One symbolic upgrade is the new private jet facilities at the airport, that are part of chief minister Alan Bell’s strategy to attract economically active high-net-worth individuals to the area.
The headline indicators for the economy and key sectors give an insight into how the island is faring, with unemployment low and the economy growing more than in the UK.
The financial sector is the biggest industry on the IoM at 35% of the total GDP, but it is still significantly lower as a percentage than Jersey or Guernsey.
Tough first half
The island’s banking industry is holding up against the challenges of the past few years, although deposits were £47bn at the end of June, down £3bn since the start of the year. There have also been individual setbacks such as Allied Irish Bank winding down its operations on the island.
There are calmer waters on the QROPS front after 50c schemes were removed from HMRC’s approved list to leave the IoM as a well placed, known player on the international pensions stage backed by a relatively youthful Association of Pension Scheme Providers.
At the start of 2012, there were 1,433 IoM pension schemes registered with the island’s Insurance and Pensions Authority, up 6% on the previous year. Of these, 703 are international.
But the life industry, comprising 16 companies, had a tough first half with offshore bond sales into the UK down around 25%.
This is probably due to the economy and distribution issues rather than the sometimes-cited RDR in the UK.
Among businesses affected by parent company strategic reviews, Clerical Medical International, part of Scottish Widows within the Lloyds TSB Group, closed to new business early this year and Friends Provident International saw some high-profile departures as it moved the focus of its operations to Asia.
A sea change
Possibly the most significant new role for the island this year is John Spellman returning as director of financial services. As a consequence, there looks set to be a more focused and active agenda in developing the finance sector.
Spellman previously spent over two years as finance director, coinciding with the global financial crisis and the collapse of a branch of the Icelandic Kaupthing Singer & Friedlander bank.
The final notice this year from the Financial Services Authority against Kaupthing Singer & Friedlander has now closed a difficult chapter, and acts as a reminder of the hazards offshore banks may face if they fail to anticipate problems in the way they are structured to their parents.
One of the issues Spellman is grappling with is the Independent Commission on Banking’s (ICB) proposed implementation of the key recommendations in the Vickers Report.
He said: “The ICB and Vickers report will fundamentally change offshore banking, but we will first have to define how the IoM interacts with the UK.”
Details such as the level of consumer protection and capital adequacy will get applied in different ways to retail banks, offshore private banks and commercial banks and how the IoM’s investor compensation scheme will apply to different types of ring-fenced banking activities is one of the topics under consideration.
Spellman also wants to change the IoM’s “very low footprint on reinsurance”, adding intriguingly that he will be exploring ideas for “different types of financial institutions” to operate on the island.
On the right tack
International tax agreements can add credibility to a country’s financial profile.
The IoM, Guernsey and Jersey negotiating a partnership agreement with the US to implement FATCA is a high-profile example of this, made unusual by the rarity of the crown dependencies joining forces in common interest.
Individually, the island recently signed a double taxation agreement (DTA) with Singapore and a tax information exchange agreement (TIEA) with Turkey for a total of six DTAs and 26 TIEAs to date.
In terms of trading links, a focused push on China’s industries has started and last month the IoM Ship Registry was recognised by the Korean Register of Shipping for its efforts to engage more closely with Asia.
Foundations are another development on the island adding an alternative to the already well established trust arrangements. Since January, 12 foundation structures have been written, with most clients likely to come from civil law, rather than English common law, countries where trusts are not acceptable legal structures.
A further significant appointment is David Kneeshaw as the new chairman of the Manx Insurance Authority.
Kneeshaw – also the chief executive of Royal London 360° – has already instituted changes that will add a stronger voice to this important organisation.
So far, he has beefed up the technical committees and specifically added a tax and technical committee to engage with the Government going forward.
There will also be a new committee to look at the core principles the International Association of Insurance Supervisers has compiled for signed-up countries, one of which is the Isle of Man.
The MIA is continuing to have quarterly review meetings with the regulator, and it is also acting as a fulcrum for generic legal issues that affect a number of the members at any one time.
Incidentally, Kneeshaw says he is “thrilled with the appointment of John Spellman and we feel we can strike up a good relationship very quickly.”
A clear example of this is the joint working plan for the life insurance sector that MIA deputy chairperson Gillian Marples is producing with Spellman over the next month.
Toeing the line
Over at the regulator, John Aspden, chief executive of the Financial Supervision Commission, has adopted a stronger tone towards advisers having found evidence of high-risk products being sold inappropriately.
He says: “It is important consumers receive the right level of financial advice, particularly in current markets.”
Many aspects of the UK’s RDR regime will be adopted, but not in relation to the timetable, which is a year later in going live (1 Jan, 2014).
On the thorny question of commission, which it will not ban, Aspden feels certain sections of society need to access financial advice and will not be able to pay fees. This is partly in the area of protection, but also “one or two other areas” he says.
There will still be full transparency, disclosure of all charges and advisers will have to get to the level four qualifications like the UK.
Gary Boal, a trained actuary and managing director of pensions specialist Boal & Co, says “things never stand still” in relation to new regulations, but the IoM continues to be well positioned.
“Internationally, it’s well regarded on the finance side. It’s trying to be a good neighbour, not the bad child it was ten years ago.”
He emphasises the combined presence of the life industry with the pensions businesses on the island give it an advantage.
Forging ahead
Offering a fresh perspective is Clive Baker, chief executive of Zurich International Life, who spent a lot of time in the Asia Pacific region before coming to Zurich this year.
“It’s been eye-opening to see how the island operates close up. For a small island and a relatively small finance sector, there is a wealth of experience that a lot of jurisdictions would struggle to match.”
If it is going to keep on doing so then it needs to make sure that this expertise isn’t diluted, he says.
Customers in the Asia Pacific region want things delivered quickly, on the latest technology platforms and they don’t want to sacrifice service or quality while they’re doing so, he emphasises.
“We need to be in no doubt that what’s expected of any organisation that wants to be taken seriously in these booming parts of the world.
“The Isle of Man looks east for a lot of its business, and if it fails to appreciate just what customers there have come to expect then it is going to make life very hard for itself.”
