LEMMA GIBRALTAR COLLAPSE MAY COST UK BODY £25M IN COMPENSATION

LEMMA GIBRALTAR COLLAPSE MAY COST UK BODY £25M IN COMPENSATION

new scotland yard

The Serious Fraud Office at Scotland Yard yesterday refused to confirm or deny “an interest” in the collapsed Gibraltar based insurance company Lemma Europe Insurance Company Limited.

It is alleged by media sources that Lemma has prompted some 800 claims and is estimated to cost the UK’s Financial Services Compensation Scheme some £25m, high enough to be one of the few cases singled out in the FSCS annual report. Just three years earlier the £1m paid out in relation to another insurance firm, Aldgate was highlighted.

Gibraltar firms chip in to the FSCS pot for compensation but a string of unrelated cases, some of them involving false bonds, have prompted the Gibraltar FSC to pressure locally based firms to meet more stringent standards not least in their auditing and justification of solvency levels. The estimated figure of £25m would mean the claim from Lemma would account for almost a third of the total claims made to the FSCS last year from collapsed insurance firms.

Lemma, which struggled for survival last year until the Supreme Court of Gibraltar found it bankrupt and ordered its provisional liquidation to proceed in December 2012, faces millions in claims, but initial investigations point to problems in the UK, not Gibraltar.

Last year the related Ukranian company, Lemma Ukraine, failed to bail out Lemma Europe but the case seems to be coming under increased scrutiny, including that of the Financial Services Commission in Gibraltar, as more details emerge that it had taken on a vast chunk of the “bottom end” of solicitors’ professional indemnity policies that were generally regarded as the very high risk end of the market.

Grant Thornton Gibraltar were appointed liquidators six months ago and their probe extends not only with Lemma but with the main conduits for its business including a firm called ‘Asset Underwriting’.

Lemma is registered in Gibraltar but provided domestic and commercial property and liability insurance in the UK. The firm had traded in the UK since January 2008 but the FSC removed its permissions in August 2012. The FSCS declared the firm in default in October 2012 and it says it has been working with the liquidators and their agents to manage the run-off of insurance claims against Lemma. “There are believed to be around 800 protected claims. The majority of these are solicitors’ professional indemnity claims. Current indications are that protected claims might cost in the region of £25m,” says the FSCS.

It was reported by the Chronicle last year that in 2009 -2010 Lemma Europe underwrote solicitors’ indemnity insurance but it was in February 2012 that the management advised its board that claims in this area had been £9m higher than expected.

That issue and the non-obtaining of funds to cover this appear to have set off the rapid spiral into a solvency crisis.

One major issue that emerged was just how Lemma came to be taking on almost one sixth of the UK’s total solicitors’ PI insurance. And also the fact that this was sold in UK by a UK Financial Conduct Authority (formerly FSA) licensed company.

Meanwhile, underwriting agency Asset France has gone into liquidation after its ultimate parent, Ukranian insurer Lemma, decided to pull its funding, www.insurancetimes.co.uk reported recently.

Insurance Times said it understands the agency was used by brokers in the United Kingdom and internationally.

FSC calls for tighter controls

 

At the end of May this year the Financial Services Commission Insurance Supervisor Michael Oliver wrote to all companies involved in insurance setting out the standards it expects companies to meet. This follows a similar drive, after the Hill Insurance collapse, to press for more stringent auditing.

The areas highlighted by Mr Oliver include: capital adequacy and whether the firms’ capital position is adequate to support the level of current and anticipated business activity given the exposure to risks; whether the firm has in place the necessary processes and policies to ensure that the appropriate level of reserves and provisions are maintained and that it is able to evaluate their adequacy and that they are maintained on an ongoing basis, in essence the FSC wants more independent validation of a firms information and justification if the firm strays from actuarial advice; risk management standards and controls and; corporate governance generally so as to establish that the firm is actually following procedures, not just paying lip service to them.

Gibraltar tax haven or international finance centre?

Gibraltar tax haven or international finance centre?

To find out more about investing in Gibraltar click here.

Speaking from Westminster Central Hall:

An arduous 15-year journey from ‘tax haven’ to international financial centre is complete, according to those responsible for regulating and marketing the industry based in Gibraltar.

James Tipping, director of Gibraltar’s Finance Centre, and one of the chief route-planners for the journey, is adamant that its jurisdiction has arrived at its destination with integrity and reputation intact. Tipping’s work now focuses on marketing Gibraltar as a world-class finance centre and ensuring that any lingering misconceptions about the running of its business affairs are well and truly dispelled.

Ever since the start of 2011, with the enactment of Gibraltar’s new income tax act, the Rock has been classified as an “onshore” jurisdiction. With over 20 tax information exchange agreements (TIEAs) now signed, Gibraltar has criminalised tax evasion and adopted all EU, OECD and international initiatives. Over the next two years, Tipping anticipates the international information exchange for tax purposes agenda will accelerate,something which, he insists, will be to Gibraltar’s good. “The Rock [Gibraltar] is committed to low tax rather than no tax and quality business is what’s sought, not quantities.”

Gibraltar’s latest action on the regulatory front has been to commit to a pilot scheme for automatic exchange of information with the UK, France, Germany, Spain and Italy. The scheme establishes a series of automatic multilateral tax information exchanges. It is based on the EU-preferred model intergovernmental agreement and is in preparation for the improvement of international tax compliance. It also prepares the ground for the implementation of the US’ Fatca model to counter tax evasion by US residents using foreign accounts.

Fabian Picardo, chief minister, says signing up to this scheme brings Gibraltar in line with the UK which is calling for regulatory continuity not just across UK dependencies and overseas territories but across the world. “This is (the) level playing field that Gibraltar has been baying for…. Gibraltar is a European territory that’s been complying with European rules now for many years. I’m very proud that in the 18 months I’ve been in government, I’ve ensured that Gibraltar has come up to date on all its European obligations, in particular those that relate to financial services.”

As for actual increased market share Tipping’s team has already fulfilled one of the government’s manifesto commitments to boost growth. Earlier this year, two key senior appointments were made to oversee strategic development in the insurance and private client sectors. Michael Ashton was taken on with responsibility to develop new insurance business, and Paul Astengo has been tasked with leading the promotion of growth in the private client sector. Both appointees report to Tipping.

More regular visits to London to win city business are planned. Gibraltar has made an annual event out of its Gibraltar Day Finance Centre lunch held in the City. The emphasis here is less on touting for business and more on forming stable new business partnerships.

James Lasry, partner of Gibraltar-based law firm Hassans, says that the Rock’s repositioning places it among the most reputable finance centres on the international stage, and guarantees it will achieve a more prominent presence in London and other capital locations. He confirms that Gibraltar is already receiving a lot of attention from the UK and Switzerland. “This isn’t just funds business, but also private clients and insurance.” The fact that more motor insurance business is currently being written by Gibraltar-based firms than by Lloyd’s of London would seem to bear this out.

With the most pivotal legislation ratified, law-makers like Hassans are concentrating on pushing forward enabling legislation that will add to Gibraltar’s overall attraction. While the number of TIEAs are stacking up, however, Gibraltar has yet to sign a Double Taxation Agreement (DTA). Lasry says that the call for Gibraltar to engage in a series of DTAs with other jurisdictions was first made five years ago to the then chief minister, Peter Caruana. Lasry says, “If TIEAs are the stick, then DTAs are the carrot.” To which end, Lasry is actively wooing those jurisdictions interested in signing up to such an arrangement. “We have a working group on DTAs, and we are looking at signing a DTA with Mauritius at the moment.” Lasry excuses the time it’s taken for Gibraltar to “catch up” with other finance centres on DTAs, making the point that Gibraltar has found it hard to attract interest from other jurisdictions on account of its small size.

Nevertheless, not all industry players think DTAs are an essential tool in Gibraltar’s box of incentives. Steven Knight, chairman of Castle Trust and Chairman of the Gibraltar Association of Pension Fund Administrators (GAPFA) says DTAs don’t suit all global clients. He believes Gibraltar’s 2.5% flat rate withholding tax is actually an inducement that encourages a wider client base.

Gibraltar is already home to a good handful of international names which it hopes will serve as an advertisement for other such players. These include names such as Barclays, Lloyds TSB, SG Hambros, Credit Suisse, KPMG, PwC, and Deloitte. In keeping with the government’s aim to cultivate long term sustainable businesses in the financial sector, Tipping points out that a number of banks have recently celebrated their 25 years of local presence.

The insurance sector is a particular area where Tipping would like to see expansion imminently but he makes the point that Gibraltar has to ensure it can offer the necessary infrastructure of auditors, accountants and layers to support such growth. Gibraltar has already welcomed five new insurers: Southern Rock, Enterprise, Calpe, Preserve, and London & Colonial.

As well as attracting new industry players, the government has the task of finding a new CEO to head up its Financial Services Commission. The incumbent, Marcus Killick (pictured), who has held the post of chief regulator for 10 years, has announced he will be stepping down in September. He has been one of the longest serving heads of a financial services regulator in the world. Demonstrating the same commitment to long term continuity as is expected from industry players, Killick has declared his intention to stay in Gibraltar working in the private sector.

Gibraltar emeralds

Gibraltar emeralds

Gibraltar Tourism can help you make informed choices about investing in Gibraltar gemstones or banks.  gibraltartourism@europe.com

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With banks crashing all around us, the instability of the markets, the fluctuation of diamonds and gold plummeting, many savy investors wanting a secure and stable place to keep their money safe are looking towards the emerald market, and what better place than Gibraltar. Only the truly savy know about this until now, so if you want to protect your hard earned cash in a safe place read on.

Is your birthday in May? If so, lucky you—the stunning green emerald is your birthstone! A scarce gem, the emerald is a symbol of beauty, status and power, valued particularly for its rich color.

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Many people purchase emerald gems and emerald jewellery simply for their beauty and appeal—perhaps as a romantic keepsake or special gift for a loved one—without even considering their value as an investment. How many people do you know who buy emeralds for their cash value?

Although emerald gems are not as popular as stock investments, there are savvy jewelers and investors who consider acquiring emerald gems as assets a serious business, and one that rivals the difficulties of many conventional investment vehicles.

There are many things to consider when purchasing an emerald for its investment value. First, let’s answer one very important question:

Are Emeralds Good for Investments?

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1. They’re small and easy to store – unlike stocks, cash, or real estate and other traditional forms of investment; valuable emerald gems are conveniently small in relation to their cash value. Just imagine: a gem worth $10 million could fit in the palm of your hand! This makes emerald gems the ultimate investment vehicle for non-detectable and easily kept assets. You don’t need a big bank vault or an army of accountants to keep track of them for you!

2. Private and anonymous investments – currently, transactions related to emerald gems and other precious stones do not require reporting to government agencies, as long as you’re a private owner and not an emerald dealer. This means you can invest in emerald gems without having them listed as part of your public records. Private investors can store emerald gems wherever they wish, be it a bank vault or a personal safe. This is ideal for investors who want to keep their assets safe from prying eyes.

3. Emeralds gems don’t easily fluctuate in value – unlike stocks and mutual funds that require regular checking to keep your money afloat and earning, emerald gems command a stable value in the market, and can save you the hassle of constantly checking the stock market and moving your funds from one stock to another.

4. Gibraltar is the perfect place to purchase gemstones, diamonds and especially emeralds, with expert dealers in a tax haven it’s cheaper getting you much more for your money, Gibraltar dealers offer a highly confidential service and most importantly it’s secure because it’s a little piece of Britain.

As we know, today’s economy is facing high levels of inflation, and this trend is expected to continue. For this reason, investing in emerald gems is a good idea, since their values don’t plummet like stocks and other traditional investments. Even when the price of high quality diamonds fell by 20%, emerald gems held their value—some even saw a price increase.

If you want to find out more about investing in emerald gems in Gibraltar then contact gibraltartourism@europe.com for a confidential consultation and introduction to a reputable and long established gem dealer here in Gibraltar.

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Golden rule – Always take an experienced independant gemologist with you to inspect the stones.

Death of Victor Carranza Emerald Tzar died April 4th 2013 – how will this affect the price of  emeralds?

Some reference has been taken from Sanchez International

Written by Gibraltar Tourism – John Middleton

contact gibraltartourism@europe.com