Currencies

Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Banks

Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Currencies, Equities

Scary movie sequel beckons for eurozone markets

Just as horror movies can spook fright nerds more than they expect, so political risk is sparking heightened levels of anxiety among seasoned investors. Investors caught out by Brexit and Donald Trump are making better preparations for political risk in Europe, plotting a route to the exit door if the unfolding story of French, German […]

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Currencies

Dollar rises as markets turn eyes to Opec

European bourses are mirroring a tentative Asia session as the dollar continues to be supported by better US economic data and investors turn their attention to a meeting between Opec members. Sentiment is underpinned by US index futures suggesting the S&P 500 will gain 3 points to 2,207.3 when trading gets under way later in […]

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Categorized | Insurance

Insurers angered by premium tax increase in Autumn Statement


Posted on November 23, 2016

Insurers have reacted angrily to the chancellor’s decision to raise insurance premium tax by a fifth, from 10 per cent to 12 per cent in the Autumn Statement.

The tax, which is levied on general insurance policies such as home, motor and health, stood at 6 per cent just over a year ago but had been increased twice since then. 

The latest increase will take effect next June and will raise about £840m in extra tax revenue per year. But while the proceeds of the last increase were earmarked for flood relief projects, Philip Hammond would only say that the latest rise would be used “to fund spending commitments”.

In his statement, Mr Hammond pointed out that: “Insurance premium tax in this country is lower than in many other European countries, and half the rate of VAT.”

Huw Evans, director-general of the Association of British Insurers, said the increase was a hammer blow for the hard pressed. “It will hit consumers and businesses alike, hurting those who buy business, motor, property, pet and health insurance,” he said.

Mr Hammond attempted to soften the blow by reiterating the government’s plan to cut the amount that insurers have to pay for whiplash injuries. Proposals were unveiled last week to wipe £1bn off the cost of claims. If passed on to consumers, that would cut about £40 off the cost of an annual car insurance policy. 

Amanda Blanc, chief executive of Axa UK, called the insurance premium tax increase: “an unwarranted attack on millions of people simply looking to protect themselves. 

“This is a classic case of the government giving with one hand, in the form of whiplash reforms, and taking with another,” she said. “The affordability of insurance is being fundamentally threatened. The country is already underinsured and ever rising insurance taxation could have the unintended consequence of making this situation even worse.”

According to Deloitte the latest increase will cost a family with a house and two cars an extra £21 per year, leaving them with a total annual IPT bill of £126. Before the first of the recent increases, which took effect last October, Deloitte says that the annual bill was £63. 

“There comes a point where people don’t insure,” said Daniel Lyons, tax partner at Deloitte. “We may not be there yet but the more expensive insurance becomes, the more there’s a possibility that people will be less likely to take out a policy. From a public policy point of view, I’m not sure that’s a good thing.” 

There was some better news for the industry elsewhere in the government’s announcements. Draft regulations were published on Wednesday that would allow insurance linked securities to be issued in the UK. These securities allow investors to back risks directly, rather than going via an insurance company, and are becoming increasingly popular in specialist commercial insurance markets. 

Inga Beale, chief executive of Lloyd’s, the insurance market, said: “It is clear that London should be competing in the ILS market which will bring considerable benefit to the London market as a whole, so we welcome today’s announcement from the government. ILS capital has been growing, particularly in global reinsurance, and the London market has the expertise and talent to select the risk that it wants to invest in.”