AMB C R R August 18, 2015 Our Insight, Your Advantage.
Gibraltar Country Risk Tier • The Country Risk Tier (CRT) reflects A.M. Best’s assessment of three categories of risk: Economic, Political and Financial CRT-1 System Risk. • Gibraltar, a self-governing British Overseas Territory, is a CRT-1 country with low levels of economic, political and Economic Risk financial system risk. • A.M. Best considers the majority of countries rated below Moderate to be categorized as CRT-1 and CRT-2. Notable exceptions Low High are many of the Eastern European countries such as Belarus, Romania and the Ukraine.
Very Low Very High
Political Risk
Moderate
Low High
Iceland Greenland Iceland Finland Greenland Finland Very Low Sweden Very High Sweden
Norway Norway
Estonia Financial System Risk Estonia Russia Russia Russia Isle of Man Latvia Russia Moderate Isle of Man Denmark Latvia Denmark Lithuania Lithuania Low High Ireland Belarus United Ireland Kingdom Belarus Sakhalin Netherlands United Sakhalin Canada GermanyKingdom NetherlandsPoland Canada Belgium Germany Poland CzechBelgium Very Low Very High Guernsey Liechtenstein Republic CzechUkraine Guernsey SlovakiaLiechtenstein Republic Jersey Luxembourg Ukraine Luxembourg Slovakia Jersey Austria Republic of Kazakhstan Hungary AustriaMoldova Kazakhstan Switzerland Republic of Hungary Moldova France Slovenia SwitzerlandRomania Mongolia FranceCroatia Slovenia Mongolia Kuril Islands San Marino Croatia Romania Kuril Islands Andorra Bosnia & Serbia Herzegovina San Marino Andorra Bosnia & Serbia Herzegovina Russia Montenegro Bulgaria Russia Montenegro Georgia Italy Macedonia Bulgaria Kyrgyzstan Italy Georgia Albania Macedonia Armenia Azerbaijan Kyrgyzstan Spain Albania Armenia AzerbaijanUzbekistan Greece Uzbekistan Portugal Monaco Spain Tajikistan North Korea United States TurkeyGreece Turkmenistan Azores Portugal Monaco Tajikistan North Korea United States Azores Turkey Turkmenistan South Korea Japan South Gibraltar Tunisia Malta For information on companies followed Cyprus Syria Korea Japan Gibraltar Tunisia Malta China Lebanon Cyprus Syria Afghanistan China Iraq Lebanon Israel Iraq Afghanistan Market Outlooks Morocco Israel Iran Canary Morocco Jordan Iran Islands Canary Jordan CRT Islands 1 2 3 4 5 Kuwait Algeria KuwaitPakistan Nepal AlgeriaLibya Bahrain Pakistan Bhutan Nepal EgyptLibya Bahrain Bhutan Copyright © 2015 by A.M. Best Company, Inc. Bahamas Egypt Qatar Bahamas All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise. 1 Mexico Western Sahara Saudi Arabia Qatar Bangladesh Mexico (Occupied by Morocco) Western Sahara SaudiU.A.E. Arabia Bangladesh Taiwan (Occupied by Morocco) Oman U.A.E. Taiwan Northern Mariana Islands Cuba Dominican Myanmar Oman Laos Hong Kong Northern Mariana Islands Republic CubaBritish Dominican Myanmar Puerto Virgin Anguilla India Laos Hong Kong Cayman Islands Haiti Rico Islands Republic British St. Maarten Puerto Virgin Anguilla Mauritania India Haiti Islands Macau Wake Island Cayman Islands Rico St. Maarten Mali Belize Jamaica Antigua & Barbuda Mauritania Macau Wake Island St Kitts & Nevis Mali Belize Jamaica Antigua & Barbuda Niger Chad Thailand Honduras St Kitts & Nevis Cape Verde Yemen Vietnam Dominica Niger Chad Eritrea Thailand Philippines Honduras Dominica CapeSenegal Verde Sudan Eritrea Yemen Vietnam Philippines Guatemala St Lucia Senegal Marshall Islands Nicaragua St Vincent & the Grenadines Gambia Sudan Cambodia El Salvador Guatemala Curacao Barbados St Lucia Guam Marshall Islands Nicaragua Grenada St Vincent & the Grenadines Gambia Cambodia El Salvador Curacao Barbados Guinea-Bissau Dijbouti Grenada Burkina Faso Guam Costa Rica Trinidad & Tobago Guinea-Bissau Dijbouti Panama Guinea Ghana Benin Burkina Faso Costa Rica Trinidad & Tobago Nigeria Somalia Panama Sierra Cote d'Ivoire Guinea Ghana Benin Ethiopia Nigeria Somalia Venezuela Leone Sierra Cote d'Ivoire Ethiopia Sri Lanka Venezuela Leone Togo Central Africa Republic Sri Lanka Palau Guyana Liberia Togo Central Africa Republic FederatedPalau States Guyana Brunei Colombia Suriname Liberia Federated States Colombia Brunei of Micronesia French Suriname Cameroon Malaysia of Micronesia Guiana French Equatorial Guinea Cameroon Malaysia Guiana Singapore Sao Tome & Principe Equatorial Guinea Uganda Singapore Sao TomeCongo & Principe Kenya Uganda Borneo Gabon Congo Kenya Borneo Ecuador GabonRwanda Sumatra Nauru Ecuador Rwanda Sumatra Nauru Dem. Republic New Guinea of Congo BurundiDem. Republic New Guinea Burundi Seychelles Kiribati Peru of Congo Seychelles Indonesia Kiribati Peru Tanzania Indonesia Papua Tuvalu Tanzania Solomon Islands New Guinea Papua Solomon Islands TuvaluTokelau East Timor New Guinea Tokelau Brazil East Timor Brazil French Polynesia Angola Coral Sea Somoa French Polynesia Angola Malawi Comoros Islands Coral Sea Somoa Zambia Malawi Comoros Islands American Cook Zambia Cook Vanuatu Fiji Samoa IslandsAmerican Bolivia Islands Bolivia Mozambique Vanuatu Fiji Samoa Zimbabwe MozambiqueMauritius Zimbabwe Mauritius Niue Madagascar Tonga Niue Namibia Madagascar Chile Botswana Namibia Reunion Tonga ParaguayChile Botswana Australia New Caledonia Paraguay Reunion Australia New Caledonia
Pitcairn Islands Swaziland Pitcairn Islands Swaziland Norfolk Island Lesotho Norfolk Island South Africa Lesotho South Africa Argentina UruguayArgentina Uruguay
New Zealand New Zealand
Falkland Islands Falkland Islands South Georgia South Georgia Tierra Del Fuego Tierra Del Fuego AMB Country Risk Report Gibraltar
Regional Summary: Western Europe Vital Statistics 2014 • Western Europe is a highly developed Nominal GDP (2013) USD bn 2.30 and affluent region. The 28 countries of Population mil 0.03 the European Union (EU) accounted for GDP Per Capita (2013) USD 70,716 25% of world GDP in 2014. The EU is Real GDP Growth (2013) % 5.7 facilitating a single European market with Inflation Rate (2013) % 2.5 standardized regulatory systems and free Premiums Written (Life - 2013) USD mil 2 movement of people, goods, services and Premiums Written (Non-Life - 2013) USD mil 39 capital. The 17 EU members of the euro- Premiums Growth (2012 - 2013) % 14.4 zone use the euro as their currency. Regional Comparison Country Risk Tier • Western Europe has been experiencing Gibraltar CRT-1 a prolonged period of slow economic Bermuda CRT-2 growth, with the EU growing 1.4% in Guernsey CRT-1 2014. Growth is largely expected to Ireland CRT-2 remain muted at 1.8% and 1.9% in 2015 Isle of Man CRT-1 and 2016 respectively. On-going concerns United Kingdom CRT-1 over Greece’s economic and political future have increased the potential downside risks to growth and stability Source: IMF, Axco, Swiss Re and A.M. Best throughout the European Union.
• In March 2015 the European Central Bank (ECB) launched a program of Quantitative Easing, expected to last through September 2016. The program entails the purchase of 60 Billion EUR of assets monthly in an effort to boost growth, encourage lending and increase inflation. Economic Growth Economic Risk: Very Low
• Gibraltar’s economy is small, with 6 Real GDP CPI Inflation a GDP of just over 2.3 billion USD in
2014, and based on services such as 5 tourism, financial services, internet gaming and shipping. 4
• As a member of the European Economic % 3 Area (EEA), goods and services can be freely traded within the EU. The official currency is the Gibraltar Pound which 2 is issued alongside the British Pound sterling at par value. 1
• Gibraltar’s economy has continued to 0 grow in recent years, driven by lower 2009 2010 2011 2012 2013 2014 commodity prices, a business friendly Source: IMF World Economic Outlook, IHS Global Insight and A.M. Best environment and an open economy. 2 AMB Country Risk Report Gibraltar
Political Risk: Very Low Political Risk Summary Score 1 (best) to 5 (worst) • Gibraltar is a self-governing British Overseas Territory with a population of
Gibraltar World Average over 32,000 people. The United Kingdom International Transactions Policy maintains responsibility for defense, 5 foreign relations, internal security, and Legal System 4 Monetary Policy financial stability.
3 • Tensions between the United Kingdom 2 and Spain over Gibraltar lasted for many
Regional Stability 1 Fiscal Policy years; however, all countries reached an agreement in 2006 and a new constitution 0 went into effect in Gibraltar in 2007.
• Recently there has been some dispute
Social Stability Business Environment over fishing and shipping territories, though maritime business around Gibraltar is largely uninterrupted.
Government Stability Labor Flexibility • A 17 member elected Parliament, a Source: A.M. Best Governor and a Speaker represent the small nation.
GDP Per Capita and Population Financial System Risk: Very Low for Selected Countries • The Financial Services Commission (FSC) regulates all financial services in 100,000 70
GDP Per Capita Population Gibraltar, including insurance.
90,000 60 • Gibraltar is a financial center. The 80,000 insurance industry has grown significantly 50 70,000 from 13 licensed insurers in 2000 to 56 most recently with 3.8 billion GBP in 60,000 40 premiums and over 9 billion GBP in held
50,000 USD assets. Several British and international Millions 30 banks have operations based in Gibraltar. 40,000
30,000 20 • The financial and other corporate sectors benefit from no capital gains tax. In 20,000
10 January 2011 the government imposed an 10,000 across the board corporate tax rate of 10%.
0 0 Gibraltar Bermuda Guernsey Ireland Isle of Man United Kingdom • In January 2015 Gibraltar introduced a Source: IMF and A.M. Best new legislative and regulatory framework for financial and professional services, aimed at rationalizing and streamlining the current system. 3 AMB Country Risk Report Gibraltar
GUIDE TO BEST’S COUnTry rISk TIErS
A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims-paying ability of an insurer. Country risk is evaluated and factored into all Best’s Credit Ratings. Countries are placed into one of five tiers, ranging from “CRT-1” (Country Risk Tier 1), denoting a stable environment with the least amount of risk, to “CRT-5” (Country Risk Tier 5) for countries that pose the most risk and, therefore, the greatest challenge to an insurer’s financial stability, strength and performance. A.M. Best’s Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and willingness of a government to service its debt obligations. Country risk Tiers Country risk Tier Definition Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial CRT-1 system regulation with deep capital markets; mature insurance industry framework. Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system CRT-2 regulation; mature insurance industry framework. Developing legal environment, legal system and business environment with developing capital markets; developing CRT-3 insurance regulatory structure. Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital CRT-4 markets; partially to fully inadequate regulatory structure. Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low CRT-5 human development and social instability; nascent insurance industry. Country risk reports A.M. Best Country Risk Reports are designed to provide a brief, high-level explanation of some of the key factors that determine a country’s Country Risk Tier assignment. It is not intended to summarize A.M. Best’s opinion on any particular insurance market or the prospects for that market. Categories of risk Country Risk Reports provide scores for three categories of risk for each country. These scores are (1) Very Low; (2) Low; (3) Moderate; (4) High and (5) Very High. Category of risk Definition The likelihood that fundamental weaknesses in a country’s economy will cause adverse developments for an insurer. Economic Risk A.M. Best’s assessment of economic risk evaluates the state of the domestic economy, government finances and international transactions, as well as prospects for growth and stability. The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the Political Risk government and society, the effectiveness of international diplomatic relationships, the reliability and integrity of the legal system and of the business infrastructure, the efficiency of the government bureaucracy, and the appropriateness and effectiveness of the government’s economic policies. Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that financial volatility may erupt due to inadequate reporting standards, weak banking system or asset markets, and/or poor Financial System Risk regulatory structure. In addition, it includes an evaluation of whether the insurance industry’s level of development and public awareness, transparent and effective regulation and reporting standards, and sophisticated regulatory body will contribute to a volatile financial system and compromise the ability of an insurer to pay claims. Political risk Summary To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of one to five with one being the least amount of risk and five being the highest amount of risk. Category Definition International Transactions Measures the effectiveness of the exchange rate regime and currency management. Policy Monetary Policy Measures the ability of a country to effectively implement monetary policy. Fiscal Policy Measures the ability of a country to effectively implement fiscal policy. Business Environment Measures the overall quality of the business environment and ease of doing business. Labor Flexibility Measures the flexibility of the labor market, including the company’s ability to hire and fire employees. Government Stability Measures the degree of stability in a government. Social Stability Measures the degree of social stability, including human development and political rights. Regional Stability Measures the degree of stability in the region. Legal System Measures the transparency and level of corruption in the legal system. Country risk Tier Disclosure A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Best’s Credit Rating Methodology that is applied to all insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation issued by a government, an insurer or other rated issuer, nor does it address the suitability of any particular policy, contract or other financial obligation for a specific purpose or purchaser. Copyright © 2015 by A.M. Best Company, Inc. Version 091714
Copyright © 2015 by A.M. Best Company, Inc. All rights reserved. No part of this report may be reproduced, stored in a retrieval system or transmitted in any form or by any means; electronic, mechanical, photocopying, recording or otherwise. 4