The Association of International Life Offices (AILO) has been in existence for more than 25 years, what would you say have been the biggest changes over that period?
AILO was formed in the late-’80s to support a fledgling international life industry servicing the expatriate community in the Middle East, Far East and around the world. In ’87, AILO members began to enter the newly opened UK domestic market.
AILO has become more international as its members have embraced the EU single market and have expanded into Latin America, Africa and Eastern Europe. The EU has been the single biggest source of new regulation in recent years, and AILO is well prepared to address this.
With the US Foreign Account Tax Compliance Act (FATCA) as a leading issue, our members more than ever need a central organisation to represent their views and advocate on their behalf. They need to access advice and knowledge collectively – the pooling of resources to lessen costs is an important factor in business.
In recent years there has been a steady increase in regulatory initiatives undertaken within Europe and the UK. Why do you think this is and is it positive for the cross-border international life industry?
The global economic crisis and various misselling scandals have been key drivers, coupled with increasing regulatory and fiscal convergence – OECD, the International Association of Insurance Supervisors, G20, etc.
Regulatory change can be positive for the cross-border industry in removing barriers to trade and raising standards to those our members are more familiar with.
On the other hand, regulation can result in ‘minimum harmonisation’, such as the Insurance Mediation Directive (IMD) and the proposed IMD2, enabling countries to ‘gold plate’ and so make cross-border business more difficult and expensive to conduct.
There is also the risk that regulation may be applied disproportionately, thereby creating an excessive burden on our members’ management time and resources.
One cannot ignore the UK’s retail distribution review (RDR). The majority of the new regulation has now been in force for six months, what impact has this had so far?
A large section of the UK population are now ‘non-advised’ as professional financial advisers who opted for independence cannot provide services at a level they can afford. Ultimately and inevitably the banks – the cause of enormous misselling of financial products – will enter this vacuum. Commission, on a disclosed and fully understood basis, is not a bad option for potential savers, who should be given the choice.
The RDR is something that is regularly discussed within AILO and its effects are being monitored, although it’s still early days and the long-term impact on the industry is yet to emerge.
What other challenges do you see AILO members facing over the next few years?
The benefits of life assurance and its application to all forms of products will come under pressure to change. Regulators across the world are pushing our members to take responsibility for advice they do not give.
This may mean that insurers turn back to direct sales forces they are able to control. FATCA-like disclosure will increasingly become the norm and members will need systems that allow information to be shared easily with revenue authorities.
Life insurers will move into retirement products on a fully transferable and portable basis as people travel all over the world to find work. Members will need to explore innovative product development to address this trend. Real insurance will come back in favour as rates tumble and people realise it’s a low-cost way to provide benefits to inheritors.
What involvement does AILO have in shaping regulation in Europe?
AILO makes regular submissions to the European Commission, MEPs and the European Insurance and Occupational Pensions Authority. Our focus is on issues that threaten the single market, as the healthy competition of an open single market is the key to delivering benefits to the consumer.
AILO has been quite successful in having its position reflected in policy development because we listen to policymakers’ concerns and put the consumer to the forefront of our considerations. As a result, AILO is recognised by the EU working groups as a source of informed input and we are frequently selected to participate in expert panels.
Many life companies are now looking east for their growth, why is this and what are the specific opportunities for life offices?
Many of the countries in Asia and the Middle East have good growth potential compared with some of the more mature markets in UK and Europe.
Do the needs of clients in jurisdictions such as the United Arab Emirates, Singapore and Hong Kong differ much from those of clients in the UK and Europe?
One constant across the globe is that clients need good holistic financial advice from their financial adviser. Each client has different needs and requires different solutions, so it is difficult to generalise.
Aside from the three ‘new’ territories mentioned above, what other countries have members identified as potential targets for growth?
- Africa: With six of the fastest-expanding economies in the world, citizens will need insurance for themselves and their business partners. This will be followed by protecting the wealth they create and the ability to pass this on to their families.
- Latin America: Again, as market sophistication and wealth generation develop, the demand for insurance products will expand.
- Eastern Europe, including former USSR countries: As wealth percolates through these economies, people will want to insure their lives and protect their families. The signs are already that the domestic life industry is opening up to cross-border players. The demographics of these states means future pension provision is also a concern for them.
How can AILO assist its members when they are looking to expand into new territories?
Members require information on new markets and AILO can provide appropriate contact points for them through its network, with members sharing their knowledge.
Furthermore, AILO’s associate members regularly provide access to many sources of information. Presentations from market experts at AILO members’ meetings help members keep up-to-date with developments in various territories.
For example, regulators in the Asia-Pacific region will find ways to copy or incorporate EU/UK-style controls into their domestic regulation, and AILO members can respond with tried-and-tested solutions.
Understanding the regulatory developments in the EU and other regions is key to developing expansion strategies, and AILO works hard to keep its members informed.
What is most exciting about the international life industry in 2013?
The fact that we are still here. The past few years have seen many negative developments and the industry was in danger of sinking under a tsunami of unnecessarily complex regulation. ‘Light touch’ is not a phrase used in Europe or the US. AILO continues to meet these challenges and significant audiences – regulators, MEPs, the Treasury – are beginning to understand the market AILO is constantly trying to help develop for its members.
The introduction of associate member status and the take-up of this option by a number of firms who are also deeply interested in the cross-border life industry has proved very rewarding. We continue to seek additional associate members, who enrich our entire membership.
How does AILO promote its work to the international life industry and the wider financial community?
AILO’s website, www.ailo.org, provides a wide range of information for advisers and their clients. Internally, we circulate current information to our members via LinkedIn, email and newsletters.
Regular members’ meetings are held on a rotational basis among jurisdictions, and in 2014 we will hold two members’ meetings, one in spring and one in autumn. The seventh AILO CEO Forum will take place in Brussels in June.
AILO’s conference entitled Will the Single Market in Financial Services Ever Become a Reality? is scheduled for 10 April 2014 and will be held in London. There will be an impressive array of speakers and attendees are invited from throughout the financial services community.
Potential new members are welcome to our ‘Meet AILO’ meetings, which are usually held in the evening, and CEOs from members and non-members are invited to come along to hear what we are up to on behalf of the industry.
What demographic does AILO target with its marketing and how?
AILO’s aim is to inform and educate those audiences who need to know more about the cross-border market. The generic information AILO provides freely on its website is aimed at financial advisers and their clients.
Brochures on a number of topics can be downloaded, including a guide for financial advisers, a guide for clients and an overview of investor protection in different jurisdictions. Several brochures are available in a number of languages.
AILO also produces tax guides, which cover about 20 jurisdictions, to inform advisers and their clients of some of the taxation issues they might need to consider if they are planning to work or retire abroad.
What are the priorities for AILO over the coming year?
AILO will continue to focus on its core role as the voice of the international life industry. The advocacy and representation performed by AILO will be major priorities for the foreseeable future and we will make further submissions in relation to European policy development on intermediation, product disclosure and Solvency II.
We will continue to work closely with organisations such as the European Fund and Asset Management Association, the European Fed-
eration of Financial Advisers and Financial Intermediaries and the European Federation of Financial Services (EuroFinuse) to produce joint responses to many of the EU’s discussion papers and declare our collective views on the impact such developments can have.
We will also work on replicating our European success and developing a similarly strong voice in the Middle and Far Eastern markets that our members are engaged in.
