Wheatley as the new Chief Executive of Guernsey Finance.
Starring in the midfield of this issue is an interview with Sir Bobby Charlton. Meeting him was a
real privilege, not just because he is a football legend but because Sir Bobby is an
extraordinarily interesting man with a great passion for people and his mine clearing charity—
Find a Better Way.
We also take a look at the talents and achievements of our award winning staff who, away from
the office, have been busy either through examinations, or volunteering for our many and
varied corporate and social responsibility activities.
Adding to our exceptional team, I’m pleased to report that Aon Guernsey has recently
attracted some of the best talent available in the market and I look forward to introducing
them to you soon, perhaps at our next Captive and Insurance Master Class which is taking
place on 21 May 2015 at Lloyd’s. I look forward to seeing as many of you there as possible.
Best Regards,
Paul Sykes
Managing Director
Aon Insurance Managers (Guernsey) Limited
[email protected]
Technical update
Prepare for an accounting revolution
We’ve known for a few years that the big
“switch off” of UK Generally Accepted
Accounting Practice (GAAP) as we know it,
is coming in 2015. In the biggest ever
change in UK accounting standards, the
familiar FRSs and SAAPs (and not forgetting
the Insurance SORP) will be replaced by
IFRS for Small and Medium Entities (also
known as FRS 102). With 3,000 pages of
accounting standards becoming 250, the
headline change is to fair value assets and
liabilities, rather than including them at
cost. The arguments will continue as to
whether this makes financial statements
more relevant and useful or causes
distortion and volatility.
FRS 103 on accounting for insurance
contracts will also apply from 2015. This
standard allows captives to continue with
their existing accounting policies,
combining elements of IFRS 4, FRS 27 and
the Association of British Insurers’ Statement
of Recommended Practice (ABI SORP). The
standard is not designed to force a change
in a captive’s accounting policies but rather
to allow them the option to move closer
towards fair value accounting (i.e. the
discounting of claims reserves or
eradicating excessive prudence). Draft IFRS
4 Phase II is expected in 2015 and the
Financial Reporting Council (FRC) has tried
not to accelerate the fair value accounting
of insurance contracts but has stated their
intention to mirror the new international
standard in UK GAAP. Discontinuation of the
ABI SORP will be consulted on.
“As Europe’s largest captive domicile,
Guernsey has the necessary resources
to develop a solution that will save
cost and trees!”
Not such a light touch
For captives, FRS 102 and 103 is not the
light touch IFRS you might expect. Even
when qualifying for the reduced disclosure
under FRS 101 (being part of an IFRS
reporting group), financial statements
disclosures explaining the amounts arising
from insurance contracts and setting out
the timing and uncertainty of insurance
cash flows are required, as are disclosures
for financial instruments. The Guernsey
International Insurance Association (GIIA)
and Guernsey Society of Chartered and
Certified Accountants (GSCCA) have agreed
an alternative with Guernsey’s Regulator
and some changes to the law are being
made by the Law Officers to facilitate this.
Reassuringly the “Balance Sheet” and
“Profit and Loss Account” will still appear
in your financial statements but the STRGL
(Statement of Total Recognised Gains and
Losses) will be replaced by the US styled
“Statement of Other Comprehensive
Income”.
The FRC has begun a major review of the
FRSSE and it is anticipated that this will be
withdrawn due to its similarity with FRS 102
with only 10 pages difference in length.
Implications for captives
So what does this mean for captives?
Possibly a lot more pages in the financial
statements due to onerous IFRS 4 / FRS 3
disclosure requirements, which would
mean more cost. As Europe’s largest
captive domicile, Guernsey has the
necessary resources to develop a solution
that will save cost and trees! Changes were
due to be announced shortly after this
article went to press so please contact us
for more details.
Rob Fletcher
[email protected]
Guernsey’s New Risk Based Solvency Requirements
On 5 November the Guernsey
Financial Services Commission
confirmed to industry that the
new Risk Based Solvency
Requirements for Guernsey
insurers would apply to
financial years ending on or
after 28 February 2015. Please
refer to the last two Aon
Guernsey newsletters, which
are available on our website, for
more technical details.
The new solvency model had
already been tested on over a
quarter of Aon’s clients with
little adverse effect so,
following some minor changes
being processed by the
Regulator, we do not expect
many clients to require
anything more than to adopt
the new test which will be
linked to the management
accounts.
The biggest change, which
remains uncertain at this time,
is the VAR (Value at Risk) to be
applied to Commercial General
Insurers. The States of Guernsey
has been asked to decide if this
should be set at 99.5% or lower,
even if 99.5% is chosen the
requirement would only be an
issue for one captive tested
during the consultation stage.
Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management | 2015 Issue 1
Regardless of the outcome, in
most circumstances, the Board’s
OSCA (Own Solvency and
Capital Assessment) is expected
to remain the most robust test
of a captive’s solvency.
2
Aon partners with new rated Guernsey reinsurer
Aon is pleased to confirm its partnership
with new Guernsey based rated reinsurer
Kelvin Re Limited.
Kelvin Re is a privately owned start-up
company using management services
provided by Aon Insurance Managers
(Guernsey) Limited. Providing short-tail
property and specialty lines reinsurance,
the company plans to build a $100m book
of business in its first year of which around
two thirds will be non-proportional
catastrophe risks.
“Kelvin Re represents an exciting
development for Guernsey’s insurance
industry as the first rated commercial
reinsurer headquartered here.
Paul Sykes, Aon Guernsey’s Managing
Director and Chairman of Guernsey
International Insurance Association, said of
the new vehicle:
develop and launch the company,
highlighting a reputation for innovation by
supporting the development of Kelvin Re
through local and international expertise,
and close cooperation with the Guernsey
Financial Services Commission.”
“Kelvin Re represents an exciting
development for Guernsey’s insurance
industry as the first rated commercial
reinsurer headquartered here. The Aon
Guernsey management team has been
working closely with the Kelvin Re Board to
“Kelvin Re is the realisation of aspirations to
develop a reinsurance market that
commenced in 2005 when Aon pioneered
insurance linked securities and collateralised
reinsurance vehicles using PCCs and ICCs.
The launch of Kelvin Re is evidence of
Director General elected
to the Executive
Committee of IAIS
The International Association
of Insurance Supervisors (IAIS)
held its 21st Annual
Conference and General
meeting in Amsterdam last
week. During the conference
the IAIS also held its biennial
Executive Committee
elections which saw the
election of William Mason as
the Commission’s Director
General.
Established in 1994, the IAIS
represents insurance
regulators and supervisors
from more than 200
jurisdictions in nearly 140
countries, constituting 97%
of the world’s insurance
premiums.
William Mason
Mr Mason said “I look forward
to serving on the Executive
Committee, ensuring that the
perspectives of smaller
countries are appropriately
considered and working to
ensure that IAIS delivers fair
and proportionate insurance
regulatory standards.”
Guernsey’s ambition to become a
reinsurance market alternative to Bermuda.”
A.M. Best has assigned a financial strength
rating of A- (Excellent) and an issuer rating
of A- to Kelvin Re Limited. The outlook
assigned to both of these ratings is stable
and reflects Kelvin Re’s strong capitalisation,
diversified projected business profile with
the natural catastrophe reinsurance market,
experienced management and welldesigned risk management function.
New Guernsey Finance
Chief Executive
Dominic Wheatley has been
announced as the new Chief
Executive of Guernsey Finance,
following Fiona Le Poidevin’s
resignation in July. Mr Wheatley
will be appointed as Chief
Executive with effect from 1
December. He has more than 25
years’ experience in the
international financial services
market in the UK and Guernsey.
Mr Wheatley said he was looking
forward to joining Guernsey
Finance:
“This is a very important phase in
the development of the Island’s
economy and the promotion of
our finance industry is a key part
of that. I am really looking
forward to joining the Guernsey
Finance team and working with
them to ensure the continuing
success of Guernsey as a leading
international finance centre.”
Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management | 2015 Issue 1
Dominic Wheatley
Guernsey Finance is a joint
collaboration between the
Commerce and Employment
Department on behalf of the
States of Guernsey and Guernsey
International Business Association
(GIBA) on behalf of the Island’s
finance industries. Its remit is to
market the Island as an
independent international finance
centre on the world stage.
3
An interview with Sir Bobby Charlton
Paul Sykes, Aon Guernsey’s Managing Director and Chairman of The Guernsey International
Insurance Association, talks to England World Cup legend Sir Bobby Charlton about his mine clearing
charity, what it was like to play for Alf Ramsey, and his best memory from the beautiful game.
In 2011, Sir Bobby Charlton, one of
Manchester United’s “Legends”, founded a
charity called “Find A Better Way” after
visiting a minefield in Cambodia and
deciding that something needed to be
done to support the humanitarian damage
which landmines cause in war-torn areas.
Find A Better Way supports modern
technological advances that create more
efficient ways of negating the effects of
mines and improve safety and security for
indigenous populations.
The Guernsey International Insurance
Association raised some funds for Find A
Better Way and it was my honour as GIIA’s
Chairman to go to Old Trafford to present
the cheque to Sir Bobby and interview him.
Sir Bobby holds the goal scoring records for
both Manchester United and England. He
won the World Cup with England in 1966
and in 1968 captained the Manchester
United team to European Cup triumph,
becoming the first English side to win the
competition. Sir Bobby is a key figure in
English football and a household name
across the nation. Accordingly he is in great
demand and my expectations had been
managed by a team of people as to how
much time I would have with Sir Bobby and
my questions were limited to a handful, and
the length of dictaphone tape I had to
record the interview.
Unexpectedly, Sir Bobby dispensed with the
formalities and carried on our conversation
long after the tape had finished. He shared
stories and football folklore including his
affection for Sir Matt Busby who he referred
to as ‘the old man’ in an almost fatherly
context. He described Sir Alf Ramsay by
contrast as a man “as hard as nails with no
sense of humour” but then told a host of
amusing stories about the times he played
under England’s only World Cup winning
manager. He shared his respect for Sir Alex
Ferguson, “The way he could manage
people was something special. He did great
things for the club and deserves his rest
now.” As for his own records he would
rather see them broken by Wayne Rooney,
Sir Bobby Charlton and Paul Sykes
“I hope he scores 300”. He has nothing
negative to say about the footballers of
today even though he had to get by on £18
a week rising to £25. “It’s not money. They
just wanted success, to play in the first
team, to play for England and have success.”
This great man transcended football and
such is his generosity of spirit and humility
that it is easy to see why. Sir Bobby was
interested in Aon and the people that work
for Aon. He spoke with a genuine interest in
people and such personal warmth that it’s
easy to see why a nation took him to their
hearts. For all of his records and his
achievements at the highest level of
football, Sir Bobby told me it is the charity
that means most, “I feel worthwhile now; I
feel I’ve done something worthwhile.”
Q. What inspired you to set up
Find A Better Way?
A. I was listening to something on the
radio one day about mine clearance
problems in so many parts of the world
and I was quite taken with it. I felt,
surely kids can’t have their legs blown
off and you leave it at that. I was asked
if I would go to Sarajevo and I caught
my first glimpse of what mine clearance
Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management | 2015 Issue 1
was. There was a soldier, “Scotty”, I
met out there in Sarajevo and he got
football pitches for the children to play
on. After playing Scotty would sit them
down and tell them what they should
do if they came across a mine and I was
listening to this and I thought I have to
try and do something about it. I would
have to try and use my influence and
started making some enquiries with
businesses, friends and colleagues and I
told them what I wanted to do and
they just supported me.
I had a terrific response and we want to
make sure that all the mines in that
particular part of the world are gone. I
was fortunate that I was a director of
the football club here at United. I
thought if I can use that and have a
little influence with the right people to
bring about mine clearance then that
was exactly what I came into this
charity for. The picture stayed with me
from my first visit (to Sarajevo). It was
horrific when we were there because
so many people were coming along
and showing us what had happened to
them, it was dreadful.
Continued on next page
4
Q. What do you see as the biggest
challenge for Find a Better Way
A. The hardest thing is the time it takes to
make things move because of legal
circumstances. The charity isn’t
anything other than humanitarian but
we sometimes use the military for their
advice and there was a lot of
bureaucracy to overcome.
To clear the 110 million active
landmines in place using current
technologies would cost an estimated
$30 billion and take over 1000 years.
The charity aims to develop technology
to accelerate the detection and safe
removal of landmines globally.
We have been across to the United
States, Japan and many other places to
raise funds but I won’t consider it a
success until there are no more
problems with mine fields. Aon is one
of the most marvellous sponsors we
have and they have given us their full
backing.
Q. How will the money we’ve
donated benefit the Find a
Better Way cause?
A. Find a Better Way is committed to
raising awareness of the risk of
landmines and improving access to
health services for victims.
We are offering money to universities
to provide new ideas and research
better ways to deal with the land mine
problem. This is the technology that is
required so we can do better than we
have been doing.
Q. You played for Manchester United
and England—what’s the best
memory from your football career?
A. To win the best prize—the World Cup.
And also the European Cup where you
win with the people you work with
every week and every day. I’d put them
together really.
It’s also been great to see all this (Old
Trafford, the theatre of dreams) come
about. Matt Busby was at the forefront
of everything we have at Manchester
United and the philosophy of it
probably started with Matt Busby
going on a trip to see what others did.
He went to San Francisco and he
watched a match there and when he
came back he spoke to me and said;
“Do you know Bobby, they sit behind
glass and they eat their meals and they
don’t even have to go out in the cold.
We have to have it—we have to have
that if we are going to be the best—we
have to be the best in everything.”
Q. What advice would you pass on
to young people?
A. If I am speaking to very young people,
I say that you have to listen. When
someone gives you advice about
football, concentrate on what they are
saying. Sir Alf Ramsey told us in the
England squad, “Listen to me and we’ll
win the World Cup” and we did.
Aon and Manchester United
Aon and Manchester United have been
working together since 2009 when they
entered into a four year partnership
commencing in the 2010 / 2011 season. Aon
were the principal sponsors of Manchester
United and the Aon logo was emblazoned
on the team’s shirts.
The second phase of the sponsorship began
in 2013 when it was announced that we
would extend our partnership with the club
for an additional eight years. Aon remains a
principal sponsor and is now the first
partner of the club’s renowned training
complex at Carrington, which is aptly
named the Aon Training Complex. The
complex is a state of the art facility designed
for Manchester United players to keep in
top physical shape.
To learn more please visit aon.com/manutd
Aon’s new Executive Director listed as one to watch
Aon Guernsey is pleased to announce Darren Bailey’s return to Aon as
an Executive Director
Prior to his three and a half
years at AIG Darren spent more
than eight years working for
Aon in both the London and
Dublin (re)insurance markets.
In his new role Darren will have
responsibility for the White
Rock companies in Guernsey,
the world’s leading PCC and
ICC group of companies, as
well as ILS business. Most
recently Darren was listed as
‘one to watch’ in Captive
Review’s Power 50.
Aon Guernsey’s Managing
Director Paul Sykes, who also
featured in the Power 50 at
number 24, said the following
of Darren’s appointment:
“I’m delighted that Darren is
joining Aon in Guernsey. He’s
extremely talented with
experience in underwriting,
consulting, actuarial and
project management. I’ve
watched his career evolve over
the years with the ambition of
hiring him. His recruitment
reinforces Aon Guernsey as it
becomes the leading
management house for ILS
clients and commercial
reinsurance start-ups in
addition to our established
captive client base.”
Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management | 2015 Issue 1
Darren Bailey
5
Aon supports the RSPB
As part of Aon’s global Empower Results day,
Aon Guernsey was proud to support the
Guernsey branch of the Royal Society for the
Protection of Birds (RSPB) at the local West
Show event in August 2014. The RSPB applied
for funding from Aon to pay for their pitch at
the West Show, which is a key fundraising
event for the charity. Aon Guernsey’s
Corporate Social Responsibility (CSR)
committee decided to support the event
and, in addition, offered volunteers to help
run the tent. Six Aon volunteers assisted with
the tea and coffee stand which left the RSPB
volunteers free to talk to people of all ages
about the work of the society.
RSPB Guernsey representative Donna said of
Aon’s involvement:
Pictured above (left to right):
Louise Coxon
“We really can’t thank you guys enough for
the support you have given to us at the show
this year, it was absolutely brilliant. Everyone
that came was fantastic and just got on with
running the tea and cakes stand so
effectively.”
Pictured left (left to right):
Nick Monda and Lisa Cleal
If you would like Aon to consider your charity
for a financial donation or staff time please visit
aon.com/guernsey/charity and complete the
application form.
Harriet receives Excellence
in Education award
Aon Guernsey is delighted to announce
that Harriet Walden has received the
prestigious Excellence in Education
award; presented to the outstanding
student amongst those who achieved
ACII status. Harriet’s average mark was
around 10% higher than her nearest
competitor and thus a deserving winner
of the award.
Earlier this year Harriet was promoted to
Assistant Insurance Manager after she
successfully gained her ACII qualification.
On her qualification Harriet said, “After
almost three years of studying I was
delighted to achieve ACII qualification in
April this year. I was relieved to know the
hours of hard work, which can
compromise your social life and spare
time, have all been worth it! I am
especially grateful to Aon for their
continued support whilst I was studying,
and I am very proud to be able to say I
have completed my ACII.”
Harriet joined Aon as a graduate trainee
in 2008 through Aon’s graduate scheme.
As well as the Guernsey office she also
worked in the London and Dublin offices.
Harriet returned to Aon in June 2012 after
a period spent travelling and successfully
passed her ACII qualification in April 2014.
Harriet Walden
Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management | 2015 Issue 1
6
Aon Guernsey hosts Captive and Insurance Master Class
Aon Guernsey hosted their
fourth Captive and Insurance
Master Class in May 2014. For
the first time the event was held
at the 325 year old Lloyd’s of
London.
“Guernsey has a strong
reputation in the captive
industry, and this is borne out by
the fact that global capital is
increasingly finding its way to
the island.”
Delegates heard from a variety of
speakers including Executive
Chairman of Aon Benfield
International and CEO of Aon UK
Ltd Dominic Christian, who had
praise for Guernsey stating that;
Tesco’s Head of Insurable Risk
Helen Pope and Guernsey
Finance’s Chief Executive Fiona
Le Poidevin were also part of the
speaker panel.
“Aon recognises the need to
promote the developments and
innovation of global financial
centres in order that
professionals in the area of risk
management can serve their
clients more effectively and are
aware of the wide-ranging
capabilities that these centres
have to offer.
Next year’s Master Class is set
to take place on 21 May 2015.
If you are interested in attending
the event please email
[email protected].
Fiona Le Poidevin
“Guernsey has a strong
reputation in the captive
industry, and this is borne
out by the fact that global
capital is increasingly finding
its way to the island.”
Lloyd’s of London
Introduction to captives seminar
Aon Guernsey held a one day seminar on 26 June 2014
providing an introduction to captive insurance.
Delegates heard presentations on the following:
— What is a captive?
— PCCs and ICCs
— Underwriting issues
— Compliance
— Accounting issues
— NED responsibilites
— Investment matters
Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management | 2015 Issue 1
The seminar was free to attend and
included a dinner for delegates the
evening before.
We will be running this seminar
again in 2015 and can also provide
in-house training for clients and
colleagues.
For more information please contact:
[email protected]
7
Key Contacts
Paul Sykes
Managing Director
+44 (0) 1481.707901
[email protected]
Diana Knott
Executive Director
+44 (0) 1481.707923
[email protected]
Graham Powell
Executive Director
+44 (0) 1481.707926
[email protected]
Stuart Brown
Executive Director
+44 (0) 1481.707932
[email protected]
Darren Bailey
Executive Director
+44 (0) 1481. 707999
[email protected]
John Rowson
Executive Director
+44 (0) 1481.707954
[email protected]
About Aon
Aon plc (NYSE:AON) is the leading global provider of risk management, insurance and reinsurance brokerage,
and human resources solutions and outsourcing services. Through its more than 66,000 colleagues worldwide,
Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and
through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world’s best
broker, best insurance intermediary, best reinsurance intermediary, best captives manager, and best employee benefits
consulting firm by multiple industry sources. Visit aon.com for more information on Aon and
aon.com/manchesterunited to learn about Aon’s global partnership with Manchester United.
© Aon plc 2015. All rights reserved.
The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual
or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information
is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional
advice after a thorough examination of the particular situation.
Aon Insurance Managers (Guernsey) Limited is licensed and regulated by the Guernsey Financial Services Commission
Registered Office: Maison Trinity, Trinity Square, St. Peter Port, Guernsey, GY1 4AT
Registration Number: 5821
FP7050
Risk. Reinsurance. Human Resources.