GIBRALTFebA/March/R April 2016 INTERNATIONAL FINANCE n INVESTMENT n BUSINESS

KPMG Round Table: Solvency II

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www.gibraltarinternational.com Gibraltar International 3 Feb/March/April 2016 Volume 22/ Number 1

Profile p18 Contents Playing games helps build hotel tourism drive News p6 Property p22 Still ‘confident’ of strong economic growth, Brexit or not A robust and resilient property market! Banking p8 Business p24 Mind the gaps Gibrael - A new Bi-national Chamber of Commerce for Gibraltar Disruptive Technologies p10 Being Disruptive News p27 “Conservative estimate” sees £2.4bn GDP by 2020 Insurance p12 More insurers expected as higher capital levels kick in Regulation p28 What will a new insolvency regime mean for Gibraltar? Banking p16 Safer Banking Business round up p29

Editorial Comment Hazards ahead if Brexit prevails

The impact is unclear on any decision by the UK – and therefore, through Less certain, is the extent to which Gibraltar will be able to maintain its association, Gibraltar – to leave the EU after so many years, but it’s pretty planned meteoric economic progress; while most governments are certain that financial services will survive. predicting low single figure growth this decade, Chief Minister Gibraltar’s report on the likely effect and possible options for the sees Gross Domestic Product (GDP) 33% higher by 2020 – by the end of his jurisdiction will not be revealed until later this year. A referendum on second term of office! Much of the impetus is construction-led – a confidence Brexit could be as early as June and definitely before end 2017. In or out to build new homes and offices – but as yet unproven, is the extent of of the EU, Gibraltar expects to keep growing, even if using a different significant inward investment bringing new businesses and employment. marketing tack. Marketing the jurisdiction beyond the UK has had limited success in However, financial services providers will be well placed if any new financial services, despite beefed-up resources and marketing funds, although a trade agreements are required for continued access, because the positive sign is the continued rise in the insurance sector with several new jurisdiction has wisely transcribed into law, and implemented, all EU license applications pending. Nevertheless, the current year’s budget anticipates Directives – and they continue to do so. The EU concern to protect personal and company tax revenue unchanged at £232.5m. consumers against any potential financial failure is shared by Gibraltar; our The government sees its border with as a major Brexit hazard, but report in this issue illustrates how the insurance sector has worked to meet air travel also may be vulnerable. Until a decade ago in the event of bad new Solvency II capital and risk assessment requirements. weather in Gibraltar, flights originating or destined for The Rock could not Jersey, Guernsey and the Isle of Man - all outside of the EU – are enter Spanish air space, nor land at Malaga, without first diverting to Tangier, working to negotiate access to the single market and to protect their to being reclassified as services from Morocco! economies by at least meeting the Directives, and helps show that it can be Today Gibraltar is protected by EU rules from Spain’s renewed efforts to done. exclude the jurisdiction from international flight agreements and Spain’s In eGaming, despite grand EU principles of open access across current general election turmoil with the possibility of a first coalition borders, there continue to be artificial barriers, or additional licencing government, is unlikely to see good relations with Gibraltar a high priority. requirements, that have dogged Gibraltar’s market-leading gaming Looking to 2025 Picardo says: “Make no mistake about the fact that we companies and prevented them from achieving their full potential, so will have to continue repositioning ourselves and further diversifying our Brexit is unlikely to have much impact. economy. Ray Spencer

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4 Gibraltar International www.gibraltarinternational.com Within the Single Market News Still ‘confident’ of strong economic growth, Brexit or not An analysis of Gibraltar’s economic paying into the EU at the same level. one of the largest, but government approval Gibraltar’s analysis to “understand the to progress has been withheld, because four prospects should Britain leave the potential economic impact of leaving the EU months after expected developer Camoren EU (Brexit) probably will be available and/or leaving the Single Market, as well as Holdings has still to pay a £87m premium. to businesses “before the summer”, the potential benefits of acceding to the “There are detailed areas which are but the detail may well not be made Schengen Area and/or the Common Customs sticking points,” Picardo explained, adding: Union” is a Manifesto commitment and “We need to ensure that agreement is public before voting in a planned UK when complete will first be shown to the something that we do not simply concede, plebiscite, which some predict could Chamber of Commerce and Federation of because if that is not in the interests of the tax be as early as June Small Business for member reaction. payers, we will continue to argue for the “I continue to think that Gibraltar rights”. hatever the outcome of the EU would be able to do very well even if the UK However, the largest single State referendum, Gibraltar’s Chief were out of the EU single market, but it investment since building the new Gibraltar WMinister, Fabian Picardo, who would be a tougher challenge,” he noted. International airport terminal under the won a second term of office for his GSLP- Even a vote for Brexit, “will not be the date previous administration is a £70-80m power Liberal Alliance in November with an the UK would actually leave the EU: that station “that will be operational by the first increased majority, remains “optimistic”, would be a very long and drawn out process, half of 2018, that’s for sure” and potentially saying “we faced even harder challenges in so we would have to be ready for the end of requires further public borrowing at least the past and we have always survived [a that period – not before then”, he pointed during construction. With dual fired reference to the Spanish 16 year blockade of out. Liquefied Natural Gas (LNG) and oil Gibraltar until 1985]. The public sector in Gibraltar “has generation, fuel storage plans have caused In a January interview with borne the brunt of a lot of the Gibraltar local controversy, but in addition the Gibraltar International, on the government’s economic activity in the period when there government plans LNG bunkering as a economic plan to grow Gross Domestic has been an economic crisis in and hedge to its present extensive oil ship product (GDP) by at least a third to reach the rest of the world”. It was “picking up the refueling activity. £2.4bn by March 2020, Picardo admitted: slack”, but now “I am looking to the private “Gibraltar would take a knock in my view if sector to be the driver of economic growth”, LNG adds to GDP we didn’t have access to the [EU] single he declared. “If the fuel of choice for the marine industry market.” (See also ‘£2.4bn GDP by 2020’, is going to change from diesel to LNG then

page 27) Huge project value in order to maintain the part that bunkering He said: “It would mean a major He pointed to the World Trade Centre being contributes today to our GDP we need to be economic shift.” However, having the UK opened in late summer, residential projects at in that industry – it’s that simple”, he

outside of the EU didn’t necessarily mean Ocean Village and MidTown’s office and declared. leaving the single market. If The Rock residential development, and “new projects And with Gibraltar marketing itself continued to have access to the single that have not yet been announced to the abroad as financial services’ “gateway to market, “I think Gibraltar has a very bright public” have “huge development value”. ‘ Europe”, Picardo agrees jurisdiction future, whether the UK is in or out of the Construction had been a major feature promotion might need to change. In the EU”, he asserted. of GDP growth and “brings in a lot of people meantime, the government is considering marketing Gibraltar’s tourist and financial services products in India, principally Delhi, we have to be ready for the end of any EU Mumbai and Bangalore and pitching for withdrawal - not before investment from Morocco. Greater use of Gibraltar House in London to promote the territory “It is very likely that the terms of the who pay in PAYE, a lot of Social Insurance commercially is envisaged. Picardo seeks to U‘K leaving the EU could include the UK into our economy. I think that is a hugely increase its effectiveness even further, and to continuing to have access to the single important sector that we need to ensure is change the 15 years old Gibraltar Day event market – EEA, EFTA, or whatever the model paced in a way that sees growth spreading to portray “a different image of Gibraltar in may be”, he insisted. Not knowing at this over the 4-5 year period”, he noted. London, not just the image of the military stage what that process would entail was a garrison and not just the image of the problem, he conceded, and whether UK Sticking points Gibraltar of yesterday, but also the Gibraltar would be allowed continued access to the The £1.1bn planned BlueWater reclamation of the future”. single market or be prepared to continue mixed-use project on The Rock’s east side is Ray Spencer

6 Gibraltar International www.gibraltarinternational.com ,QRUGHUWRSURWHFWWKH%DQNDQGRXU&OLHQWVZHDUH,QRUGHU WR SURWHFW WKH %DQN DQG RXU &OLHQWV ZH DUH QRWHQJDJHGLQULVN\EDQNLQJDFWLYLWLHV&RQVHTXHQWO\QRWHQJDJHG LQ ULVN\ EDQNLQJ DFWLYLWLHV &RQVHTXHQWO\  ZHGRQRWRIIHUFUHGLWIDFLOLWLHVRU,QYHVWPHQW%DQNLQJZHGR QRW RIIHU FUHGLW IDFLOLWLHV RU ,QYHVWPHQW %DQNLQJ  services. 2XU2XU FDSLWDOFDSLWDO E EDVHDVH L LVV V VRXQGRXQG D DQGQG Z ZHH GRGR QRWQRW GHSHQGGHSHQG RQH[WHUQDOÀQDQFLQJ8QOLNHRWKHUEDQNVZHDUHQRWRQH[WHUQDO ÀQDQFLQJ 8QOLNH RWKHU EDQNV ZH DUH QRW LQYROYHGLQSURSULHWDU\WUDGLQJLQYROYHGLQ SURSULHWDU\ WUDGLQJ ,I\RXDUHORRNLQJIRUDWUXO\SURIHVVLRQDOEDQNWKDWZLOO,I\RX DUH ORRNLQJ IRU D WUXO\ SURIHVVLRQDO EDQN WKDW ZLOO Turicum is a Gibraltar Private Bank with Swiss roots, VDIHJXDUGVDIHJXDUG \RXU\RXU DVVHWVDVVHWV  WKHQWKHQ 7XULFXP7XULFXP  VKRXOGVKRXOG  EHEH \RXU\RXU EHORQJLQJWRDPDMRUÀQDQFLDOJURXSZLWKRIÀFHVLQEHORQJLQJWR D PDMRU ÀQDQFLDO JURXS ZLWK RIÀFHV LQ ÀUVWFKRLFHÀUVWFKRLFH Gibraltar and Zurich. 2XUFRUHFRPSHWHQFHLV3ULYDWH%DQNLQJSURYLGLQJ2XUFRUH FRPSHWHQFH LV 3ULYDWH %DQNLQJ SURYLGLQJ  Contact: \RX\RX ZLWKZLWK LQGHSHQGHQWLQGHSHQGHQW  LQYHVWPHQWLQYHVWPHQW  DGYLFHDGYLFH  Local desk VXFFHVVIXOSRUWIROLRPDQDJHPHQWDQGDSHUVRQDOVXFFHVVIXOSRUWIROLR PDQDJHPHQW DQG D SHUVRQDO .HYLQ&DVFLDUR NHYLQFDVFLDUR#WXULFXPFRP .HYLQ&DVFLDUR NHYLQFDVFLDUR#WXULFXPFRP long-term orientedoriented customercustomer service. service. 6LOYLD)RUWHV*ULPDOGL VLOYLDIRUWHV#WXULFXPFRP 6LOYLD)RUWHV *ULPDOGL  VLOYLDIRUWHV#WXULFXPFRP :HDOVRSURYLGHGHSRVLWDU\VHUYLFHVIRULQYHVWPHQW:HDOVR SURYLGH GHSRVLWDU\ VHUYLFHV IRU LQYHVWPHQW  IXQGVIXQGVRecently we have been granted an extension International desk of our depositary licence under the Alternative 0DULR)DEEUL PDULRIDEEUL#WXULFXPFRP 0DULR)DEEUL PDULRIDEEUL#WXULFXPFRP InvestmentInvestment Fund Managers Directive (AIFMD). This 0LFKDHO&XE\ PLFKDHOFXE\#WXULFXPFRP 0LFKDHO&XE\ PLFKDHOFXE\#WXULFXPFRP OLFHQFHOLFHQFH HQDEOHVHQDEOHV X XVV W WRR FDWHUFDWHU IRUIRU FHUWDLQFHUWDLQ ¶LQVFRSH·¶LQVFRSH· <

finance share buybacks). We view this as an early warning of a worsening in credit quality, Mind the gaps which in due course will result in a rise in defaults. Prudence is warranted in the US. By Xavier Denis, number of eurozone economies. We expect Conversely, credit trends are more supportive the gap to widen in 2016. As the US reaches in the eurozone where balance sheets do not Global Strategist, full employment, wage pressures will start to exhibit the same strains. Societe Generale build, feeding a pick-up in core inflation in the Over the past 18 months, two key factors Private Banking US next year. In the eurozone on the other have driven the outlook for corporate earnings hand, unemployment has declined to 10.8% in the US and the eurozone: oil prices and inancial markets often but remains well above the pre-crisis low of foreign exchange rates. Interestingly, the seem fickle. Some of 7.2%. In consequence, wage pressures are effects have been opposite on each shore of F the strongest returns in largely absent and inflation is well below the the Atlantic. US corporate profits have been equities, for example, are recorded European Central Bank’s 2% target. hard hit by the decline in the energy sector and when the outlook appears bleakest. Part of the The US Federal Reserve (Fed) recently by the impact of a stronger dollar on explanation for this can be found in the study hiked its interest rates for the first time in multinationals and US exporters. On the other of behavioural finance. The latter stages of a almost ten years – employment continues to hand, a weaker euro and cuts in energy bills bear market often see investors herding improve and wage pressures to build, have boosted eurozone profitability. These together, all seeking to liquidate positions at reducing the need for such extreme policy set - effects will however begin to reverse from Q2 the same time. And such consensus means tings. In Europe, the ECB faces a sluggish 2016 onwards. that when the selling pressure is eventually economy, low core inflation and a banking exhausted, it becomes easier for the market to sector which is trimming its loan book to Alternative investments rally. In addition, such moves do not require a bolster capital buffers. It is no surprise that Potential upside in equity markets will be con - shift in fundamentals – the easing of negative Chairman Draghi was so vociferous about his strained by the current high valuations and the news-flow can suffice. intention to ease policy further. outlook for earnings growth. In this low In the same vein, markets often fail to This divergence has been widely flagged growth environment, security selection move in line with improvements in the macro to markets, proof that the bout of nerves becomes key – in particular, companies picture. As a bull market develops, valuations displayed by emerging market bond investors demonstrating an ability to grow their sales tend to rise and in its latter stages there during 2013’s “taper tantrum” has taught pol - and cash flows despite new competitive pres - remains little room for multiples to increase icymakers a lesson. Back then, the Fed sures should do well. Further, Japanese and further. Such gaps between market spooked markets by intimating an early eurozone equities will remain supported by performance and economic fundamentals can “tapering” (reduction) of its Quantitative abundant liquidity. be tricky to navigate. Easing (QE) programme, leading to worries We continue to see potential in non- We also see a number of gaps looming of a sharp liquidity squeeze. This time, directional investment strategies. In particular, in the economic background for 2016, in the investors have had ample forewarning of the alternative investments should benefit from outlook for inflation, in central bank policy opposite moves planned by the Fed and the higher dispersion of performance, in settings, in corporate leverage and the credit ECB. strategies such as Global Macro and cycle and in corporate earnings growth. The US economic cycle is well Long/Short Equity. In addition, the unique Regarding inflation, the picture has been advanced, with the recovery now in its sixth characteristics of convertible bonds make muddied by the impact of the slump in energy year. We note however a steady rise in them a valuable adjunct to portfolios in a low- prices, which has pushed the headline index corporate borrowing (to refinance maturing return world. In 2016, careful portfolio close to zero in the US and below that in a debt, fund mergers and acquisitions and construction and diversification across themes will prove key. In summary, the gaps listed above argue Convertible bonds, the best of both worlds for another out of sync year for economies and the financial markets. As the global economy exits the zone of turbulence which will be generated by the shifts in monetary policy, the outlook for 2016 does look more attractive. However, high valuations in both fixed-income and equity markets still translate into very slim margins of safety. Mind the gaps indeed. www.privatebanking.societegenerale.com /hambros

Source: (SGPB, Datastream. Data as of 7 January 2016)

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Many of us are used to paying for our goods and services online. Despite the Being disruptive numerous scare stories and the occasional loss of privacy (Ashley Madisson being the By Marcus Killick, Isolas Yes, on occasions companies and trusts most recent embarrassing example), the were used inappropriately and illegally. Banks overwhelming majority of payments occur ast month in London I caught my first are sometimes used, both on and offshore for smoothly, efficiently and with the expected Uber “cab”. It arrived quickly, delivered money laundering. Bad people do bad things level of confidentiality. It is sometimes Lme exactly where I wanted to go and I and it is in all our interest to stop them where forgotten that the older methods of payment stepped from the rear door without reaching we can. But the system itself is not flawed, were hardly risk free. Cheques could be for my wallet, having paid with Paypal. For nor is it evil. It is simply sometimes misused. stolen, wallets with cash lost and credit cards my return journey on the tube I skipped the To claim otherwise is like blaming drink cloned. queue for the ticket machine, put my driving on General Motors simply because Yet every innovation carries the fear of contactless debit card next to the scanner at they manufactured the car. the unknown. Bitcoin is poorly understood the ticket barrier and passed through in a So, how do we achieve this? Firstly let’s by most. The idea of mining for , of fraction of the time it had taken a few months stop being scared of innovation. That includes an anonymous creator, of failures like Mt earlier. Welcome to the new world of the industry itself, as well as Governments Gox, of wildly fluctuating values, all give disruptive technologies. and regulators. For example, I don’t legitimate cause for nervousness. Yet, whilst, Look around, they are everywhere. understand how my ipad works, but I am not the fear of virtual is understandable Airbnb can find you a bed for the night. scared of it. This is not my advocacy for they do represent a potentially massive new Instagram can end your political career. regulatory ignorance, rather our reaction area in financial services. The sooner their Twitter can prove how dull your life is to should not be Pavlovian to all that is new. risk is managed the sooner their potential can strangers as well as friends. Yet within this Secondly let us look towards where the next be unleashed. And where better to do it surge many mainstream international disruptive technology is likely to come from in the crucible of financial innovation, the financial services centres remain trapped in a and look to support it. international finance centres. rut. Products and services are tinkered with, Gibraltar has two obvious examples of Time is short to achieve this. For incremental improvements are made. Yet we how this can be achieved, one historic and one example, the UK Treasury has announced a were once in the vanguard of new initiatives. current. Historically it was one of the first series of initiatives dealing with digital We were the disruptive technology of our smaller finance centres to encourage the currency in a report which was published time. Just look at international business online gaming community. By focusing on in conjunction with the Chancellor of companies, asset protection trusts and funds the quality rather than the quantity of the Exchequer’s annual budget in 2015. for experienced and sophisticated investors, to licensees it quickly attracted some of the The report stated that; name but a few. largest players in the industry, attracted by a “The government considers that favourable tax environment and an increasing digital currencies represent an interesting So what happened? skilled workforce. Gibraltar was also able to development in payments technology…the Firstly we became a victim of our success. provide a regulatory environment robust potential advantages are clearest for purposes Why change and develop when what we had enough to give protection from reputational such as micro-payments and cross border was so profitable? Understandable, but risk whilst approachable enough to ensure transactions.” flawed, just ask MySpace (or Jeeves) about that bureaucratic over regulation was avoided. The UK is also considering the that one. Secondly, in the face of an The result, a new sector of the economy development of a “regulatory sandbox” for onslaught of mostly inaccurate providing large numbers of jobs and that has financial technology companies where and bias criticism we became proved remarkably resilient to outside entrepreneurs could test ideas and concept introspective and defensive. economic factors. One could point to the technologies in a lightly regulated We have sought to become insurance sector in Bermuda to see a similar environment with the informed consent of whiter than white by success story and the smaller international customers. Whilst the word “sandbox” makes avoiding risk rather than finance sector is dotted with such examples it sound more like a cat’s litter tray (isn’t understanding and where innovation has led to dominance. But “incubator” far less grating?), the fact this is managing it. these cases are less frequent than before. happening now means that, unless we move The result quickly, another opportunity for the smaller is that, to a So where now? centres to shine may be lost. certain extent we By our very nature we are dependent on I believe the initiative can best be gained have lost our edge. servicing customers beyond our shores. We by creating the best supportive and regulatory Yet as centres we are, are therefore generally reactive and environment. This is one that promotes by our very nature, capitalist and free market. responsive, not simply to events but also to growth but which provides protection from This makes us part of the system that has possibilities. One such possibility is now in unnecessary risk. Gibraltar has taken this proved to be the most adaptive and the world of cyber payments and virtual approach, creating a working group on virtual innovative in the history of mankind. Surely currencies (a report by Boston Retails found currency, with support from Government, the it is time to return to these roots and regain our that around 8% of US retailers intend to start regulator and the industry. Part of its aim is to position as vanguard. accepting Bitcoin as payment in 2016). Continued page 26

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capital under S2, but nowhere near as much as Gibraltar has had to make up ahead of S2, and More insurers expected as if the UK sector does not raise rates, I am not sure it will impact on premiums”, she said. higher capital levels kick in Brian Morrissey, a KPMG actuarial partner, was emphatic: “Ultimately policy - Gibraltar’s insurers today are far better requirements from January”. holders will have to pay, shareholders won’t. prepared to protect consumers against any Self-assessments and work by firms to With the raft of rules and regulations across meet capital requirements had demonstrated S2, including emerging conduct areas, there potential failure of their businesses after that the majority of firms had made significant also may be less choice and less innovation, meeting tighter European-wide industry progress towards compliance; the FSC as consolidation will continue apace.” capital and risk requirements from 2016. had made clear that access to so-called New public reporting of insurers’ Introduction of the Solvency II (S2) Directive transitional provisions would be available financial condition required by S2 “will be “only in exceptional cases” to lighten the totally irrelevant to policyholders,” Quinn may well present new business financial burden of the new requirements for held. “They will say ‘what’s this, it doesn’t opportunities, Ray Spencer finds a limited period. mean anything’ - there is so much in there and Gibraltar International understands the it’s so complicated, it will only help analysts,” t the second in a series of industry- FSC was closely monitoring only a handful of she added. focused round table discussions led cases – maybe half a dozen – both large and Another predicted pressure on insurers A by accountancy and auditing firm, smaller businesses. from S2 will be a higher audit fee, because of KPMG (Gibraltar) in association with The insurers, managers and administra - the greater complexity and specialisms Gibraltar International Magazine, key tors meeting at Gibraltar’s Finance Centre required, as companies strive to meet S2 insurance sector players were both concerned round table all strongly agreed that Solvency public reporting obligations for the first time. at the administrative and extra cost burdens of 1 (S1) - was “no longer fit for purpose”. Jon Tricker, KPMG (Gibraltar) implementing S2, but also excited at the As Perdoni remarked: “We are happy managing director and audit partner, down-stream potential for further developing that S2 provides a level playing field across emphasised the importance of auditors their businesses. the EU, and as a National Competent reviewing the opening S2 balance sheets Authority we will be supervising to the same “in order to expose any issues early on. The standard as every other member state. That nightmare scenario is an external audit helps this jurisdiction.” occurring for the first time in 2017 and capital issues then surfacing”, he warned. Highlighting consumer effect However, Quinn, who also is an But Danny Gibson, chief executive of suc - accountant, ventured: “There are so many cessful private employers’, public and prod - assumptions and judgments involved in S2 ucts liability insurer, CGICE, noted: balance sheet preparation, if any of the “Gibraltar writes insurance for 1-in-6 UK assumptions are changed only slightly, a cars, and - given more capital is now required totally different outcome would result - and and therefore the return to shareholders is less, both could probably be justified”. - the consequence is that rates will rise, “We could end up without a level although that is exactly what the UK playing field within the same jurisdiction, let government does not want to happen. alone within the rest of Europe,” she charged. “S2 is good for the consumer, because Highlighting another effect, Quinn insurance companies are a lot more solid, but maintained: “Gibraltar has a relatively small in my opinion it will probably have to be paid audit industry and doesn’t have the technical for with higher insurance premiums.” expertise that is needed for this, so other Liz Quinn, a director of Quest Insurance people need to be brought in as reporting The Solvency II Joe Perdoni, Head of Prudential and Management that looks after ten insurance deadlines get shorter over the next few years.” effect absorbs responsible for insurance companies and S2 at companies from small owner-managed The FSC will consult with the insurance insurance discussion the Gibraltar Financial Services Commission enterprises to FTSE-250 and NASDAQ listed industry on what constitutes “proportionate”, (FSC), revealed there had been “no decline in concerns, disagreed. high quality reporting, Perdoni assured, and the number of applications from insurance “The UK motor industry has not made whilst the UK’s Prudential Regulatory businesses in Gibraltar; if anything it’s gone a profit in the UK for the last 20 years and Authority (UKPRA) had gone further by the other way. We have seen more people no-one has put their rates up as a result. The requiring formal opinions on the soundness of interested in the jurisdiction than before.” motor industry can be very irrational in the insurers, “it depends on what the rest of How well insurers comply with S2 way it behaves and in the last ten years it’s all Europe has to say on this, because we want to requirements is being closely monitored by been about turnover.” ensure that our approach is consistent with the FSC, which felt confident – having taken She pointed out that Gibraltar’s insurers other jurisdictions”. “quite a firm stance with insurers over our compete with UK providers. “Anecdotally, expectation – that they would meet capital they may have had to put in a little more Continued page 14

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Continued from page 12 Education still needed of insurance, to give diversification and make Stephen Mumford, finance director capital go further’. Morrissey remarked: “It’s important to at Advantage Insurance, emphasised: Morrissey, referring to captive insurers, have somebody come in and walk through the “Irrespective of the principle activity of the declared: “People are saying ‘we have always core methodologies, for example. There is a company, all members [of the Board] need to made money, we have always underwritten lot of capital management activity using S2 be educated in S2; it’s going to be difficult to carefully and always looked after capital’, and numbers, which surprisingly have not been provide for it in the smaller/mid-sized it is the S2 capital overlay on top that has fully scrutinized or challenged. He added: “In companies that do not have the necessary caused a lot of concern amongst captives, the owner managed and entrepreneurial resources and access to support.” including those in Ireland and Malta.” He organisation, the challenge has been Gibraltar’s ability to create Protected went on: “There is a lot of talk about how subjecting it to detailed and robust second line Cell Companies (PCCs) enables insurers still proportionality applies to captives and I see or external scrutiny.” to flourish, because that structure enables that as a corporate business there is no way I Tricker went further. “As an auditor risks to be contained, so eliminating S2 issues, would set up a captive.” there is a simple reality where you have a apart from capital requirements. For Gibson, who founded CGICE in smaller insurer outsourcing key functions to Having worked with leading Gibraltar 2003, such are the demands of S2 that “I an insurance manager that prepares all of the insurance companies, Nigel Feetham, a senior would think twice before starting from scratch S2 documentation: and head office will have partner with Hassans law firm, said: “S2 again.” other things to be thinking about, so that doesn’t sit well in terms of smaller owner- Instead, he felt it would be wiser to use once they have a document meeting S2 managed businesses. I was involved in other capital available and would look to requirements, they are going to spend the drafting the original insurance legislation for become a Managing General Agent (MGA), minimum time possible in tailoring their doc - Gibraltar in 1996-7 and I have seen the entire going to firms with capital resources like Arch ument”, he felt. industry here grow from a couple of captive Re-owned, Watford Insurance Co (that set up companies, and from my experience some of in Gibraltar late last year), and working from the companies who were licensed in the early commissions without becoming liable for any years probably would not be licensed today; of the risks that S2 is designed to capture. it’s capital, governance and culture.” “The MGA business would be worth twice as He went on: “Some of the businesses we much as the insurer”, he remarked. saw in Gibraltar 10 years ago are very well- As a result of S2, Feetham predicted the embedded in the local industry, but as a local insurance industry in the medium to consequence if someone came along with the long term, being made up of only two tiers; same business today it may well be that they “very large players – very well-managed might not meet requirements as, say, if they businesses with very good infrastructure, were setting up the insurer from a small well-known insurance brands – and mid-sized broking business.” owner-managed businesses such as CGICE.” That would not be negative for the Capital return challenges jurisdiction, Feetham said, “because around Nigel Feetham Reviews by external auditors of S2 Allan Christian, a KPMG S2 expert, until 90% of corporate tax paid in the insurance (Hassans), Liz policies and frameworks were, unless recently employed by UKPRA, contended sector is probably from the larger players, and Quinn (Quest), challenged early in the process, likely to find that S2 of itself was not considered a barrier to they are leading in innovation. Alain Dufraisse (Aon) and Jon gaps and areas in need of improvement, entry for smaller innovative entities wishing The expectation is that the owner- Tricker (KPMG) which was the reality for companies in to set up in Gibraltar – the main concern managed, mid-sized players in 10 years time agree smaller Gibraltar by virtue of their size and available remaining was return on capital, rather will themselves become big players in their entities face resources. “I would expect external audit in than potentially onerous S2 governance market. Of course, the challenge for the future tougher the first year to have quite a lot of comments requirements. It was a point supported by is to ensure that we also keep the best prospect. on S2”, Tricker asserted. Quinn, who defended local well-run companies in Gibraltar”. For captives, knowledge of S2 when a companies, saying: “The challenge is return company’s main activity was in retail or on capital under S2.” Solvency 2 Round Table manufacturing, is not a natural thing. As However, Quinn noted: “With monoline Insurance Sector Participants Alain Dufraisse, a director of captive and insurers in particular –although already at Stephen Mumford & Dennis Burns insurance management firm, Aon (Gibraltar) nearly 300% of the previous S1 capital – Advantage pointed out: “With captives we had to go requirements - that will only just take them Alain Dufraisse – Aon through an education process with the over the line for S2, because their balance Phil Hodgson – Argus directors representing shareholders as they sheets are shrinking, the capital requirements Danny Gibson – CGICE were not always insurance specialists, but the are going up, or they have to raise Liz Quinn – Quest boards are now 100% engaged and do know subordinated debt or other finance just to get Joe Perdoni & Laurence Thompson what is going on with all aspects of the over the line”. She questioned whether motor – FSC captives activities. Under S2, they need to underwriters, for example, might say ‘I’m Nigel Feetham – Hassans evidence this consistently, including in the going to start doing property, marine, Andrew Matthews - R&Q annual board review” miscellaneous and a whole lot of other types

14 Gibraltar International www.gibraltarinternational.com

Banking

out with public money. Other improved measures in terms of deposit guarantees and Safer Banking provision funding are reassuring to the extent they provide the consumer with some safety. Although knock-on effects occurred, Due to limits of guarantee mechanisms and By Benjamin Moss, Chief Risk related events combined to create a time involved to create provisions at a Officer, Turicum Private Bank simultaneous rather than successive national and EU level, high net worth breakdown of the system. The observation of individuals still need to exercise caution in afe banking has gained this phenomenon flagged several areas that selecting their financial institution. a new meaning required reform notably in terms of Ssince the financial and transparency, regulatory intervention and Asset recovery banking crisis of 2008, both in interconnectedness within the industry. Educated decisions need to be made at this terms of how the customers Radical intervention was therefore necessary level more than ever as the crisis view the industry but also both on the content of the regulations and evidenced that size is not necessarily syn - how it has impacted the on the supervisory framework to ensure onymous with safety and banks can fail. It articulation of regulatory stability and adequate oversight of the also brought to light the fact that asset reform. financial industry. recovery can take a significant amount of In light of the hefty Structurally, regulatory models time, recent cases have seen clients not reform agenda put in place changed to ensure enhanced prudential access their assets held with failing at EU level, consequently oversight with greater powers awarded to the institutions for a number of years. Despite affecting Gibraltar, consumers are regulatory bodies found at EU level, this, the tools at the disposal of consumers legitimately entitled to question whether ensuring greater harmonisation across are still limited when evaluating the health of these changes directly serve them in Member States, but also greater transparency a given institution, therefore reliance on providing a safer platform for their money and oversight of cross border activity. regulatory authorities is still warranted. and financial assets. Indeed, there is no doubt Due to the inability to pinpoint Credit ratings used to be considered a

that via the regulatory reform agenda safety systemic risk as a single legislative topic, the useful tool in selecting both institution and and stability has been achieved to an mitigation of it has materialised in various investment, the crisis once again bringing to arguable extent across the industry, in an aim legislative provisions. Significant progress light serious shortcomings in this respect

to provide a more resilient and stable has been made in a relative short timeframe most notably in terms of securitised assets put at the disposal of the general public. Less reliance on behalf of regulators and more In light of the hefty reform agenda put in place ‘ transparent processes have helped to at EU level, consequently affecting Gibraltar, improve the quality of credit ratings; it would however be short-sighted to rely consumers are legitimately entitled to question solely on them. Financial data on banks are whether these changes directly serve them in generally available in one format or another providing a safer platform for their money depending on the jurisdiction; however, their ‘ complexity and comprehensiveness tend to and financial assets confuse more than clarify.

financial system. However, to what extent do by tackling issues that have concrete or Macro issues these changes affect the individual over the apparent systemic risk features, there is So far the ambitious post crisis reform greater good? however commonality to these measures in agenda has been a success in that it has relation to the constant pursuit of more achieved to put in place concrete measures in Domino effect metaphor transparency. By removing opacity of a relatively short period of time. The The main conceptual issue was that the crisis financial instruments and financial institu - measures however mainly focus on fundamentally changed the perspective on tions balance sheets, the access to informa - macro issues, consequently the individual systemic risk, not only confirming tion from a supervisory perspective is facili - consumer still needs to be aware and existence of its catastrophic consequences tated. conscious of its own responsibility in mak - but also its unpredictability. The contagious The reform agenda put in place at ing informed choices. Conversely, bankers nature of systemic risk is traditionally EU level does however lead with the should be ready to answer questions relating portrayed by the domino effect metaphor. overarching principle that systemic risk to their institution such as capital and This depicts the idea that connected financial requires macro-prudential supervision and liquidity ratios and ultimately its own asset institutions fail as a consequence of the links mechanisms. quality. between them, causing a knock-on effect of Measures on capital requirements, www.turicum.com successive failing institutions. However, this market infrastructure and funds all assist in metaphor does not seem to adequately reflect providing the EU with a more robust bank - Turicum how systemic risk materialised during the ing sector with increased safety measures to Private Ban k recent crisis. avoid bank failures or needing to be bailed

16 Gibraltar International www.gibraltarinternational.com

Profile

Caleta Hotel and other local hotels in the difficult-to-fill and unprofitable January Playing games helps build period. Franco Ostuni, the Italian manager for the past 15 years, was jointly hotel tourism drive instrumental in developing the chess festival Having twice been instrumental in after visiting the reputedly oldest such event in Hastings. Callaghan remarks: “We found opening up competition in airline it a very dull affair with nothing for partners services to Gibraltar, Brian Callaghan and others involved and no women players. one of the territory’s leading tourist We thought we could do better by offering industry figures believes more can be more for everyone involved; we also discriminate by having a female-only done by government and industry to tournament with separate prizes and the increase The Rock’s appeal to ability for women to also compete in the holidaymakers and other visitors, general all-comers event.” finds Ray Spencer The small Gibraltar International Chess Festival he started 13 years ago then More people know Gibraltar through chess attracted 60 players. Now, over a 10-day - Brian Callaghan. period ending in early February, the Festival lthough in his 76th year, UK But Shirley’s father wanted his attracts 450 participants staying at hotels Somerset-born Brian Callaghan is daughter back in Gibraltar. “It was a locally, and some in Spain. “The Tradewise A showing no signs of winding down momentous decision for me in 1964 to return Gibraltar Chess Festival has been an his efforts to extend interest in Gibraltar; here and I’m hugely privileged to have lived extremely successful venture, thanks to local instead he runs a successful business that has in this community for so many years”. private sponsors and the government,” already helped put Gibraltar on the The Caleta Palace Hotel (as it was then Callaghan enthuses. “This time, we have worldwide map and has plans to expand the known) was being built at on people travelling to Gibraltar, paying for jurisdiction’s hotel offering and introduce The Rock’s east side by his father-in-law, their own air fares and accommodation, from new event-led attractions. George Bassadone and Callaghan joined as 57 countries.” Callaghan was one of the last National assistant manager when Service entrants in the Somerset and just 24 years old – with Cornwall Light Infantry, and as a subaltern no experience! “I felt a had been posted to Gibraltar for a couple of little unsure, but the years. hotel business really is no different from The festival was voted in 2014 the ‘best He was taken by the outdoor life many others; it’s just a managerial task in in the world’ by the Association of Chess environment. “I spent most of my time on that you need to get things done and done Professionals – votes for 2015 will be cast in the Upper Rock teaching people how to well, and see to the detail.” March. The Financial Times has already climb and when it was raining we used to go Initially with 86 bedrooms, the hotel crowned Gibraltar’s Chess Festival “the down the caves, but I was pretty bad at both expanded in 1972 by a further 70+ rooms to most prestigious tournament in the world”. of those things. I was just trying to teach meet rising demand. Callaghan doesn’t think the chess people to have confidence in themselves,” he festival - that adds some £700,000 direct says. Fewer hotel beds income to Gibraltar - will get much larger, in It was a chance party invitation that But Callaghan, normally quiet, shy even, and part because of the territory’s comparatively led him to meet Shirley - “a staggeringly totally unassuming, is suddenly moved to small size. “I think it is best that we have beautiful woman, who like all good girls observe: “One of the failures of successive something that is prestigious – we are not in in those days gave me a long hard governments in Gibraltar since the frontier the numbers game”, he maintains. “There are apprenticeship of 18 months or so here and reopened [in 1985 after being closed by more people around the world who know of when I returned to the UK after the forces - Spain’s General Franco for nearly 16 years] Gibraltar because of chess than for any other trying to persuade her to be a feature in my has been in relation to tourism. Today, we reason”. That claim is being strengthened by life - she led me quite a dance” - before he have fewer hotel beds than we had 20 years this year’s event being featured on Chinese returned to Gibraltar to marry her 53 years ago!” national television and also on major Indian ago. He has not given an interview on his stations, a development that presents a He moved back to the UK with his new personal and business interests for more than challenging language and time zone wife and joined Unilever at Marple Bridge, 40 years, although in 2013 Callaghan opportunity for live TV coverage, he near Manchester as a meat buyer, having received the Order of the British Empire believes. prior to the Army gained experience six (OBE) from the Queen for services to As Callaghan explains: “When you years earlier as a butcher’s boy before tourism - and to chess. think of Monaco you think of the motorsport progressing into hotel meat supply and That game has turned out to be slaughterhouses. something of a savior for the present-day Continued page 20

18 Gibraltar International www.gibraltarinternational.com

Profile

Playing games helps build hotel tourism drive progressing a £7-8m, seven storey, 3-star twice-weekly services. Continued from page 18 hotel development also on Gibraltar’s east “It was the first commercial operation grand prix, Cannes for the film festival, side at Devils Tower Road, to create a to bring planes to Gibraltar that were not there’s Rio’s Carnival, the New Orleans 120-bedroom Holiday Inn Express. “Since controlled by GB Airways or its associate, Mardi Gras and, in my view, Gibraltar could the closure here of the Queen’s Hotel 18 BA [British Airways]. We broke what similarly become known as a of months ago, we identified that there is a gap effectively, was a controlling situation by the chess”. in the market for a budget offering,” he says. Gaggero family [owners of GB Airways Now the Caleta is adding Gibraltar’s “The other hotels are, in the main, until sold to easyJet in 2008], who first International Backgammon Tournament 4-star rated – the ratio between 4-star and undoubtedly did a particularly good job, but in late February with support from the 3-star is clearly wrong against any they were the only people flying here and it European Association of Backgammon and international survey - and Gibraltar clearly is was really difficult for others to get in.” the government. With some 200 entrants lacking in budget hotel accommodation,” That ground-breaking initiative already booked, he believes this new event Callaghan rationalises, so an agreement was required Ministerial support and has the potential to be similarly successful to signed with InterContinental Hotels Group “subsequently Exchange Travel, became big chess even though considerably fewer play to privately finance work to start on the operators – they bought more people than backgammon, which presents “a small, but Holiday Inn Express at end-February, with a anyone else to Gibraltar at the time.” 17 month build time. Calllaghan had shares in ET’s ground Almost all hotel occupancy is 3-4 days handling company and when in the early duration - very few for 7 days – “making it 1980’s the company shed that activity, “I and very difficult to present a positive hotel my team ran it and we developed the feasibility study that would allow repayment business. It helped the hotel considerably, of a large capital loan, given the occupancy because we were in charge on the ground and experience”, he points out. we were able to see that we got our fair share Substantial outline development plans of the tourist business coming into for Callaghan’s Caleta Hotel were submitted Gibraltar”, Callaghan recalls. “We were the in early 2014 and approved on appeal late lead hotel with Exchange, but they gave last year. This involves building 50-70 business to every hotel in Gibraltar, as luxury apartments, with prices at today’s indeed did BA with The Rock and others.” equivalent of £400,000, for high-demand But in the late 1980’s there was a single bedroom apartments, a revamp of the setback: “The ET business folded; we were existing 4-star hotel but with 70 fewer back to having only GibAir / BA flying to rooms, and construction on part of the site of Gibraltar, so we needed to find an alternative about 40 rooms as a separate 5-star hotel or - another way for people, who wanted to stay aparthotel. at this hotel, to get here.” Detailed plans for the overall Over several months in 1996 Callaghan A ‘pairs blitz’ at probably more affluent total market”, he development continue to be prepared, but the worked to convince Airlines to add the Tradewise notes, adding: “We are at the forefront of the project, expected to start there later in 2017, scheduled flights to The Rock, and along Chess Festival tourist industry in Gibraltar; I think we “cannot commence until hotel bed stock is with Joe Bossano, the then GSLP Chief develop, and have new ideas, that are put increased on completion of the Holiday Inn Minister, they forged an agreement for two into practice against a very difficult Express", Callaghan explains. flights a week service, starting in 1997. background of there really being no growth In the meantime, the hotel will continue [Weeks before that agreement was signed in the [hotel] industry.” usual operation, renovation of a final floor of Bossano lost the General Election and the rooms having just been completed, while in following GDP Chief Minister, Peter Competition hits trade the main building all the public areas – Caruana, made it one of his first acts.] This year the Caleta Hotel’s trade is restaurants, conference and entertaining anticipated 10-12% down to end-March, areas - shortly will have been upgraded. Incentives to fly but Callaghan maintains that this was With a total envisaged cost of £50m+ “The agreement not only provided anticipated, “because of the sudden for the hotel redevelopment, Callaghan is permissions to land, but because we had to competitor, Sunborn” – a 189-bed floating candid: “We certainly can’t fund it ourselves; persuade an airline to fly here, they also hotel at Ocean Village that opened with a we will need to get partners with the vision received a financial incentive in the form of government special aid early in 2014. that we have, to join with us.” ‘marketing assistance’ in quite a large “It hit us a bit. They came into the sum,” Callaghan relates, but emphasises: market as a 5-star hotel for which there is no New airline “I wouldn‘t describe it as a subsidy, but market locally in any large number, and of On the death of his father-in-law, the young certainly it was a huge step for Gibraltar, and course, they [Sunborn] are now marketing in Callaghan took a 50% stake in the I believe similar arrangements continue to our 4-star market,” Callaghan says ruefully. Gibraltar arm of a tourist business, the this day with various airlines.” This year, “In the future? (Pause); to be honest, I’m not UK-based Exchange Travel (ET) and in the Monarch will fly 17 weekly services from sure.” 1970’s, Callaghan persuaded ET to begin four UK airports. His strategy now is to diversify by commercial flights to Gibraltar, initially with Continued page 23

20 Gibraltar International www.gibraltarinternational.com 08:50 Property A robust and resilient property market!

By Douglas Villalta, Interest rates CEO, Century21 All eyes are on the interest rates. They have been so low for so long that just about everyone expects them to rise several times during 2016. We anticipate that any such increases will start off in small increments, so we will not experience a sudden impact on the housing market, but this possible increase could result in some buyers failing to qualify for a mortgage. Buena Vista Park Villas However, such is the resilience in the local property market and the constant modate super yachts in excess of 60 metres hile 2015 has been a very demand for buying a home in Gibraltar, that in length, Blue Water will also feature an positive and nourishing year for the anticipated high number of buyers can exclusive 5 star hotel incorporating high end W the real estate market in offset the potential loss of those who won’t serviced apartments. Gibraltar, we expect 2016 to be even be able to qualify for a mortgage as interest Furthermore, premium luxury build - better, despite the cocktail of global rates increase. ings situated right on the water's edge will uncertainty, with the main ingredients Attractive interest rates in 2015 made offer spectacular marina apartments, including China’s economic woes, predicted buying a very attractive option over renting, complimented with high end retail and

higher interest rates, historically low oil and Gibraltar saw a healthy number of commercial units and hundreds of car prices and Britain’s referendum on exiting investor clients tapping in on the buy-to-let parking spaces making Blue Water a very

the European Union and increasing tensions market. Gibraltar anticipates more of the special and prestigious address in Gibraltar. in the Middle East which predict a certain same trends in 2016 without too much volatility likely to rip through financial upheaval in any segment of the market. Buena Vista Park Villas markets in the first half of 2016. There is also the line of thought that‘ a - Phase III Buena Vista was developed for those discerning clients who wanted to acquire a Blue Water is ideally positioned between bespoke detached home in Gibraltar, Gibraltar's two most popular beaches on the east incorporating private gardens with side and will undoubtedly be the development swimming pools and unobstructed sea views. to invest in during 2016 Phase I sold out before completion and the impressive Stone Block in Phase II is ‘ Be that as it may, developers in rise in interest rates may result in the selling already in advanced negotiations with an Gibraltar wasted very little time switching season in 2016 kicking off at a much higher overseas investor client. their approach from sitting on the fence to pace than predicted, in view that buyers will Phase III on the lower level, consists of embarking into new luxury residential want to lock in as low an interest rate as very spacious bespoke detached and developments which sold out within days of possible. semi-detached villas and although a high the official launch, as a result of the number of properties have since been sold confidence factor and high demand in the New off-plan exclusive within this final phase, there is still the local property market. This will bring new developments to watch out for opportunity to acquire one of the remaining listings to market with the passage of time. in 2016 sea facing detached villas with private The median sales prices in Gibraltar are Blue Water is ideally positioned between swimming pool or alternatively, one of the definitely on the upswing and we expect this Gibraltar's two most popular beaches on the remaining semi-detached villas. to continue well into 2016 at a healthy pace. east side and will undoubtedly be the www.century21gibraltar.com Another important factor to take into development to invest in during 2016, as the consideration is that mortgages aren’t as end result will be an exclusive city within difficult to obtain for most buyers and there - itself and adding a new and dynamic fore more homes are coming to market, as extension to the local property scene. families are slowly but surely moving up the Boasting from the most unique and local property ladder, which is where interest specialized super yacht marina in Europe rates step in. directly on your door step which will accom -

22 Gibraltar International www.gibraltarinternational.com Profile

Playing games helps build hotel tourism drive There’s a need for infrastructure of simply chasing higher visitor numbers, Continued from page 20 investment – “imagine what could be done if “because Gibraltar is quite small and the Given the changes, Callaghan believes you could put £20m into the Upper Rock”, more people you flood Gibraltar with - who, his late father-in-law would be pleased at the he muses, and “politicians inevitably look at at the onset, seem to be good for the way the hotel and its interests have short term solutions to ease the problem and jurisdiction - in the longer term, we could end developed, but neither of his two children, there needs to be a longer term view as to up with a Venice syndrome where there are Tamara, who with a degree in hotel where we want to be in 8-10 years’ management is married and living with two time, because the lead-time for tourism children in Scotland, and Bruno, a leading infrastructure is 3 years. figure in Gibraltar’s insurance sector, are at present “not too keen to become involved”. Cable car However, as Callaghan reflects: “Well, Warming to his subject, Callaghan insists: they still may do that. I don’t know; these are “You need to provide an environment where things in the future - nothing is written in hotels will be built organically – when stone.” For now Callaghan, who also was a investors want to build hotels. You have to founding member of the Gibraltar Heritage create the environment for entrepreneurs to Trust, and has a small three-villa holiday come in and invest their own money and rental business in Marrakesh, is focusing on there’s a need for infrastructural investment expanding tourism initiatives. in general, so that when people visit Gibraltar “Tourism is not considered by they walk away with a feeling of ‘wow, what so many tourists that some of the The Caleta Hotel politicians as a pillar of the economy,” he a place that is, we must tell our friends about residents are having to leave”! at Catalan Bay charges. “I think this is wrong since the vast it’.” As more accommodation is developed, majority of people, who vote in Gibraltar and He would like to see a 30-year plan for there will be differing requirements for types who are not employed in the public sector, a cable car for visitors from Casemates and standards of hotels and restaurants, he work in tourism or related activities, so an Square to the Northern Defences – “the finest admits, yet Callaghan cautions: “What is important part of the population have historical fortification in Gibraltar”. clear is that we should be going for a product ambitions connected with tourism.” However, he doesn’t think it’s a matter of excellence”.

www.gibraltarinternational.com Gibraltar International 23 Business

facilitating business from both sides. Indeed, the objective of Gibrael is to Gibrael - A new promote, strengthen and encourage the bilateral trade relations between Gibraltar Bi-national Chamber and Israel. The Chamber’s activities focus on four main channels of assistance. First, of Commerce for Gibrael acts as the first port of call for Gibraltar businesses or individuals requiring Gibraltar information about doing business in Israel, and vice-versa for Israeli businesses By: Eran Shay, Managing Director, “The idea to launch “Gibrael” came enquiring about doing business in Gibraltar. Benefit Business Solutions and from the realisation that there are many Second, Gibrael acts as an “introducer”, con - potential synergies between Gibraltar and necting relevant business people from both President of “Gibrael”- the Gibraltar- Israel. Over the last few years, both the countries. Thirdly, Gibrael advertises and Israel Chamber of Commerce and local business - promotes relevant business opportunities, es are thirsty for innovative technologies and projects, seminars and exhibitions. Fourth, ecently a new Chamber of we thought Israel, who is renowned world - the Gibrael organises professional meetings, Commerce has been established on wide for being the “start-up nation” and a delegations, trade-missions and thematic R the Rock, between Gibraltar and place from where many leading technologies seminars in areas related to the Gibraltar - Israel, under the name “Gibrael”. Gibrael is have emerged, could best answer these Israel commercial relationship. the brainchild of Eran Shay and Ayelet needs”, says Eran, who serves as President of Gibrael liaises with the Government Mamo Shay, who moved to Gibraltar from Gibrael. For Israeli companies, Gibraltar can of Gibraltar, the Gibraltar Chamber of Israel over 8 years ago and run a local serve as an ideal testing ground for new Commerce, Israeli Ministry of Economy, business & strategic consultancy firm called technologies as well as the ultimate gateway Israeli Embassy in London and with related Benefit Business Solutions, providing into the bigger European markets. There are institutions in Israel such as with the Business Accelerator services to companies benefits for both countries, and Gibrael Israel Export Institute, the Manufacturers from around the world. would act as a bridge connecting people and Association, and the Federation of Israeli

My ideas are my capital. Perfectly implemented by professionals.

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24 Gibraltar International www.gibraltarinternational.com

Business

Chambers of Commerce. describing the unique characteristics and Amongst the first initiatives of Gibrael, specific advantages that each sector offers to was a HiTech seminar held on the Rock in new incoming businesses. The magazine also October, with visiting companies from Israel, highlights the quality of life in Gibraltar, who presented the audience at the John describing the various leisure and recreation Mackintosh Hall with some of the biggest facilities available, nightlife, marinas, technologies that have come out of Israel as shopping, beaches and tourist attractions. It well as an insight into how equity crowd also talks about the culture and festivities funding is used as a tool for investing in (National Day, Queen’s Birthday parade, start-up companies. The Israeli companies 3 Kings etc.), the harmony between religions were very much keen to learn how Gibraltar on the Rock along with an insight into the can be used as a platform from which to local Jewish community. This first of its kind expand onto the bigger European markets. publication is being distributed to Israeli Another important initiative on behalf Chambers of Commerce and Israeli Business channel for small business owners to tap into Gibrael seminar of Gibrael has been the publication of a Clubs in over 28 major financial centres a wide network of contacts and opportunities at the John special magazine about Gibraltar, written around the world including Toronto, in new markets, without having to commit Mackintosh Hall mostly in Hebrew and aimed at the New York, Los Angeles, Sydney, Singapore, substantial resources. Such Chambers also Jewish/Israeli business community world - Capetown, Buenos Aires, London, Berlin act as useful lobbyists to their respective wide. The magazine starts with a welcome and more. It will no doubt put Gibraltar on Governments to take any such actions and message from the Chief Minister. It then the map! measures as may be required to remove any gives some background about Gibraltar Gibrael is the second bi-national obstacles to businesses and create the correct covering its history and geo-political Chamber of Commerce to be established in environment that will facilitate interaction position along with highlights of the Gibraltar after AmCham was founded a and trust amongst people from different economy and tax regime. It continues with a couple of years ago, between Gibraltar and countries so that economic and social more in depth analysis of the different the . Bi-national Chambers of prosperity can be attained, for the benefit of business sectors such as Finance, eBusiness, Commerce are particularly vital for small both countries. Shipping, Tourism and Real Estate, business growth as they are a fairly low cost [email protected]

www.gibraltarinternational.com Gibraltar International 25 Disruptive Technologies

Being disruptive Continued from page 10 within a regulated environment. However, a the key risk areas, therefore exchanges, wallet key decision that needs to be made is whether providers and transmitters. There also needs look at what the features of a regulatory existing regulatory regimes can be adapted to to be consideration of what virtual currencies framework for virtual currency should be and, include this area or a new regulator should be should actually be within scope. Should it just through this enable the jurisdiction to be a created. In doing so the costs of establishing be decentralised ones (e.g. Bitcoin) or also benchmark, attracting high quality virtual a new regulator need to be considered as does cover centralised ones which have a single currency business. whether the skill sets of the existing administrating authority (i.e. a third party that The aim is clear, to establish criteria for regulator can be adapted to meet the controls the system such as Linden dollars). establishing a business in the jurisdiction, challenges of virtual currencies. Regulatory Should non-convertible virtual currencies also assisting those that meet them and acting as a culture has also to be factored in; regulators be covered? barrier to entry for those that don’t. It will not can nurture new areas (as Gibraltar did with Virtual currencies are not the only simply be a veneer of registration or one that gaming) or kill them. Will the regulator be arena the international finance centres can simply focuses on AML criteria but one that dynamic or inert? Will its existing workloads, make a valuable, constructive and significant provides a comprehensive approach. prevent it from giving this area sufficient contribution to. The development of P2P individual attention? These are fine, value platforms, crowd funding and other areas of So how might this framework judgements, but vital ones. disintermediation also present opportunities. look? Any regulatory environment costs. If it We sit on a tipping point in the evolution of Firstly, there would be primary legislation is too expensive, or requires huge internal financial services across the world. Let us establishing the requirement to be authorised, costs for the regulated entity, then the sector make sure we are on the mammal rather than the scope of area to be covered and the will never grow. It is therefore, almost dinosaur side of it. powers and duties of the regulator. inevitable that some costs will be met, in the www.gibraltarlawyers.com Secondary legislation will then set out early stages, from the public purse. the process for licensing and the prudential Government therefore will need to decide is and conduct of business requirements. These the long term value of the new business worth in turn are supported by Codes of Practice. the short term costs, when set against other There is nothing in the framework that is spending priorities and wishes. unfamiliar to any financial entity currently Regarding scope, the focus should be on

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26 Gibraltar International www.gibraltarinternational.com News

Gibraltar”. [An undersea electricity supply “Conservative estimate” cable to Morocco has been mooted.] The feasibility of the first energy project sees £2.4bn GDP by 2020 will be decided early this year with a view to implementation in 2017 by which time the A slower rate of growth still Bossano, minister for economic development second, 2-stage project will have been and a former chief minister for eight years evaluated and it is envisaged to complete by means an economy one third until 1988. 2020. greater and possibly more aided In the current 2015-16 financial year, the Deposits in Gibraltar Savings Bank are by renewable energy projects revenue estimate is £560m, £40m short of forecast to rise by £500m to reach £1.6bn+ in target, and for the next four years it will four years, but profitability – from a portfolio ibraltar’s Gross Domestic Product continue to grow at a lower rate to reach of investments locally and abroad - will fall (GDP) in the period 2011-15 £710m by March 2020, £150m - or 27% - slightly from 9% to 8.75% (or £14m) retained Gexceeded expectations by growing more than this year. in GSB reserves, which are anticipated to from £1.1bn to reach £1.84bn, rather than the “We have always been committed in jump by 268% from the £19m expected in £1.65bn originally forecast. every election to above-average economic March to reach £70m in 2019-20. A ‘National Economic Plan’ for the next growth regardless of what is happening in the Growth in PAYE received from the four years to 2020 repeats in cash terms, rather global economy”, he stated, and he promised insurance sector in particular and the than percentage terms, about the same GDP there would be no change to the 10% corporate tax increases from both the insur - growth as achieved in the previous 4 years and company tax or personal tax rates “in ance and gaming sectors in 2014-15 “were is targeted to be £600m higher and to reach general”, but incentives for inward investment greater than we had anticipated”, Fabian £2.4bn, a one third rise in the economy in 4 both for businesses and individuals are being Picardo, Gibraltar’s Chief Minister said, and years. considered. that gave a large boost to GDP. “The If some of the anticipated inward An envisaged 8-year inward investment insurance sector is one of the great success investment materialises, “the figures will turn programme follows two years’ of discussions, stories of our 4 years – it is something we are out to be, if anything, conservative”, possibly and focuses on renewable energy projects that very proud of; the growth has been by at least another £100m, declared Joe “would create new export industries for exponential”, he insisted .

www.gibraltarinternational.com Gibraltar International 27 Regulation What will a new insolvency regime mean for Gibraltar? By Grant Jones , Simmons Gainsford (i.e. Spain, Cyprus and Malta) are Model Law directors remaining in company control, that adopters. function being taken by the Gibraltarian IP. (Gibraltar) LLP The new regime introduces two UKIA- A CVA is amazingly flexible. It's anything the ibraltar’s new insolvency regime modelled concepts: regulated insolvency creditors agree; a delayed payment, a reflects UK/EU-centricism and practitioners (IPs) and director disqualifica - write-down or a debt-equity swap, etc. Ginternationalism, having Worldwide tion. Gibraltar’s competitors often lack a” So is Gibraltar now a mildly pro- a 3-level application. “regulated IP cadre and an ability to creditor UK clone? No. The UKIA mainly Level 1 - the Commonwealth. Gibraltar, prevent serial directorial defaulting. Quality abandoned the very pro-creditor insolvency as a UK Insolvency Act 1986 (UKIA) improves, but regulatory costs increase. High- ‘administrative receiverships’ procedure, ‘designated territory’, has it's insolvency volume, low-margin, letter-box, multiple which gave secured creditors (i.e. banks) proceedings automatically UK-recognised directorships become too risky. Contrariwise, a privileged position. Gibraltar has and elsewhere within the Commonwealth. major international Gibraltar-based holding substantially maintained ‘administrative Neither Cyprus nor Malta, Gibraltar’s feel comfortable. receiverships’. So Gibraltar has both a competing Commonwealth cousins have Insolvency jurisdictions are pro-creditor pro-creditor and a pro-debtor toolbox. Having ‘designated territory’ status. (seeking immediate creditor returns) or pro- pro-bank procedures, combined with an Level 2 - the EU. Gibraltar, under the debtor (emphasising corporate rehabilitation). internationally recognised insolvency ‘EC Insolvency Regulation’ has it’s Like the UK, Gibraltar was traditionally platform, should enhance Gibraltar's position insolvency proceedings automatically pro-creditor, but the UK moved, via UKIA to as an international banking centre. Banks EU-wide recognised. a mildly pro-debtor stance. Gibraltar’s should feel very comfortable lending Level 3 - ‘the rest of the World’. UKIA-modelled new regime followed suit, to Gibraltar companies, sitting within Gibraltar, a UN Cross-Border Insolvency introducing UKIA-copied Administration international groups. The new regime Model Law (Model Law) adopter, has Orders (Admins) and Company Voluntary provides for a world class regime, that should it’s insolvency proceedings automatically Arrangements (CVAs). only enhance Gibraltar's worldwide position. recognised amongst the 40 Model Law states, Admins are like the rehabilitative US e.g. Japan, the US, etc. Not all EU states Chapter 11, but less costly and without the www.sgllp.co.uk/locations/gibraltar.htm

28 Gibraltar International www.gibraltarinternational.com BUSINESS ROUND UP

Chief Minister discusses Gibraltar’s support for Prime the existence of undeclared earnings. additions for 2016. Brexit with Minister for Minister, David Cameron’s efforts to More than 80 people attended Monarch Airlines Europe achieve continued EU membership the event at the Sunborn Hotel in has announced four The Chief Minister, the Hon Fabian on the basis of reforms. Mr Picardo Ocean Village. Nick Warrington, new flights from Picardo QC MP met with the told the minister that the necessary HMRC’s senior policy adviser in the London Gatwick commencing on 1st Minister for Europe, the Rt Hon legislative work by the Gibraltar Centre for Offshore Evasion May. Flights will operate on David Lidington MP, in a private Parliament to ensure readiness for Strategy, said that one of the biggest Mondays, Thursdays, Fridays and session at Lancaster House, St. the referendum on EU membership problems was in making people Sundays with a mix of early morning James’s, London in December to was being carried out. He reassured realise that they had a problem, and afternoon departures. discuss issues of interest to Gibraltar. Mr Lidington that Gibraltar would particularly internationally mobile British Airways Mr Lidington, who had earlier not be the source of any delays. individuals and those with complex will offer an additional addressed a gathering of British financial affairs. two services to its Step up in tax disclosure There was now no place for already existing nine weekly flights Financial and professional facilitators of off-shore from London Heathrow. The service advisers were tax evasion to hide, he additional flights will commence on warned at a December said, and urged advisors 1st May and will operate early Overseas Territories leaders seminar organised by PwC, to “do a thorough client morning on Mondays and Fridays. attending the Overseas Territories auditors and accountants on health check” – on easyJet has added Joint Ministerial Council, warmly the workings and effect of individuals and businesses - but he a new route from congratulated Mr Picardo on his international exchange of noted “your client experience may Manchester which will landslide win at the November information by 51 countries, suffer as a result of chasing the commence on 3rd July. The new Gibraltar General Election. including Gibraltar from this year, information required”. year round service will operate twice The main issue discussed that they as well as their clients can a week on Wednesdays and Sundays between the two ministers was the be subject to criminal or civil Airlines update and will add to the current easyJet question of Brexit. Mr Picardo proceedings if they fail to alert the The three major airlines serving London Gatwick and Bristol services signalled HM Government of UK’s Inland Revenue (HMRC) to Gibraltar have all made significant to Gibraltar.

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www.gibraltarinternational.com Gibraltar International 29 WHY SHOULD YOUR COMPANY SPONSOR OR ADVERTISE IN THE GIBRALTAR INTERNATIONAL MAGAZINE? Answer: l We produce a quality, informative, business publication, with the aim of informing and encouraging international companies and investors to choose Gibraltar to invest and do business with your companies

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30 Gibraltar International www.gibraltarinternational.com Professional Bodies based in Gibraltar Gibraltar Association of Pension Fund Administrators (GAPFA) Gibraltar Federation of Small Businesses Ltd (GFSB) Jane Caulfield, Chair, Tel: + (350) 200 45877 Gemma Vasquez, Chair, Tel: + (350) 200 47722 Email: [email protected] Email: [email protected] Association of Trust & Company Managers (ATCOM) Gibraltar Funds & Investments Association (GFIA) Marc X. Ellul, Chairman, Tel: + (350) 200 70921 Joey Garcia, Chairman, Tel: + (350) 200 64740 Email: [email protected] Email: [email protected] Bar Council Gibraltar Insurance Association (GIA) Keith Azopardi, Chairman, Tel: + (350) 200 79423 Chris Johnson, Chairman, Tel: + (350) 58452000 Email: [email protected] Email: [email protected] Gibraltar Association of Compliance Officers (GACO) Gibraltar Insurance Institute (GII) Carlos M. Martins, Chairman, Tel: + (350) 2000 2022 Lorraine Moberley, President, Tel: + 350 57150000 Email: [email protected] Email: [email protected] Gibraltar Bankers Association (GBA) Gibraltar Society of Accountants (GSA) Kevin Hook, President, Tel: + (350) 2000 4000 Desiree McHard, President, Tel: + 350 200 47300 Email: [email protected] Email: [email protected] Gibraltar Betting & Gaming Association (GBGA) Society of Trust & Estate Practitioners (STEP) Peter Howitt, Chief Executive, Tel: + (350) 200 68450 Peter Isola, Chairman, Tel: + (350) 2000 1892 Email: [email protected] Email: [email protected] Gibraltar Chamber of Commerce (GCC) Chartered Institute of Personnel & Development (CIPD) Christian Hernandez, President, Tel: + (350) 200 78376 Lesley Louise, Chair, Tel: + (350) 54428000 Email: [email protected] Email: [email protected] Gibraltar Finance Centre Council (GFCC) Gibraltar Electronic Money Association (GEMA) Stephen J. Reyes, Chairman, Tel: + (350) 200 41200 Dani Spier, Chairman, Tel: + (350) 200 79645 Email: [email protected] Email: [email protected] For all the latest Gibraltar business news visit www.gibraltarinternational.com

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