Solvency II – Stepping up to the starting line

Solvency II is a comprehensive risk-based approach to capital adequacy and risk management for insurance providers, which aims to provide better protection to policyholders and minimize firm failures. It replaces the outdated Solvency I norms, which became obligatory in Europe in 2004 (introduced in the early 1970s) along with its 13 existing insurance directives. The new program is to be implemented in all 27 EU member states and three countries from the European Economic Area (EEA).

Solvency II should help to protect policyholders’ interests more effectively by making firms more receptive and responsible towards market volatility and risks inherent in the financial system. The Solvency II regime will be applicable to every insurance company with gross premium income of more than EUR 5 million or gross technical reserves in excess of EUR 25 million. Its directives are supposed to be finalized for national supervisors and the European Insurance and Occupational Pensions Authority (EIOPA) by 30th June 2013 and the regime is expected to be in force from 1st January 2014.
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Timetric’s world economic outlook for 2013

The prospects for the global economy in 2013 have improved but the economic environment remains complex. Although the chances of an extreme event affecting international financial markets – such as a disorderly break-up of the eurozone – have diminished, the risks for global financial stability remain high.

In the advanced economies, the scope for monetary loosening is limited and fiscal constraints are poised to remain in place in the years ahead, hindering the capacity of economic authorities to react to new episodes of instability. Meanwhile,these economies will continue to undergo a deleveraging process which translates into weak growth and social and political pressures.

Growth in the emerging world has decelerated across many of the main economies as a result of diminished international trade and investment flows. This has triggered a downgrade of growth prospects affecting many important economies, particularly China, India and Brazil. However, domestic demand remains resilient which will allow these economies to continue to drive global growth.

According to Timetric, the outlook for the global economy is for a moderate recovery in 2013, with momentum improving from mid-year onwards and paving the way for a broader upturn of global GDP in 2014. Global growth is expected to pick up slightly from 3.2% in 2012 to 3.5% in 2013.

The main reason supporting this cautiously optimistic outlook is that policy uncertainty, which was an important factor dragging global growth last year, should moderate in 2013. Sufficient policy action by economic authorities in the second half of 2012, particularly central banks including the ECB and the US Federal Reserve, has contributed to stabilise financial markets and restore investor confidence, and this is poised to continue in 2013.

However, three major downside risks to global growth persist. First, while the ECB has given an important leap forward to curtail future debt crisis by announcing the launch of a public debt purchase programme in secondary markets – known as OMT (Outright Monetary Transactions) – the mechanism still needs to be implemented. This poses a significant challenge amid a context where austerity measures will continue to act as a drag on growth.

Secondly, the US Congress effectively reached a last-minute compromise to avoid the so-called “fiscal cliff”, which would have triggered a surge in taxes and a cut in subsidies equivalent to 4% of GDP. However, the underlying structural debt and fiscal problems persist and this could trigger a new episode of volatility by the end of the year.

Finally, China seems to be recovering from a testing economic period, amid a key leadership transition that introduced new government authorities after a decade of the previous administration. Growth is expected to pick up slightly to 8.1% in 2013, up from a ten-year low of 7.8% in 2012, but the economy is calling for a vital rebalancing towards more domestic consumption in order to achieve sustainable growth in the years ahead. While policy action adopted in 2012 will kick in this year, boosting economic activity, downside risks to growth persist.

All in all, the main advanced and emerging economies will probably show improvements in their key macroeconomic indicators, although only some of them – albeit the majority – will deliver stronger growth in 2013.

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Tourism on the up in Thailand

The tourism sector in Thailand picked up strongly in the fourth quarter of 2012. According to the Tourism Authority of Thailand, the number of tourists reached 2.2 million in December, a 22.4% year-on-year rise. In the whole of 2012, total number tourists arrival reached at 22 million, a 15 % annual increase, mainly led by healthy growth in arrivals from China, Japan and Malaysia.

Meanwhile, tourism revenue reached THB 96.5 trn (USD 31.5 bn) in 2012, an increase of 24.3% compared to 2011. During the last three years, tourism revenue has soared by an annual average of 23.8% on the back of strong tourist arrivals from major markets. Among the other highlights, the average occupancy rate rose to a 5-year high of 60.2% in 2012, above the rates of 57.4% and 50.2% respectively reported in the previous two years. This is good news for the overall economy, with the tourism sector accounting for around 5% of total employment.

Tourist arrivals: Thailand from Timetric

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Construction drags on growth in Colombia

Colombia’s overall economy grew by 2.1% in Q3 relative to the same period in 2011, which was well below expectations, owing to the dismal performance of the construction sector. Construction fell by 12.3% relative to the same period a year ago, owing to declines in both public works and building.

Construction and real GDP growth: Colombia from Timetric

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The EU’s exceptional economy looks set for growth in its wealthy population

The number of Polish millionaires more than doubled during the pre-crisis boom period of 2005-2007, but while the country was the only EU member to escape recession during the global downturn of 2009, recent years have seen HNWI wealth setback by falls in equities and house prices. 

As of 2012 there are just over 28,400 High Net Worth Individuals (HNWIs), individuals with net assets of $1m or more excluding primary residences, in Poland according to WealthInsight data.

98% these individuals are core millionaires, people with wealth of between $1m-$30m excluding primary residences, who account for about two-thirds (63%) of Polish high net worth wealth. There are 487 ultra-HNWIs, individuals with net assets of $30m or more excluding primary residences, and 4 billionaires, including Jan Kulczyk, an entrepreneur and Poland’s richest person.

Between 2007 and 2012 the number of HNWIs in Poland dropped by 8.2%; local HNWI wealth decreased by 14.9%. Continue reading

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