Banks

Carney: UK is ‘investment banker for Europe’

The governor of the Bank of England has repeated his calls for a “smooth and orderly” UK exit from the EU, saying that a transition out of the bloc will happen, it was just a case of “when and how”. Responding to the BoE’s latest bank stress tests, where lenders overall emerged with more resilient […]

Continue Reading

Currencies

China capital curbs reflect buyer’s remorse over market reforms

Last year the reformist head of China’s central bank convinced his Communist party bosses to give market forces a bigger say in setting the renminbi’s daily “reference rate” against the US dollar. In return, Zhou Xiaochuan assured his more conservative party colleagues that the redback would finally secure coveted recognition as an official reserve currency […]

Continue Reading

Capital Markets

Mnuchin expected to be Trump’s Treasury secretary

Donald Trump has chosen Steven Mnuchin as his Treasury secretary, US media outlets reported on Tuesday, positioning the former Goldman Sachs banker to be the latest Wall Street veteran to receive a top administration post. Mr Mnuchin chairs both Dune Capital Management and Dune Entertainment Partners and has been a longtime business associate of Mr […]

Continue Reading

Banks

Financial system more vulnerable after Trump victory, says BoE

The US election outcome has “reinforced existing vulnerabilities” in the financial system, the Bank of England has warned, adding that the outlook for financial stability in the UK remains challenging. The BoE said on Wednesday that vulnerabilities that were already considered “elevated” have worsened since its last report on financial stability in July, in the […]

Continue Reading

Currencies

China stock market unfazed by falling renminbi

China’s renminbi slump has companies and individuals alike scrambling to move capital overseas, but it has not damped the enthusiasm of China’s equity investors. The Shanghai Composite, which tracks stocks on the mainland’s biggest exchange, has been gradually rising since May. That is the opposite of what happened in August 2015 after China’s surprise renminbi […]

Continue Reading

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.”