Month: October 2015

Royal Forex Trading helps investors navigate a challenging market

Posted on by Ashton Wenborn

The first recorded use of the word hedge – meaning to dodge or evade – can be traced back to the 1590s, and an understanding of the process is arguably more important in the current financial climate than it ever has been. Recent events have alerted investors to the dangers of excessive risk-taking and the pitfalls of trading without paying due attention to risk management, particularly for currency traders. Participation in the largest of all financial markets comes with its fair share of challenges, and hedging has become a key strategic consideration for any and all involved, whether it be simple or complex in design.

Employed often as a risk management strategy to either limit or offset the probability of losses from fluctuations in commodities prices, securities or currencies, hedging, more than this, serves a number of additional functions. Used also in investment employment to mimimise the risk of adverse price movements, or as a means of transferring risk without buying insurance policies, the risks in question can take very different forms, meaning that there is no single solution when it comes to mitigating the damages.

Recent events have alerted investors to the dangers of excessive risk-taking and the pitfalls of trading without paying due attention to risk management

Commodity risk, for example, arises when adverse price movements impact the value of contracts, and the hedging strategy in this instance calls for commodities’ future or contracts for difference (CFDs); credit risk, on the other hand, arises when the money owed isn’t paid by an obligor, and asks that obligations are sold at a discounted rate. These risks take all manner of shapes, and include interest rate, equity, volatility and volumetric risk, though it’s when it comes to currency risk that the strategy is arguably most important. On this last point, the risks stem from multi-currency activities undertaken by financial and non-financial actors in the global economy. And in answer to these activities, hedging strategies include forward and futures currency contracts, as well as money market operations.

Beset with challenges
The scale and variability of the challenges facing traders mean that trading firms are of real and growing importance when it comes to employing an effective risk management strategy, particularly when it comes to forex trading.

Royal Forex Trading is something of a market leader in an industry beset with challenges. Comprising an elite team of experienced traders and finance professionals both, Royal has carved out a place for itself over the seven or so years in which it has been active by keeping to one conviction: knowing what traders want. “To that end, Royal offers thousands of traders around the world the right tools to make it in the financial markets on a daily basis”, according to the company website. “From superior trading conditions, to tailored personal broker services and close client support, our job is to enable you, the trader, to succeed.”

With an active presence in Australia and Lebanon already, the firm has expansion plans in place to grow in Asia, Europe and Latin America, and remains committed to the task of providing investors, hedgers and traders access to financial markets in an ethical, transparent and efficient manner. With over three million transactions to its name already and a solid financial backbone that includes reserve capital in excess of $5m, through its advanced online platforms, Royal’s clients can enjoy firsthand the experience of a “global partnership and royal treatment”.

Speaking on how hedging relates to Royal’s expertise, the firm maintains that a successful hedge is determined by a number of factors. The first is contingent surrounding circumstances, thus creating the need for a hedge, the second, a sensible and economically feasible environment to warrant its deployment, and the third, an ability to deploy the hedge in a timely manner, both rationally and efficiently. This provision of timely and efficient hedging strategies is perhaps the biggest factor that distinguishes Royal’s performance from that of its competitors, and which has allowed it to form strategic partnerships with clients and investors.

Diverse investment horizons
Experienced trading firms, of which Royal is one, utilise hedging for the purposes of risk management, and while ensuring business flows for firms, hedging enables investors to engage in all asset classes, using a rational, systematic and cautious approach. Royal takes pride in being a pioneering and leading firm in this activity. Understanding that regulators in different jurisdictions face the eternal dilemma of how to protect investors without imposing too many restrictive and suffocating restrictions on the industry, the firm’s ethical and professional responsibilities are best evidenced by its ability to negotiate what remains a trying climate.

Recognising that not all investors have the same risk appetite or investment horizons, Royal’s comprehensive range of financial instruments and diverse account types means that it is equipped to cater for all types of client. Add to that an ability to engage with all types of risk management strategies, and the reasons for firm’s reputation as an attractive investment partner are clear.

The firm has shown itself to be adept at not just natural hedging, which reduces unwanted risk by matching cash flows (i.e. revenues and expenses), but at more exotic methods. Forward hedging, for example, means that while the amount of the transaction changes, the payments procedure and exchange rates are determined in advance, and in a forward contract there is no exchange of money until the agreed-upon settlement date. Similarly, futures refer to a certain amount at a specified date and price, although standardisation, trading domiciliation and the time pattern of cash flows are key points of differentiation. Lastly, CFDs are financial derivatives that allow speculation on price movements through either long or short positions, where the seller pays the buyer the difference between the present value of an asset and its value at the time at which the contract was bought.

Options hedging, meanwhile, is an altogether different animal, and whereas futures are ‘obliging’ contracts for both parties, options, in contrast, give one party the right but not the obligation to buy or sell as asset under specified conditions, whereas the other assumes an obligation to sell or buy that asset if it’s exercised. In doing so, options provide the only convenient means of hedging or positioning ‘volatility risk’. Indeed, the price of an option is influenced by the outlook of an asset’s volatility. Out-of-the-money options may well prove a particularly useful and cost-effective method of hedging against risks with very low probabilities, and ones that, if they occur, have disproportionately high costs.

Looking at the myriad complexities associated with these methods, Royal’s work is made to look all the more impressive, and their contributions do a great deal to underline the importance of hedging in currency markets. Most are familiar with the choices involved in hedging equity and equity futures. One might take an opposite position in futures to protect against systematic market risk, adopt the market neutral approach, where the equivalent dollar amount in the stock trade is taken in futures, or the beta neutral approach in determining the historical correlation between a stock and an index.

Forex hedging
As far as forex hedging is concerned, the vast majority of currency management instruments enable firms to hedge through taking the opposite long or short position. These are tools that effectively serve the same purpose, and include futures, forwards, debt, swaps and options, which all cost the same but differ when it comes to the details.

As an experienced member of the currency trading community, Royal has reached a set of conclusions and summations that stand it in good stead to survive, and thrive even, in the future. First, while governments, corporates and individuals struggle to balance their revenues and expenditures, hedging is, and will continue to be, an indispensable tool. A great many corporate risk managers attempt to construct hedges on the basis of their outlook for interest rates, exchange rates and a variety of market-based factors, however the best hedging decisions are made when risk managers acknowledge that market movements are unpredictable.

The firm goes on to say a hedge should always seek to minimise risk, and should in no way represent a gamble on the direction of market prices. Indeed, a well-designed hedging strategy reduces both the risks and costs for the investor. Hedging also frees up resources and allows management to focus on the aspects of the business in which it harbours a distinct competitive advantage. Hedging increases shareholder value by reducing the cost of capital and by stabilising earnings. From a corporate point of view, leading investors and clients to partake in hedging actively increases business turnover, by adding another layer of defensive activity, so while it comforts regulators on the one hand, it is beneficial for all parties involved.

IKBZ facilitates the growth of Myanmar’s insurance sector

Posted on by Ashton Wenborn

The insurance sector in Myanmar has been active for quite some time, perhaps surprisingly so for those not familiar with the market. Following the signing of the peace treaty of Yandabo in 1826, which ended the First Anglo-Burmese War, many English insurance companies came to Burma to buy life insurance.

The Burma National Insurance Company and the Burma (Government Security) Insurance Company, owned by local companies, entered the insurance market in 1940 before the Second World War. By nationalising a local insurance company, the state-owned Union Insurance Board was established in 1952. All life insurance businesses were state-monopolised under the Union Insurance Board in 1959, and by 1964, the socialist government abolished all private insurance companies. From late 1969 to 1976, all insurance business activities were centralised under the Insurance Division of the People’s Bank of the Union of Burma. Under the Union Bank Law (1975), the insurance business was outsourced to the newly formed Myanmar Insurance (MI). It was in 1993 when the Myanmar insurance law empowered the MI enterprise to engage in all insurance business activities. The enactment of the insurance business law took place in 1996.

Although the market will likely prove lucrative for foreign insurers, regulatory risks loom large

The Insurance Business Supervisory Board launched a license application process for private insurance companies in November 2012 to diversify the provision of insurance services and to modernise the sector. However, it was 2013 that proved a landmark year in the history of the country’s insurance sector, marking the commencement in operation of 12 domestic insurers. We take immense pride that IKBZ Insurance was the first private insurer in Myanmar to get registered as a company bearing the registration number 001 on 25 May, 2013.

The present day
Myanmar’s underpenetrated insurance market was recently opened up to domestic private players, after decades of state monopoly. With an opening to foreign investment expected to follow, the country offers plenty of opportunities to multinational insurers.

The country is on the path of economic development and notable transformations have been witnessed in all sectors. IKBZ is proud to have been a part of this metamorphosis.

The year 2014 saw some eminent multinational insurers begin establishing their representative offices so as to be ideally positioned to enter the Myanmar insurance market as soon as it is opened to foreign investment. These companies include AIA, ACE, MetLife and Prudential, to name a few to have obtained authorisation from the insurance regulator.

Currently, there are 15 foreign insurance companies that have representative offices in Myanmar, and, among those, companies who have been in Myanmar for over three years were allowed to provide insurance within Myanmar’s special economic zone (SEZ).

Through these representative offices they can provide training and consultancy services to both domestic insurers and the country’s insurance regulator. This process will allow these multinationals to gain key strategic insights and contacts in the Myanmar insurance industry, and grant them an early-mover advantage that could be worth hundreds of millions in dollars once the market opens to foreign insurers.

Although the market will likely prove lucrative for foreign insurers, regulatory risks loom large. The existing Japanese firms, which have had representative offices in the country for over two decades, are only allowed to operate inside the SEZ and can’t operate in any other region. They will have to pay an annual fee of $30,000 to the government for their licenses, and are allowed to issue marine cargo, building risk, and cash transfer insurance policies.

Initially, the private insurers were only permitted to underwrite business in six of the 48 recognised insurance categories in Myanmar, while MI retained its monopoly over the remaining 42 categories. However with changing times, after having reviewed the performance of these private companies over the last two years, the insurance regulatory board jointly with MI decided to liberalise and allow these private insurers to do business with two more products – health insurance and inland marine cargo insurance.

For the masses
Next to the KBZ bank, IKBZ is the second largest business conglomerate within the KBZ group, catering to a wider customer base. Moreover, being associated with the KBZ Bank, we have the privilege of expanding our insurance business using the bank as one of the major marketing channels for selling the fire insurance products, which are a compulsory buy for any landed property loan offered to its customers in Myanmar.

Within a short span of time, we have earned a good reputation for our excellent performance and services delivered. We, as a company, dominate the largest market share in Myanmar with the highest amount of premium income compared to those of all other private insurance companies in Myanmar (see Fig. 1). Our diverse platform and strong capitalisation provide a stable market to our business partners across all lines of business.

Through our growing network and by using wider branches of KBZ Bank to reach out to our customers, we are within the reach of the majority of the population of Myanmar. The extensive knowledge and experience of IKBZ befitted many of our customers. Hassle free onboarding, media presence, promoting awareness, public seminars and word of mouth from our existing customers, all contribute towards our high customer acquisition rate which currently stands at around 72.5 percent. Currently with no price competition existing in the insurance market in Myanmar, we as a company can only compete for the client’s acquisition and retention through the efficient and excellent services we provide.

As an underwriting company, we make sure we follow simple yet effective underwriting process to address the needs of our customers. Only after proper risk assessment, the premium is charged, followed by the final step of the issuance of the policy to our customers. Attaining minimum turn-around time to issue policies is our key deliverable at the underwriting stage. This is achievable due to the in-house robust IT infrastructure, which helps smooth the operations of real time business by connecting all 14 branches with our head office in Yangon.

Myanmar

Catering to the service industry, effective claims management is yet another significant step. Claim settlement is integral to establishing an insurer’s relationship with its policyholders. With strong commitment to our customers, IKBZ responds effectively to every claim intimation. Our surveyors undertake due diligence to avoid fraudulent claims. Policyholders are indemnified, complying with the contractual promises in the policy. IKBZ’s reputation is built upon fast and fair claims handling.

What makes us a trustworthy brand is our efficient claim settlement, proactive customer support, and regular interactions with existing policy holders. This has helped us gain the confidence in our policy holders, who are pleased to continue their businesses with us. We have achieved a near-perfect customer retention rate of 98.5 percent, abiding by the three pillars of customer retention: keeping customers happy, reducing customer’s effort and delivering excellent and proactive customer service.

In times to come, we expect the insurance regulatory body of Myanmar to liberalise the market further and allow private insurers to have bancassurance as a preferred distribution channel, which may act as a boon for us, as we are associated with the country’s largest private bank. We also hope and foresee that the Insurance Business Regulatory Body will open the market further, having monitored the phenomenal progressive performance of the private insurance companies in the last two years and therefore, eventually allow them with more premium insurance products going forward.

As the consultancy giant McKinsey & Company predicts, Myanmar’s economy could more than quadruple in size to more than $200bn by 2030. Having said so, we believe that opportunities and huge potential in the insurance industry will also accelerate for private insurers in the near future.

Emerging risk
Growing business gives rise to an increase in risk appetite, exposing the insurers to a sharp rise in losses. With the evolving risk environment, insurers must be prepared to merge proactive measures of risk management with the traditional standard protocols and approaches, to counter the losses. Risk education, co-insurance, re-insurance and a well-informed task force – the pillars of insurance – will help the insurers to develop innovative, customer-centric and market-penetrating customised insurance solutions.

With the advent of technology, insurers can now interact more closely with its customers, and are able to understand their needs. Insurance companies should shift the focus from risk, ratings and products to understanding customer data analytics, and offer risk advice and prevention services to customer, and customised solution to the customer.

New talents must be introduced into the business periodically to build a diverse workforce, promoting fresh ideas and innovation. These are the key to performance enhancement of the business and providing a better customer satisfaction.

Success doesn’t make us rest on our laurels. As a key contributor to the Myanmar insurance industry we must scale greater heights by providing products and services that exceed customer expectations. Quality has always been our watchword and will remain so forever.

Standing out from the crowd

Posted on by Ashton Wenborn

The past few years have seen markets fluctuating. Often, when stock markets are discussed as being turbulent, we mean deterioration; but over the last few quarters that hasn’t strictly been the case. Insurers and their investment strategists have returned to more comfortable domains in which returns are guaranteed.

For those buying into insurance policies, both private and institutional insurances have encountered a higher standard of performance, deliverables, and customer service. Following the downturn, many insurers struggled, but those who managed to weather the storm have realised a new way of fulfilling client needs. A great lesson has been learnt in customer retention – not standing still but ensuring ongoing, better relations.

Regulation control
Across financial services, firms have had to deal with tightening regulations while offering better returns to investors. While new capital buffers make sense from a worst-case scenario point of view, those funds could be used to sustain and create more business. And as regulations continue to evolve in national boundaries, organisations – especially multinational organisations – have struggled to keep business on track while complying with the shifting hordes of legislation.

Research into markets has proven this to be the case. In its recent report in tandem with PwC, the Centre for the Study of Financial Innovation (CSFI) argues that regulation has provided a continued and disruptive influence on the market: “Regulation is once again a prominent banana skin across all segments of the industry. The latest wave of regulatory change is not only creating huge operational disruption, but also calling into question longstanding strategic certainties. Costs, prices and returns could soon become unsustainable if the changes aren’t managed effectively.”

World Finance Global Insurance Awards 2015

With the sheer volume of regulations impacting every aspect of business, organisations have had to reassess the way they conduct themselves in the market. And while a number of the enforced regulations are long-term in nature, as the CSFI report suggests, there are many changes that have been enforced with immediate effect that have led to substantial operational rearrangement.

The report goes on to highlight the cumbersome nature of many of the regulations, and the impact this is having on sentiment: “Concern is driven by the quantity of regulatory reform at all levels, in particular the EU’s Solvency II Directive. The fear is that these initiatives are loading the industry with costs, and distracting management from the task of running profitable businesses, as well as heightening compliance risk.”

It is in this face wave of regulation and legislation that firms must perform to the best of their abilities, while aiming to recover and rebuild following the slowdown in financial markets – a tough task for even the most able firm.

Strong in-house sentiments
And yet, many organisations are seeing the possibilities before the market. In its annual insurance outlook for the year, Swiss Re has identified challenges with accompanying opportunities. The firm’s analysis suggests that globally, the market will show signs of improvement, albeit different regions are showing mixed signs. Despite interest rates rising in many regions, long-term investments may struggle to pay out decent yields. Non-life premiums will rise by around 1.45 percent in advanced economies, while emerging markets will see a growth of eight percent in the sector. Across the board, life premiums will rise by four percent for the year, while property catastrophe reinsurance will remain under pressure. So, while clawing back into investment opportunities is proving difficult, it seems that going back to the core business of purely serving clients while improving within that market is a on the horizon and a distinct focus area for insurance providers.

Searching for yields in financial markets has been difficult over the last few years. With bond markets showing some signs of recovery in certain geographies there may be options ahead, but the stagnation that has stifled markets in the last few years generally riffles on.

A lifetime promise
Each segment of the insurance markets has been presented with a unique challenge to overcome between now and the next round of regulations. In the life insurance sector, central bankers’ persistent reliance on low interest rates has hurt saving product potential and investment returns. Other concerns are associated with the structure of the industry and political interference in the form of pension and healthcare reform. For non-life insurers, the growth of cyber risk has raised concerns for many practitioners, as underwriting online unknowns becomes more and more difficult to quantify. The segment has also become more and more aware of climate change over the last few years, as it has with catastrophe risk – the two of course being entwined. Reinsurers have become concerned with new types of capital and excessive capacity from sources such as hedge funds and other equity providers. On top of that, issues have been raised from a number of quarters about a lack of ability in risk management across financial services in general.

Concerns raised by brokers and intermediaries have been illuminating insofar as they have highlighted the need to recognise the changes hitting the industry. Recent reports have suggested that change management and a tighter focus on distribution channels are of utmost importance for brokers aiming to evolve with their clients’ requirements. A sign of the times perhaps that preparedness is one area considered lacking in many firms – understandable given the issues confronting managers in an ever-changing regulatory environment. In some cases, clients and reinsurers have identified a tendency in insurers to react to change a little slowly, causing knock-on ramifications for others in the industry, and a perception of a lack of determination and resources. One reinsurance provider however, recently pinned that on the influence of legislators, in that ‘over-regulation stifles creativity’. As organisations and their managers come to grips with the changing industry, surely regulators will produce a forward-looking and diverse marketplace?

At the same time, uncertainty within geopolitics has pushed up premiums and kept companies on their toes. The nuclear deal with Iran has suggested a dialogue may take place soon, but with indecision surrounding the future of the region, few multinationals are yet to take the next step in moving into the market. China’s ambivalence over the yuan has raised question marks over much of Asia, as Greece continues to influence much of the narrative in Brussels while Brazilian growth stifles, forcing economies across South America to look hesitant.

With the many challenges facing the industry forcing changes, insurance players have re-evaluated the way they do business. Many have disappeared in that process. Here, we celebrate those firms that have successfully navigated the year’s trials in the World Finance Global Insurance Awards, 2015. We’ve scoured the globe to once again uncover the top national performers in each sector, with the judging panel putting together a list of those firms who stand out from the crowd.

Global Insurance Awards 2015

Posted on by Ashton Wenborn

Argentina

General
Caja de Seguros

Life
BNP Paribas Cardif

Australia

Life
BT Financial Group

Austria

General
UNIQA Insurance Group

Life
Sparkassen Versicherung

Bahrain

General
Bahrain Kuwait Insurance

Life
Life Insurance Corp International

Bangladesh

General
Green Delta Insurance Company

Life
MetLife

Belgium

General
Ethias

Life
Argenta

Brazil

General
Allianz Brazil

Life
Brasilprev

Bulgaria

General
Armeec Insurance

Life
Sivzk (Tumico)

Canada

General
Intact

Life
Manulife

Caribbean

General
General Accident

Life
Scotia life

Chile

General
ACE Group

Life
Sura

Colombia

General
Liberty Seguros

Life
Bolivar

Costa Rica

General
Assa

Life
Adisa

Cyprus

General
Royal Crown Insurance

Life
CNP Cyprialife

Denmark

General
Topdanmark

Life
Sampension

Ecuador

General
Seguros Sucre

Life
ACE Group

Egypt

General
Misr Insurance

Life
Suez Canal Insurance

Finland

General
OP Pohjola

Life
Nordea Life Assurance Finland

France

General
Covea

Life
AXA Assurance

Germany

General
HDI-Gerling

Life
Zurich

Greece

General
Interamerican P&C

Life
NN Hellas

Hong Kong

General
AXA General Insurance

Life
HSBC Insurance (Asia-Pacific)

Hungary

General
Allianz Hungary

Life
Magyar Posta Életbiztosító

India

General
ICICI Lombard

Life
Max Life Insurance

Jordan

General
Middle East Insurance Company

Life
Jordan Insurance Company

Italy

General
Unipol Assicurazioni

Life
Poste Vita

Kazakhstan

General
Nomad Insurance

Life
JSC Kazkommerts Life

Kenya

General
CIC General Insurance

Life
British American Insurance Company

Kuwait

General
Kuwait Insurance Company

Life
Gulf Insurance & Reinsurance Company

Liechtenstein

General
Vienna Insurance Group

Life
Baloise Life

Luxembourg

General
AXA Assurance

Life
Swiss Life

Malaysia

General
MSIG Insurance (Malaysia)

Life
AIA

Malta

General
Gasanmamo

Life
HSBC Life

Mexico

General
GNP

Life
Seguros Monterrey New York Life

Myanmar

General
IKBZ Insurance

Life
IKBZ Insurance

Netherlands

General
Achmea

Life
Srlev NV

New Zealand

General
TOWER

Life
Asteron Life

Nigeria

General
Custodian and Allied Insurance

Life
AXA Mansard Insurance

Norway

General
SparBank 1

Life
Nordea Liv

Oman

General
Oman United Insurance

Life
National Life

Pakistan

General
Adamjee Insurance

Life
EFU Life

Panama

General
Assa

Life
Pan America Life

Peru

General
Rimac Seguros

Life
Pacifico Seguros

Philippines

General
Charter Ping An Insurance Corporation

Life
Pru Life

Poland

General
UNIQA

Life
MetLife TUnZiR

Portugal

General
Allianz Portugal

Life
Ocidental Companhia Portuguesa de Seguros de Vida

Russia

General
AlfaStrakhovanie

Life
Renaissance Zhizn Insurance Company

Saudi Arabia

General
Bupa

Life
Medgulf

Serbia

General
Generali Osiguranje Srbija

Life
Generali Osiguranje Srbija

South Korea

General
Samsung

Life
Hanwha Life

Sri Lanka

General
Janashakthi

Life
Ceylinco Life Insurance

Sweden

General
Trygg-Hansa

Life
Alecta

Switzerland

General
Swiss Mobiliar

Life
Swiss Life

Taiwan

General
Chung Kuo

Life
Fubon Life Insurance

Thailand

General
The Viriyah Insurance

Life
SCB Life Assurance

Turkey

General
Zurich Sigorta

Life
Garanti Emeklilik ve Hayat

UK

General
Allianz UK

Life
Legal & General

US

General
Progressive Corporation

Life
Lincoln Financial Group

Vietnam

General
Bao Viet

Life
Bao Viet Life

Green Delta Insurance Company works to provide for all of Bangladesh

Posted on by Ashton Wenborn

Opportunities in the Bangladesh insurance industry are as vast and undertapped as they were a half century ago, that’s according to Farzana Chowdhury, Managing Director and CEO of Green Delta Insurance Company (GDIC). Irrespective of the country’s political and economic challenges, the industry boasts much in the way of potential, and it shows no signs of slowing up in the years ahead. We spoke to Chowdhury about the country’s changing insurance industry and GDIC’s place within it.

How has the insurance industry developed in Bangladesh?
Despite being among the most populous countries in the world, with a population density (individuals per sq km) of about 1,200, insurance penetration is a mere one percent or so. However what gives us the confidence that the scenario is changing much faster today than in the past is that structural long-term drivers are firmly in place, including the demographic dividend, sustained economic performance, rising household incomes and an easing of monetary policy. The Bangladeshi insurance sector continues to evolve as it adapts to the ongoing regulatory, socio-economic and political changes.

Most of the population, especially at the grassroots level, do not even know there is something
called insurance

Why is there a general lack of awareness regarding insurance in the country?
The insurance industry is at a very nascent stage. Most of the population, especially at the grassroots level, do not even know there is something called insurance. Concurrent with this challenge are the facts that formal social security is almost non-existent, quality healthcare costs are extremely high and typically out of reach of the masses, and, in the case of corporate contingencies, especially in the small- to medium-sized segments, they tend to lose almost everything without any hope of getting back on their feet.

The reason lies in the mindset of the population. Most consider this product as something that’s good to have rather than a necessity. In Bangladesh, the number of insurance companies is more than the necessity, meaning that companies indulge in unethical business practices, which has triggered a negative perception in consumers’ minds.

How do you intend to address this issue?
Having been in this market for the past three decades, we understand the value of insurance and realise its immense contribution towards providing financial, as well as social security. So when we say that our intent is to provide insurance for all, what we’re really saying is that we are focused on safeguarding not just the interests of the citizens of our country but ringfencing the interests of the nation too.

Over the past decade or so, we were in the institution-building mode and focused on growing awareness on the potential benefits of insurance for our countrymen. In doing so, our topline grew substantially from BDT 515.30m in 2004 to BDT 2681.37m in 2014, positioning us as the largest and most trusted non-life insurance enterprise in Bangladesh.

In the next phase of our evolution, which began sometime in early 2013, we’re focusing on controlled growth with a concurrent focus on profitability. I am happy to state that this overarching objective is already bearing results. Hence, 2014 can be summarised as the year during which we focused on the quality of our portfolio and, coupled with a tight control on our operating costs, we recorded a 4.46 percent growth in our net profit after tax to BDT 239.25m.

Could you tell us how Green Delta has developed and grown over the years?
GDIC is one of the leading private non-life insurance companies in Bangladesh. Incorporated in 1985 as a public limited company, under the Companies’ Act 1913, business started in 1986, with a paid up capital of BDT 30m. Now, GDIC has amassed about BDT 807m with a credit rating of AAA and ST1. GDIC holds the proud distinction of being the first ever company to raise its paid up capital to such a level.

Under the charismatic leadership of Nasir A Choudhury and myself, GDIC has been leading the winds of change in the insurance industry of the country in terms of service standard, innovative products and legislative restructuring. After a glorious journey of three decades in the insurance sector, GDIC has now become a big family of visionary board members, 600 plus committed staff, numerous valued clients and thousands of esteemed shareholders. By now, Green Delta has been able to uphold the brand image as a prompt claim settler, superior service provider, and diversified product supplier – almost like a one-stop solution provider in the non-life insurance sector in the country.

You aim to provide insurance for everyone. How do you deliver on this promise?
To offer one example, women constitute around 52 percent of our population and to cater to this large and growing segment, the time was just right to launch a product exclusively for them. Nibedita is the first such product in the non-life insurance industry of Bangladesh focused on providing comprehensive coverage exclusively to women (with trauma allowance). Hence, bundled with the product, we also provide counselling and therapy sessions for their holistic well-being. Nibedita is also not just a standalone comprehensive insurance product but an assurance that women can cope with the crisis at hand and are able to restore their confidence.

To give another, Shudin is a health insurance programme exclusively covering workers in the ready-made garments (RMG) sector. This product is clearly in response to the Rana Plaza tragedy of 2013 where over 1,100 workers were killed and several others injured when the building, largely comprising RMG factories, collapsed. We are also actively working with the Bangladesh Garments Manufacturers Association and the International Labour Organisation to co-develop a policy that is truly effective for the target segment and help them realise the underlying value of insurance.

Thus we address national issues and come up with new and innovative products to cater to the Insurance need of people from all walks of life.

Bangladesh GDP growth

What does the future hold for Green Delta?
Despite a politically and economically challenging environment, the Bangladeshi economy has consistently reported an average of six percent growth over the past few years, making it among the fastest growing economies in the world (see Fig. 1). Given the high growth and increasing income levels, the household income flowing into insurance is expected to continue to increase in the future. One demographic advantage in Bangladesh is that the working population is expected to rise in the coming years, translating into an increasing customer base for the industry.

For the coming financial year, growth is now projected at 6.4 percent, slightly higher than earlier forecast, as a revival in worker remittances is expected to bolster private consumption, while private sector investment will pick up on greater political stability. Moreover, the government will continue its efforts to step up project implementation. Currently we are seeing a consistent 13-15 percent growth every year in the insurance industry. The consistency of the growth gives us hope regarding a brighter future of the industry. However, if the growth in the sector reaches 20 percent every year, that will be remarkable. We are determined to play a vital role in helping this industry reach the desired growth. The market penetration of insurance is currently less than one percent. With our flagship project ‘insurance for everyone’ and the government’s recent praiseworthy initiatives related to safety net insurance to give coverage to the bottom of the pyramid group, we are hopeful regarding the possibilities of a five percent market penetration within five to 10 years’ timeframe.

GDCI holds 13-14 percent of the market share of the insurance industry and is the leader of the non-life insurance sector in the country. In the decade ahead, if our projections work out properly, we will be more aggressive in the market and aim to capture the 22-25 percent of the market share. But we don’t want to grow alone; we want the whole industry and the other insurance companies to grow with us. That will eventually help us realise the concept ‘insurance for everyone’.

Tumico: Bulgaria must fix laws to create a fairer insurance landscape

Posted on by World Finance

The Bulgarian financial sector is undergoing dramatic transformations. Georgi Borisov and Venelin Georgiev from Tumico discuss the legislative and regulatory challenges that insurance companies face in Bulgaria, and the benefits that EIOPA’s Solvency II directive will bring to Bulgarian insurance.

World Finance: The Bulgarian financial sector is undergoing dramatic transformations. Here to shed light on these changes: Georgi Borisov and Venelin Georgiev.

Now first, tell me about the challenges in your local sector.

Georgi Borisov: The national legal framework allows us to do business only in the field of long term life insurance.

We’re deprived of contact with the short term life insurance contracts, which is the main sector of life insurance in Bulgaria.

For example, the company can grow significantly, even in production volume, if some unfair legal texts are just removed from the legislation. And this is one of our main goals for the future.

Some examples can be given. First, pensions that are paid from premium pension funds are not subject to taxation, whereas insurance savings are taxed.

Second, payments of premiums to pension funds is regulated and smooth, while insurance payments to insurance companies often depend on the mood of the employer of the applicant for insurance.

Third, tax authorities and the government violate regulations and directives of the European Union. There is a lack of dialogue between the government and business. The opinion of Mr Tony Thompson, who is the representative of the World Bank for Bulgaria, is that government is a partner and regulator to be avoided by business.

World Finance: We’ve just heard from Georgi some of the issues that your industry has faced; tell me about your company, and how it’s been able to transcend these problems and build a long term growth strategy.

Venelin Georgiev: Many managers advise their companies to change and rethink their goals. We at Tumico however defend the opposite idea. Because of the restrictive legal framework, we defend product simplicity and universality.

The form of simplify and repeat is received very well by the market. That is why in our practice we constantly develop more clearly defined target groups of people – also add limiting characteristics that are placed on all our papers and advertisements. Combined with altruistic product content, which says that with us it’s easy, and we hold it is so.

Georgi Borisov: I would also add that simplicity is a useful tool against the growing complexity of corporate structures. To manage with globalisation, companies are beginning to use complex metric systems of management. This is a hidden killer of the current type of business.

To avoid this, we strive for simplicity: but only simplicity is not enough. Along with it, Tumico has the following business practices: rejuvenation of staff, education of our own talent, concentration of our resources and market action, and solving complex administrative tasks by small groups of highly qualified specialists.

World Finance: Venelin, what are your clients asking for mostly? Is it corporate or private insurance?

Venelin Georgiev: We have different types of clients, but we have focused on the hardest segment: this is product at the expense of the insured.

The reason for sincere price is that through all those years, we managed to stop the turnover of our members. It should be noted that when Tumico was founded, this was a significant problem. Of all 662 people who founded the insurance company, today only three of them are still members. But in the last year, 2014, just 14 of our 30,000 members ended their membership. So you can see that fighting turnover is a very small component of our work.

World Finance: Fascinating; so tell me Georgi about how you’re preparing for Solvency II. We know that it’s coming, what’s the industry responding with?

Georgi Borisov: We understood the full meaning of Solvency II when we made our own forward-looking assessment of own risk – formally known as ORSA, Own Risk and Solvency Assessment. Solvency II looks forward in time and estimates a larger volume of factors that affect solvency, while the Solvency I directive was focused on the past and present.

But there is also a hidden effect. Questions set by EIOPA in Solvency II were a huge exchange of experience between European insurers. So this was a most pleasant surprise.

World Finance: Georgi, your company in particular, let’s talk about some of the changes that are coming.

Georgi Borisov: Corporation membership in AMICE, the Association of Mutual Insurance and Insurance Cooperatives in Europe, where Tumico was accepted and welcomed as a full member, turned out to be very useful. This is the main reason, according to us, that we are in step with EIOPA’s and the local regulator’s requirements.

World Finance: OK. So finally Venelin, what does the future hold for the Bulgarian insurance industry?

Venelin Georgiev: Gear and depth of insurance penetration will grow with the increase of peoples’ wellbeing and care. In social insurance, the obligations and rights of the business should be aligned with those of the state to its citizens, at least.

In Bulgaria there’s a difficult process of the separation of the state from its social activities, because of the structure of our country’s debt. It is still the largest employer, and its own structures provide the population with healthcare and pensions.

This must be changed so that the market advantages can become available for citizens.

Russia’s Irkutsk Oil becomes one of the biggest producers of oil and gas

Posted on by Ashton Wenborn

Irrespective of the challenges facing fossil fuels in Russia today, Irkutsk Oil has strengthened its position as one of the leading independent upstream producers, not just in East Siberia but also in the whole of Irkutsk region. Within the last four years, it has boosted per day production by 630 percent, and last year produced 4.1 million tons of oil and condensate.

According to an industry expert, Irkutsk Oil has become “the largest company among the small players” and led the charge to boost output in East Siberia. “I want to put East Siberia on the map as an oil producing region”, said Nikolay Buynov, Chairman of the Board of Directors. “We are confident that our joint efforts will not only contribute to the growth of our business, but also to the socio-economic development of the areas where the company operates.”

On June 5 2015 Irkutsk Oil produced its 15-millionth ton of hydrocarbons since it began operations in November 2000 – achieved propitiously in the lead-up to the company’s 15th year in business – demonstrating the solid growth that Irkutsk enjoys to this day.

In the first half of 2014 crude oil prices were over $100 per barrel, only to later lose more than half of that value throughout the second half of the year

In 2015, it plans to produce up to six million tons of crude oil, increasing production by about 50 percent. In order to meet production growth, the company has launched plans to increase the capacity of the Markovsky uploading facility from 3.4 million to seven million tons. The expanded and modernised facility will feature three storages, measuring 20,000 cubic meters each, along with sieves, pumps, a power supply system, and other facilities.

Even in a challenging climate, the company continues to expand its resource base. In 2014, licenses for the geological study, exploration, and production of hydrocarbons at the Verkhnetirsky and the Verkhnenepsky blocks were bought at the state-run auctions. Both of the new licence blocks are located in the Irkutsk region and border licenced blocks already owned by the company, bringing the total number of licence blocks and fields in Irkutsk Oil’s portfolio to 22.

The company’s impressive development has not gone without recognition, and the company was included in the list of Russia’s top-30 fastest-growing companies, receiving the honorary second place. Organised by the most prominent Russian business news agency RosBusinessConsulting (RBC), the journalists who conducted this research added that it was very positive young fast-growing companies such as Irkutsk Oil that are capable of influencing industries and sectors, as well as creating new markets in the current economic environment.

Using advanced technology
The good news comes as a result of the company’s growing number of producing wells, with exploration and production drilling spanning nine fields and licence blocks in the Irkutsk region and the Republic of Sakha (Yakutia), about 70 percent of which is located at the Yaraktinsky field. The amount of drilling has increased in comparison with 2013, up from 177,000 to 300,000 in metres. Moreover, the company applies modern stimulation techniques and enhanced oil recovery methods in problematic wells.

In 2014, Irkutsk Oil began to carry out pilot testing of a new sulphur removal unit at the Yaraktinsky field. The new facility enables the company to remove some sulphur impurities contained in crude oil of certain wells at this location. The first stage aims to reach the apex of the total processing capacity of sour oil, achieving up to 600,000 tons per year. In the second stage of production in 2016 Irkutsk Oil plans to extend its capacity up to 1.3 million tons per year. The company is also considering an extension of neighbouring facilities, assuming further production will increase. The new facilities will enable the building of additional wells that were previously unattainable, due to abnormal sulphur content in the collective operation.

Last year was not only a year of record highs, but it also proved to be one filled with challenges. In the first half of 2014, crude oil prices were over $100 per barrel, only to later lose more than half of that value throughout the second half of the year. The company had to quickly adjust and react to the sharp decline in oil prices and the volatility associated with the roller-coaster ride of exchange rates, coupled with the deteriorating lending capacity of financial institutions constrained by sanctions. The group’s low financial leverage, growing production, and smart allocation of resources helped it to navigate in the stormy waters of the economic turbulence in Russia.

“We step in the difficult way, and that is not only because of the oil crash”, said Buynov. “In 2017, the production at the Yaraktinsky field may reach the maximum level and then it could start to steadily decrease. To lift output we plan to apply the advanced technologies, enhancing oil recovery such as water-alternating-gas injection.” Moreover, Irkutsk Oil is getting ready to pay more taxes for mineral extraction – the tax incentives for Yaraktinsky field expire at the end of 2017. “But there’s no time to stop. We just have to get on with our work. We become stronger, sturdier and more independent with each coming year”, said Buynov.

The company is facing many challenges, mostly in connection with production growth, that require it to quickly adopt to new and advanced technologies. Motivated professionals are indispensable in facing and overcoming these challenges. In a bid to improve HR management quality, Irkutsk Oil began to strengthen its management team and employ highly skilled specialists. “This improvement claims attention because new employees should be involved in business processes as quickly as possible”, noted Tatyana Lukachich, the Deputy Director General for HR.

She added that Irkutsk Oil implements measures directed at the improvement of the HR management quality, the creation of a transparent staff recruitment process, the efficient evaluation of the capabilities and performance of the company’s personnel, as well as the implementation of health and social safety programmes. The company’s HR policies create a favourable environment for employees’ self-improvement, new skill development, and career advancement.

A worker monitors gas pressure at Irkutsk’s main oil and gas condensate development, Irkutsk, East Siberia
A worker monitors gas pressure at Irkutsk’s main oil and gas condensate development, Irkutsk, East Siberia

Keeping operations fresh
The company is also focused on advancing staff training. In 2014, a corporate training centre was created to provide educational classes, as well as occupational and fire safety training. It also cooperates with many higher educational institutions and organisations in Irkutsk, Moscow, and other cities that provide training, re-training and qualification development to personnel. Professional training courses are screened and selected to maximise their effectiveness and to provide employees with the required knowledge and expertise.

Therefore, by the end of the 2015, the company plans to create a list of appropriate training courses for every employee. “We are going to improve the system of staff training and development, making it transparent and constant”, said Lukachich. “It allows us to attract and retain motivated, skilled personnel”. The company is well known as a desirable employer: in 2014, Europe’s leading staffing agency SuperJob placed the company repeatedly among the top in a list of more than 850,000 top employers.

Despite a great and growing number of socio-economic challenges, Irkutsk Oil continues to implement large-scale environmental projects in areas where the company operates. It uses its best efforts to preserve favourable conditions for the environment and promote the rational use of natural resources at all of its fields and licence blocks.

In particular, the company applies maximum effort to industrial and household waste effective management. It has installed systems for the thermal destruction of oil sludge and household waste. Furthermore, Irkutsk Oil has built and operates a solid waste landfill, which is used free of charge by the local village Verkhnemarkovo. In 2015, it began preparations for building a solid waste landfill at the Yaraktinsky field. Moreover, the landfill will receive drill cuttings, and Irkutsk Oil plans to construct a wastewater treatment facility at this same location. The company strives to protect both surface and subsurface water resources and minimise its impact on water resources at all stages of exploration and production.

Irkutsk Oil’s environmental projects and its rational use of natural resources have been acknowledged by the World Wildlife Fund and the Creon Group, which included the company in Russia’s top five environmentally responsible oil companies in 2014. The company landed fifth in the ranking among 19 leading Russian oil and gas companies by the World Wildlife Fund. The companies were compared using 28 measures in categories such as environmental management, environmental impact, information disclosure, and transparency.

Both the World Wildlife Fund and Creon Group recognised Irkutsk as the third best company for environmental impact. According to the organisers of the project, the purpose of this rating is to promote effective use of hydrocarbon resources, environmental protection, and the socially responsible management of business in Russia, all of which Irkutsk Oil does to great effect.

Owning the market

Posted on by Ashton Wenborn

What happens when governments own markets? When prices are backed by the state for political reasons? Where the state does everything it can to encourage people to make highly leveraged bets on the market – and steps in to intervene whenever something goes wrong? Where as a result investors, most of whom are complete amateurs, are convinced that prices can only go up? And where a decline in the market will affect not just asset prices, but the entire economy – because so many people are involved in the game?

Of course, all this goes against the spirit of free-market capitalism. You might think that it could only happen in a state-run economy, like China, with its persistent attempts to prop up the stock market. But it also applies in non-Communist countries – including Canada.

As shown by the Chinese stock market, the state can back up prices to a degree, but at some point
reality sets in

Some two years ago, I wrote in this column that Canadian house prices were completely out of whack with standard metrics. According to The Economist, prices at the time were overvalued by 78 percent in relation to rents (the highest in their survey of 18 countries), and 34 percent relative to income. Institutions such as the OECD and IMF were yelling warnings from (and to) the rooftops. I concluded that: “Canadian housing is in a bubble, caused in large part by the existence of extremely low interest rates… Instead of a crash, expect a gentle sag. At least until interest rates go up, as they eventually will.”

So far, according to the Teranet index, that prediction has proved accurate in three of the top-five housing markets, with Montreal, Ottawa, and Calgary peaking in mid-2014, even though the benchmark interest rate has actually halved to 0.5 percent. However, Toronto and Vancouver have continued to bloat. Earlier this year, the average price of a detached house surpassed a million dollars in Toronto, and twice that in Vancouver. This despite the fact that Canada’s economy was in a funk after the collapse in its main export, oil.

There are clearly a number of factors involved. For example, foreign ownership in these cities has probably helped drive up prices, though no one knows for sure because data on said foreign ownership is not available. But perhaps the main reason has less to do with the invisible hand of supply and demand, than with the visible, if heavily-camouflaged, hand of the state.

Troubled assets
For many decades house prices in the US and Canada tracked quite closely, but they diverged significantly in the aftermath of the 2007 financial crisis – instead of crashing like over the border, Canadian prices dipped only slightly before resuming their glorious upwards march. This success was attributed to a robust banking system, coupled with a mythical cultural aversion to excessive debt. However there was more to the story than that.

As investment advisor Hilliard Macbeth notes in his timely book When the Bubble Bursts: Surviving the Canadian Real Estate Crash, the Canadian Government is heavily involved in the housing market because they provide subsidised mortgage insurance for banks. This is rather like allowing stock market investors to borrow from banks, and guaranteeing that if things go pear-shaped the state will step in. During the crisis, the government launched an Insured Mortgage Purchase Programme, which dramatically extended this insurance. At $69bn, its scale was in relative terms the same as the famous TARP in the US, but it received far less attention or debate. They also temporarily lengthened maximum mortgage periods to 40 years (though that has since been scaled back to 25) and changed the rules so that homebuyers could raid their tax-free pension accounts to make a down payment.

As in many other countries, interest rates were set to emergency levels. When the Bank of Canada cut its rate even further in 2015, this crashed the Canadian dollar, but allowed the house-buying spree to continue unabated, which was convenient for a fall election. Residential investment has ramped up so that it now accounts directly for about seven percent of GDP, more than the 6.3 percent reached at its peak in the US (which has now collapsed to about half that level). Cities such as Toronto and Montreal are awash in freshly completed condominiums looking for buyers. Construction is so important that any slowdown will hurt the economy, which will reduce housing demand, which in turn will reduce construction in a negative feedback loop.

Handle with care
So how long can the last remnants of this real estate boom continue? According to Hyman Minsky’s Financial Instability Hypothesis, a marker for the final stages of a credit cycle is the appearance of buyers who – like the NINJA borrowers with ‘no income, no job and no assets’ of the US sub-prime crisis – can’t service interest payments but rely on the borrowed asset increasing in value. In Canada, you can buy a home with only five percent down, but in 2015 more than a quarter of down payments from first-time buyers were themselves borrowed (not sure where they got the down payment for those loans). If buyers can’t afford the down payment, maybe they can’t afford the house.

An even stronger indicator, though, is total faith in the market. As Minsky put it, “Success breeds a disregard of the possibility of failure.” Or as one of Macbeth’s investment clients told him, “Real estate always goes up in value.” Risk seems lowest when everyone is in perfect agreement, which of course is when risk is highest.

As shown by the Chinese stock market, the state can back up prices to a degree, but at some point reality sets in. And with near-zero interest rates, and rates expected to rise in the US, there is little more that the government can do, short of actually buying all those condominiums themselves – it’s hard to arrest ‘malicious’ short-sellers, though they could crack down on renters.

This leaves them in a bit of a quandary. When speaking about Iraq, Colin Powell used to cite the Pottery Barn rule: “You break it, you own it.” The converse is that, if you own it, it’s your problem if you drop it. As the result of a long series of policy measures designed to keep homeowners happy, the state now owns the Canadian housing market. When the central bank eventually tries to raise interest rates, it will be hoping that it doesn’t shatter

Johnson: British Virgin Islands must innovate to remain competitive

Posted on by World Finance

The British Virgin Islands has long been considered a leading financial centre, with its business-friendly government. But stronger competition in the incorporations space is forcing the BVI to innovate its offering. Julien Johnson, Executive Director of BVI Finance, explains how the British Virgin Islands has changed, and introduces two innovative new funds.

World Finance: The British Virgin Islands has long been considered a leading financial centre, with its business-friendly government. With me to discuss the opportunities the region represents is Julien Johnson, from BVI Finance.

Well Julien, the British Virgin Islands of course is one of the leading financial hubs, but what sort of opportunities does it represent?

Julien Johnson: Well, the BVI has been an important part of the global economy for a very long time.

The main BVI advantage really is a robust regulatory framework that meets, and in many instances, exceeds, regulatory standards.

We have an entrepreneurial business community, we have a government that is committed to coming up with new legislation that meets the needs of the industries.

We’re also a price-competitive jurisdiction, in terms of our fees: our legal fees and corporate services fees are very competitive, making the BVI a cost-effective place to do business.

We also have an independent legal and judiciary system based on English common law, with highest appeal to Privy Council in London, which is attractive to investors.

Beyond that, we have a very good cadre of professionals working in the industry, resident in the BVI, who can provide services in every sector, whether it be trust funds, the captive insurance business, incorporations business. We also have most of the leading firms with a presence in the BVI. So it’s really a one-stop shop for all of your offshore financial services needs.

World Finance: Well when people do think of offshore jurisdictions, they often think of money laundering; so how do you ensure that business is above board?

Julien Johnson: Well, the global fight against money laundering is an evolving process. The BVI has long been a part of this process; in fact, the BVI was one of the very first jurisdictions to institute anti-money-laundering laws, going as far back as 1999.

We have a very robust anti-money laundering framework; we take very seriously our role in combatting money laundering globally. And as I said before, we meet and in most cases exceed international standards.

World Finance: The BVI prides itself on setting the highest standards when it comes to regulations and transparency; so, how advanced is this?

Julien Johnson: Setting the highest standards for transparency has really been a part of the BVI’s strategy in maintaining its competitive advantage. The BVI has signed 27 tax information exchange agreements with various countries around the world. Most recently the OECD has upgraded our rating to largely compliant in its latest peer review, which is a huge endorsement of the work that we have done as it relates to transparency and international cooperation on tax matters.

It’s a fundamental part of our business model, and one that we’re very proud of our achievements in this area of cooperation and transparency.

World Finance: You do face growing competition in the low-cost, high-volume offshore incorporations business; how do you approach this?

Julien Johnson: Well, there certainly is growing competition. The BVI’s approach now is really to look beyond incorporations. Obviously incorporations is our core business, and a very fundamental part of what we do. And really what provided the growth in the industry, and where we started from. But we’re looking beyond that.

We’re a one-stop jurisdiction that offers many other products and services. As an example, the BVI recently launched two new funds products: the approved fund, and the incubator fund, which are geared towards start-up managers, and also managers who are focusing on a very small group of connected people. So these are examples of very new and innovative products that we have launched in response to growing competition in the market, and a need to diversify ourselves.

Beyond that, the BVI has recently launched a campaign called BVI forward, which is the result of a report done by the global consultancy firm McKinsey and Company, which is really an overview of the financial services industry in the BVI, and to develop a plan to move it to the next level.

So, parts of that report are actually a key focus on value-added services, and developing additional value in the industry for its growth. So we’re very excited about that, and certainly there will be a lot more coming out of that very soon as we move financial services to the next level in the BVI.

World Finance: Finally, how does a company go about setting up in the BVI, and what do they need to be aware of?

Julien Johnson: As the world’s leading domicile for offshore companies, the BVI has established a BVI Business Company that is the core of many businesses globally.

The success of the BVI Business Company has really been the foundation of the financial services industry in the BVI. Over a million companies incorporated to date – half of which are active.

The BVI has developed a very efficient company registry. So the process of establishing a business company in the BVI is fairly easy, once the proper due diligence is performed, and customs and things have been satisfied.

The actual set-up of a business company is done through a local registered agent; a list of those are available at bvifs.vg. And the agent is responsible for setting up the company and administering it, as well as ensuring that the business behind the company is one that is legitimate, and will not bring disrepute to the industry.

Royal Forex: You have to be totally transparent with your clients

Posted on by World Finance

The current volatility and fluctuation in global currencies have boosted the popularity of investing in the foreign exchange market. Ghassan Elias Kteily, AGM/Chief Growth Officer for Royal Forex Trading, discusses the opportunities for traders, and the challenges for brokers – as well as the likely trends that will emerge as Chinese growth slows.

World Finance: The current volatility and fluctuation in global currencies have boosted the popularity of investing in the foreign exchange market. 

With me to speak about how best to navigate this industry is Ghassan Elias Kteily, AGM/Chief Growth Officer for ROYAL Forex Trading.

Well Ghassan, the forex market. Tell me about the opportunities and indeed the challenges that represents?

Ghassan Elias Kteily:  The abundance, if you like, or the approachability of the foreign exchange market makes it easy to trade. And a factor that really adds to that and enhances trading, is the low margin – that’s the leverage. The low margin, which is as low as one percent, and sometimes a quarter of a percent or half of a percent, enables you to trade 200 times your money.

It gives the opportunity to speculators to trade with very little money, big amounts and volume of foreign exchange. However, it increases the risks and rewards – so this is an opportunity and it is a challenge at the same time.

Well ROYAL is a global financial trading brand and you offer your services through headquarters in both Beirut and Sydney but when it comes to trading and data security, how do you deal with different jurisdictions?

Ghassan Elias Kteily:  We chose to be fully regulated in both jurisdictions in Lebanon by the CMA, which is the Capital Markets Authority; and in Australia by ASIC, which is the Australian Securities and Investment Commission.

So when we talk about data security, we are talking about protection against cyber attacks. Companies like ROYAL through adhering to the requirements of the regulators – that is segregating the clients funds, putting in place proper risk management strategies, meeting with all the liquidity ratios – do guarantee that funds are secure, and that clients can worry about trading in the markets, not about their funds being secure or not with ROYAL and other companies.

World Finance: And those trading in the Middle Eastern markets differ from that of the west?

Ghassan Elias Kteily:  The Middle East’s investors are as sophisticated as they are in the rest of the world. However, eight countries in the GCC and in the Middle East have their currencies pegged to the dollar.

So for them, currencies are pegged, and there isn’t much uncertainty over there. People tend to trade commodities instead: oil, gold, silver and so on and so forth.

Trading commodities is more risky than trading currencies. And Middle Eastern investors work on a tactical, not a strategic basis. And that’s what makes their trading more short-term and abrupt: so, quick trade will come out. While with the European investor, you’ll find that they will take a strategic position, like with equities, and leave it for a longer-term.

World Finance: And when it comes to regulation, how stringent is your industry?

Ghassan Elias Kteily:  Very stringent. Regulators have opted for stipulating and dictating more rigid parameters and benchmarks that will regulate the industry. And accordingly, they have imposed higher margins, more capital requirements, higher ratio requirements, to ensure that companies stay on the safe side. Consequently, the investors, the clients, and their moneys are safer.

World Finance: Transparency is of course a huge issue, how do you approach this?

Ghassan Elias Kteily: Transparency relates to many aspects. There is trading transparency: that is, what you demonstrate on your website. You have to advertise and promote what you really do offer – you have to be totally transparent with clients regarding spreads, fees, commissions, the depth of the liquidity you have. And in volatile markets clients will be concerned very much about having their orders executed.

And this what you should be transparent about. Basically, advertising honestly and transparently how much you can help the client transact his transaction and his business through you as a company.

World Finance: Now finally, we have seen the Chinese stock market having quite an impact on markets worldwide, so what other trends do you foresee impacting your industry over the coming months?

Ghassan Elias Kteily: What I foresee is that moving forward for the next 18-24 months, emerging markets and developing countries that are the major partners to China, like Brazil and other Latin American countries and some east European countries, which basically export steel and copper and wood to China; as the Chinese economy slows down, they are bound to be affected.

Their currencies are going to be affected because if you export less, to the second largest economy in the world, that means you are earning less foreign currency.

Likewise, it will affect their capital markets because their borrowing power will be less, you have to borrow at a higher rate and that means spending more, and that means, your capital market locally will be affected adversely as well.

Hong Kong insurance finds growth in China’s developing middle class

Posted on by World Finance

The Hong Kong insurance industry is operating in one of the world’s most challenging yet promising environments. Candy Yuen, CEO of HSBC’s insurance and pensions business in Hong Kong explains where the company is investing, how HSBC is growing its market share, and the four big themes that will affect the Hong Kong insurance sector over the next year.

World Finance: The Hong Kong insurance industry is operating one of the most challenging yet promising environments: with regulatory change, rapidly changing customer expectations, and subdued investment markets all influencing strategy. 

With me know is Candy Yuen from HSBC insurance Hong Kong to discuss. 

World Finance: Well Candy maybe you can start by telling me how has the insurance industry in Hong Kong developed over the past years?

Candy Yuen: Well, the insurance industry in Hong Kong has enjoyed good growth momentum over the past few years; we have been having double digit growth consistently for the past decade or so, especially on the life side.

For example, we just published the first half results and the new business premium grew by 25 percent and the long-term inflow premium grew by 15 percent, so it’s a growing industry.

As for HSBC, we are also enjoying the growth: we’ve been on the top of the market consistently. For example ever since the mandatory provident fund has been launched in 2000, we’ve been the number one in market share and we are also consistently in the top three on the life-side.

World Finance: And with changing customer expectations, how has this impacted products and services?

Candy Yuen: Before I answer your question maybe I’ll share with you the purpose of the HSBC, because I think that will help you to better understand how customer expectations impact our products and services.

The purpose of HSBC is to connect people to opportunities, enable businesses to thrive, economies to prosper, and help our people to achieve their ambitions and goals.

So we place everything about the customers’ needs in the centre of what we do. For example, we spend a lot of investment on doing customer research, understanding the customers’ priorities and preferences.

These kinds of studies give us great insight into what customers care about most, to create the products that actually meet the needs of the customers very well. And they’re very well received and have become our flagship products.

World Finance: How do you adapt your services to clients’ needs?

Candy Yuen: Well, we put the clients’ needs at the centre of everything we do. By asking questions, understanding the individuals’ financial circumstances, before we actually recommend the products for them and what is the required coverage for them. So this is all need-based.

And secondly, we provide our customers a lot of choices. So in this way, the customers can help to choose the way they prefer to interact and do business with us.

We invest a lot in our digital technology and infrastructure, again making it easier, better, and faster to do business with us.

World Finance: What strategies will HSBC adopt to capture the growing trend of digital engagement with regard to insurance sales?

Candy Yuen: Same as in any other medium, customer experience is of utmost importance to the success of any products or services that we offer. So we want to understand our customers and their online behaviour, so that we can deliver the best products, and the most appropriate services and offerings through them.

And we also understand a growing proportion of our customers are appreciating the convenience of buying products online, so we also keep adding new products that could be made available online. We also constantly update the look and feel of our website and mobile apps, so that it keeps improving, and the customers find it easier to navigate, and use our website and mobile apps.

World Finance: It is expected that there will be even closer economic collaboration and co-operation between Hong Kong and Mainland China, so how will this impact the life insurance market in Hong Kong?

Candy Yuen: Since CEPA became effective in 2004, more than 10 years ago now, there have been a number of liberalisation measures that have been introduced which benefit the insurance industry and provide good opportunities.

Earlier this year, our group has already announced that we have a lot of focus on Asia, China and the Pearl River Delta areas: heavily investing to help to capture the growth markets there, and also, to help the emerging affluence of the middle-class – to help them achieve their financial goals. And insurance definitely plays a critical role there.

World Finance: Finally, what trends do you foresee impacting the insurance industry in the coming 12 months?

Candy Yuen: Nowadays, you know, with the fluctuation and high volatility in the equity market, I believe insurance will become increasingly important, as a long-term investment vehicle option. Because I think customers are looking for longer term, more stable returns, and possibly even with some level of guarantee.

And secondly, I think well – even though there is recently a fluctuation in the renminbi currency – I believe, you know, over the medium long-term, I thing renminbi is still increasing demand, so I think policies with renminbi denomination will also be gaining popularity.

Third is regulatory changes. You know, especially in Hong Kong, we will be having an independent insurance authority. Worldwide, the trend on the financial side is, we are moving towards market consistence, economic capital framework, we are also having increasing regulatory requirements on managing counter-risk.

Fourthly, and you know, digital, technological, breakthrough, I think that can be easily be a game changer. And in fact the competition, you know, is becoming very blurred. So I believe it would not be surprising if there will be new players, you know, joining us; with some interesting innovations.

In general, we are take it as positively because, you know, even though that could pose potential challenges but that definitely pose new opportunities for us to better serve our clients.

World Finance: Candy, thank you.

Candy Yuen: My pleasure, thank you Jenny.

Viriyah: Technology is changing the face of Thai insurance

Posted on by World Finance

The Thai insurance sector is growing from strength to strength, especially in the non-life sector. But a 33 percent drop in car sales in 2014 dramatically affected the motor insurance industry. Natdhanai Mankosol and Arthapas Cheuasangpun from Viriyah Insurance discuss the technological innovations that are helping Viriyah offer better services to their insurance customers.

World Finance: The Thai insurance sector is growing from strength to strength: especially in the non-life sector.

With me now is Natdhanai Mankosol and Arthapas Cheuasangpun from Viriyah Insurance one of the leading providers in the area to talk about how the sector is evolving.

Well Natdhanai if I might start with you let’s look at the economic and indeed the political situation at present in the country – how is that faring?

Natdhanai Mankosol: The political and economic situation in the past was not really that good. We got a new government, and the new government is trying to build a new system and economy; it’s trying to get rid of a lot of corruption and a lot of other problems.

The government is trying to create more new giant projects and invest money to help the economy grow more. There are a lot of projects going on. We are all – in Thailand – happy with our new government; we are getting better and we can see the light at the end of the tunnel.

World Finance: And Arthapas does this translate into a favourable environment for the non-life insurance sector?

Arthapas Cheuasangpun: Well, as predicted it will take a couple of years for the economy to fully recover. During that time the consumer market will decrease as households are spending less and saving more.

The automobile industry has also been affected by this – as you can see from the 33 percent drop in car sales last year. With 50 percent of non-life insurance premiums coming from this sector, it has caused a dramatic effect for the industry.

World Finance: This is a heavily competitive sector, how do you approach this?

Arthapas Cheuasangpun: We have 140 branches and claim service centres nationwide, operating 24/7, providing impeccable services for our customers.

We have the largest customer-base in Thailand, making us the leading Thai non-life insurer for the past few decades.

We are recognised as a trusted household name, and we pride ourselves in the satisfaction of our customers, especially now for our claim services.

Fairness is our policy, so we treat our customers fairly and honestly. We have further plans to enhance our services by incorporating new technology and innovation to maintain existing policyholders and to reach out for potential customers.

World Finance: Of course technology and innovation are changing the face of the insurance sector – so how do you see this developing? And how are you adapting alongside it?

Arthapas Cheuasangpun: Because we are embracing new technologies and innovation to increase the function and speed of our services, we’ve introduced three different projects this year.

The first – Viriyah Smart Claim, we call it VSC – which targets the convenient use of our customer. It provides a precise location of an accident for our nearest claim inspector to reach the scene within 20 minutes. This also provides us with valuable statistical information of frequent accidents, so we can have our staff stationed nearby for an even faster service.

The second, we call it Live Video Conference. This allows our claims staff to monitor repairs at different stages. With further development to allow our customer to monitor their vehicle personally.

Last is Fast Track Repair: this project is to ensure that all minor damages get repaired within 24 hours. With this technology and innovations that we’ve introduced, we are confident that we are adapting to the modern market.

World Finance: And finally Natdhanai, how do you see the insurance sector in the region developing in terms of needs and coverage; and how do you set to capitalise on this?

Natdhanai Mankosol: The AEC [ASEAN Economic Community] is coming really fast, it’s arriving early next year and we are going to see a lot of people travelling around the region, We’ve got to have our alliance in our neighbour countries, with their insurers.

We’re going to see many people travelling around and we can see it opens more opportunities for us to sell more travel insurance, or cargo, or what we call carrier liability insurance for both businesses and for people travelling around, especially in the future.

World Finance: Natdhanai and Arthapas, thank you.

Arthapas Cheuasangpun: Thank you.

Natdhanai Mankosol: Thank you very much.

China’s middle class becomes world’s biggest

Posted on by Ashton Wenborn

Global Wealth 2015: The Year in Review, a new report published by the Credit Suisse Group, reveals that the US is no longer home to the largest middle class on the planet. Overtaking its place for the first time is emerging economy China with 109 million adults now comprising its middle class – a clear margin ahead of the US’s 92 million. Home to one fifth of the world population, China now accounts for almost 10 percent of global wealth.

[T]he study also found that the inequality gap has widened this year

The shift indicates that the trend of a global expansion of the middle class is on-going, particularly in emerging countries and in Asia. “As a result, we will see changing consumption patterns as well as societal changes as, historically, the middle class has acted as an agent of stability and prosperity,” said Tidjane Thiam, CEO for Credit Suisse.

That being said, the study also found that the inequality gap has widened this year, with greater wealth for some of the richest people and countries. Thiam however stressed that despite this imbalance, the economic significance of the world’s growing middle class must not be underestimated, particularly given their impact on consumer markets.

Credit Suisse predicts that global wealth is set to continue increasing at around 6.5 percent each year, growing by 38 percent to $345trn by 2020. Given China’s rapid economic expansion since 2000, the country’s growth is set to continue, albeit at a slower pace. The number of China’s millionaires is also expected to increase significantly by 74 percent to 2.3 million over the next five years.

Dell agrees to record breaking deal with EMC

Posted on by Ashton Wenborn

Dell has agreed to the terms of a $67bn deal to join up with the Massachusetts’s-based data storage company EMC in what could prove the biggest tech merger in history.

According to sources at Dell, the partnership “brings together the industry’s leading innovators in digital transformation, software-defined data centre, hybrid cloud, converged infrastructure, mobile and security.” However, not all are convinced of the deal’s capacity to reinvigorate either company.

Both have enjoyed long periods of explosive growth in years past, but also suffered the adverse effects of an evolving technology market

Both have enjoyed long periods of explosive growth in years past, but also suffered the adverse effects of an evolving technology market – as cloud computing and a shrinking storage market eat away at their margins. Nonetheless, the two will create the world’s largest, privately owned, integrated technology company – in a time where there is life yet in the IT market for an old dog still learning new tricks.

“The combination of Dell and EMC creates an enterprise solutions powerhouse bringing our customers industry leading innovation across their entire technology environment,” according to the company’s founder Michael Dell. “Our investments in R&D and innovation along with our privately-controlled structure will give us unmatched scale, strength and flexibility, deepening our relationships with customers of all sizes.”

Accommodating capital markets and cheap financing make the present time an ideal one for the transaction, and the sentiment is shared by technology giants HP and IBM also, who are undergoing transformations of their own. The consolidation of IT services is crucial in a period where larger clients are looking to buy from fewer clients, and the HP/EMC tie-up is arguably the most notable response to this development yet seen.

Ivory Coast back in business with $1bn eurobond

Posted on by World Finance

Côte d’Ivoire’s latest foray into the bond market ushered in a period of stability in 2014. Nialé Kaba, Minister to the Prime Minister for the Economy and Finance, discusses the changes in the Ivory Coast since its 2011 bond default, and the infrastructure improvements the new bond will deliver.

World Finance: Côte d’Ivoire’s latest foray into the bond market ushered in a period of stability last year. Here to share insight into this year’s issuance and its contribution to macroeconomic growth, Minister Nialé Kaba.

So of course your country has made deep structural reforms since the issuance of this last bond, right? So tell me about some of those, particularly in the energy sector.

Minister Kaba: In 2015, our energy production capacity was, 2000 megawatts a year, which we aim to increase to 4,000 megawatts a year. This will allow us to move from a coverage rate of 54 percent to approximately 95 percent in 2020 and the Eurobonds have allowed us to pursue the following important investments: the supply of a capacity of 110 megawatts for the CIPREL thermal power plant, continuing investments in the hydroelectric power station of Soubré, with a capacity of 275 megawatts, and we also have plans to produce a thermal power plant in the city of Grand-Bassam, which is a few dozen kilometres from Abidjan and which will have a capacity of 220 megawatts. Construction is scheduled to start in 2016.

World Finance: So what other structural reforms were you able to get off the ground since this bond issuance?

Minister Kaba: All sectors of our economy were covered by the reforms, and I would like to talk in particular about the reforms in the public finances sector, which consisted in stabilising the macroeconomic business climate through the correct management of public finances, by promoting transparency, by the speed with which the administrative procedures are applied, by improving the conditions under which public contracts are awarded.

We also did a great deal of work on the business climate; and in 2014 and 2015 the International Finance Corporation put us among the top 10 reforming countries in the world. We are continuing to improve our ranking and hope that eventually, in the not too distant future, we will be one of the top 50 countries for Doing Business.

World Finance: The re-payment schedule, of course, was staggered for this bond and its yield was hovering around the six percent mark – tell me how were you able to attract foreign interest given that, of course, your yield was lower than comparable equivalent securities, Zambia and Nigeria for instance.

Minister Kaba: Over the last three years, Côte d’Ivoire has had an average growth rate of nine percent, which is one of the best given the current international environment. Côte d’Ivoire has carried out a great number of reforms, as we have just explained, reforms to set our house in order, reforms also to allow investments to be carried out in the various sectors which drive our economy. In particular, we are currently living in an environment which has returned to normality on the social level and in an environment which offers excellent prospects.

It’s true that we went to the market for relatively large amounts, but all of these investments were carried out in a framework which was fully under control, as we make sure, in the framework we have with the International Monetary Fund, that the sustainability of our debt in particular is respected but also monitored, and that we keep an eye on our economy’s capacity to honour its commitments.

It has to be said that when we were doing the roadshow, many fund managers and many investors told us that the President of the Republic, who used to be Vice-President of the International Monetary Fund, Deputy Managing Director of the International Monetary Fund, reassured them as to his governance. I believe that it is all of these elements together that have allowed the international financial community to have confidence in us; and we intend to work to maintain and increase that level of trust.

World Finance: Of course your country has gone through a period of political stability since the last two bonds have been issued, but that wasn’t the case in 2011. So tell me what is different about the financial market today?

Minister Kaba: You need to understand that in 2011, the year you referred to, we were coming out of a deep post-electoral crisis. Fortunately, all of that was brought under control very quickly, allowing Côte d’Ivoire to resume its process of reconstruction and of growth. And in 2012, 2013 and up to the present day in 2015, we had years when we were able to build our return to peace, our return to social cohesion. And today, we are working towards peaceful and inclusive elections.

World Finance: Now in the years to come, tell me, how are you going to keep productivity at pace with growing debt?

Minister Kaba: The question of the debt is an interesting one, not only for the financiers but also for Côte d’Ivoire itself. We have ambitions to increase the national wealth and reduce the level of poverty, and eventually eradicate it from the country altogether.

We have to bear in mind, with regards to the debt, that we are already under a programme with the International Monetary Fund and the debts we have contracted are carried out in the framework of that programme. They are the subjects of a sustainability analysis, and whenever we come out, we have the authorisation, so to speak, of our partner, which analyses and looks at the potential of our economy with us.

Lastly, in the framework of the viability analysis of our debt, we forecast the creation of national wealth, which will itself generate resources to allow us to honour our commitments, and at the moment, the sustainability of the debt is certain. The share of the private sector in national investment is growing faster than that of the state; and we feel, we hope, that that will be the case more and more with the efforts we are undertaking with regards to Doing Business.

World Finance: Minister Kaba, thank you.

Minister Kaba: Merci Madame.