Barclays
CIT talks to Simon Phillips about his new role as head of captive insurance at Barclays and how the firm is tackling current industry issues
What sort of captive services does Barclays provide?
The Barclays offering to the captive market spans four key product pillars: transactional banking, Standby Letters of Credit (SBLoC), investments, and trust structures as an alternative to SBLoCs. It is not unusual for banks to provide some of these services but few can claim to be able to provide them all.
For captive insurance entities, there is great peace of mind in knowing that you are dealing with a team that has in-depth experience of the captive insurance sector. It means that the captive can benefit from a number of choices, deal with a knowledgeable partner that can demonstrate flexibility in the approach that it takes and do so quickly when it is appropriate. At a time of challenges for captives, the ability to draw on a wide range of services in a number of geographies is appealing to the captive insurance market.
The head of captive insurance role at Barclays is a new one—why was this position created and what will you bring to the captive insurance business at Barclays?
The captive insurance market is a key area for Barclays and this role was created to ensure that as an organisation we have the right strategic focus on the sector. This will enable us to bring the full capability of the Barclays group to captive clients to help them maximise the opportunities that we see in the current challenging operating environment. Captives are looking for experts who can work in partnership with them to ensure the best possible alternatives are put forward for banking services, investment and structuring choices across key captive locations.
How is Barclays planning to expand its business in terms of geographical scope and service offerings?
We will continue to provide a high level of service to our existing clients as well as expanding our client base to include new captives. We have recruited, and will continue to recruit, a team of industry experts who have real insight and experience of the captive sector, in addition to their knowledge of banking, trust and investments.
It is not enough to have experts in one jurisdiction. Barclays offers a wealth of expertise in a number of key jurisdictions, including Guernsey, the Isle of Man, Gibraltar, Malta, Bermuda, the Caribbean and onshore in the US, which are all key areas for captive work. We are expanding the team both in terms of number and geography, offering services to captives and providing a level of understanding that means we can act as a consultative partner as well as providing the core services that captives need. Our ambition is to be the ‘go-to bank’ in the captive sector.
You have said that the global economic situation has made captive companies/managers consider other options to more efficiently manage captives. How will Barclays tackle this?
Captives face challenging times. Costs continue to rise while returns on assets continue to be challenged on the back of the historically-low interest rate environment and the volatility in the investment market. We have seen an increasing number of captives reviewing their existing arrangements and service providers to ensure that they have the right strategy in place to control costs while maintaining acceptable returns on their assets within defined risk parameters.
We believe that it is harder to do this if you are seeking these services from a range of providers that don’t necessarily have a complete view of the activities and objectives of the captive. I am pleased to say that existing, and new, Barclays clients see the benefit of working with Barclays to bring a tailored solution covering their collateralisation and investment needs. The bedrock is that we offer a very experienced and knowledgeable relationship team that can give clients access to the wide capabilities of the Barclays group across the key captive jurisdictions globally.
Traditional cash-backed SBLoCs will remain a key part of our offering but we do see clients wishing to look at alternatives such as trust structures, which also links in with desire to review the investment strategy for assets that sit within the captive—whether this is cash, fixed income or, in some cases, a degree of exposure to equity markets. While the global economic environment is, and is likely to remain, challenging for the foreseeable future, we do see opportunities to maximise the upside while managing, with acceptable parameters, the downside risk. Our view is that it is even more important that captive boards—in conjunction with parent organisations—review their current arrangements to ensure they are aligned to current and expected future market conditions.
How will regulatory changes affect the captive market and what solutions will Barclays provide to help clients comply with these regulations?
Regulation continues to increase globally across financial services business and the direction of travel or pace of change is unlikely to abate in the short-term. An obvious example of regulation that is affecting the captive and wider insurance sector is Solvency II. While the high level structure of the regulation is understood, the day-to-day implications for captives in various jurisdictions require further clarity.
While it is not our role to tell our captive clients how they should approach regulation, we do work collaboratively with clients to help them in structuring their banking and investment needs to meet the changing regulatory landscape.
