Gibraltar-based motor insurer
Markerstudy has taken capital action, moving from a £109m deficit last year to a £20.6m surplus, the firm has revealed in a report.
A capital injection of £35m, plus capitalisation of an inter-group loan for £92m and the net impact of a group restructure of £2.6m means the company has moved to a surplus as of the end of last month.
The move was a necessary one because of Solvency II, Gary Humphreys, group underwriting director at Markerstudy, told Insurance Business. As a privately-owned business with no external debt or shareholders, Markerstudy is “fairly unique for an insurance group of our size,” he said. When the business was started in 2000, there was no long-term plan in terms of how growth or acquisitions would be structured, but the insurer has grown “organically and by opportunity.”
However, after the introduction of Solvency II, that structure was rendered inefficient: “the inter-company debt wasn’t formalised and there was no loan repayment, so it just sat there as a debt – which in a Solvency II world, didn’t sit well from a balance sheet point of view.”
The insurer agreed to reorganise and restructure the group to create different holding companies for the insurance and non-insurance entities, and to formalise debt structures so that they could then count as Solvency capital, Humphreys explained. While the capital was always there, the reshuffle “needed to be done because the structures were inefficient and messy, and the way that Solvency II treats capital is completely different to how it used to be under Solvency I. We needed to get the paperwork in order,” he said.
The move has put Markerstudy “in a nice strong position,” having completed ahead of schedule, but the insurer has not been immune to the challenges facing the industry.
Brexit has been an ongoing challenge: “We’ve exited non-UK business, partially due to the difficulty in writing business outside the UK, but also with one eye on Brexit and where that may leave us from a financial services position going forward,” Humphreys said, pointing to the uncertainty remaining on a deal with Europe.
There may be a silver lining when it comes to Ogden, though. “Ogden challenges are going to lead to some opportunities in the market – I think there’s a number of carriers in the market who have not yet felt the pain of the reinsurance costs that will come through, and that will lead to pricing opportunities, we believe.”
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