Download British Virgin Islands

AMB Country Risk Report
August 24, 2016
Our Insight, Your Advantage.
Country Risk Tier
CRT-2
British Virgin Islands
• The Country Risk Tier (CRT) reflects A.M. Best’s assessment of three
categories of risk: Economic, Political and Financial System Risk.
• The British Virgin Islands (BVI’s), a CRT-2 country, is a Dependent
Territory of the United Kingdom.
Very
High
Very
High
Very
High
High
High
High
• The BVI’s are a major off-shore business center, with several
hundred thousand registrants, mainly originating from Latin
America and Hong Kong. The BVI’s are a significant insurance
mutual and captive jurisdiction. Economic performance is expected
to improve as a result of the modest economic growth in North
America, as well as improvement in the construction sector. The
BVI’s economy grew at a rate of 2% in 2015, up from 0.7% in 2014.
Looking forward it is expected that the BVI’s will maintain 2-3%
growth near-term driven by an stable outlook for the United States.
• The map below depicts the countries A.M. Best evaluates in the
Caribbean.
Moderate
Moderate
Moderate
Low
Low
Low
Very
Low
Very
Low
Very
Low
Economic
Risk
Political
Risk
Financial
System
Risk
Bahamas
Dominican
Republic
Cuba
Cayman Islands
Haiti
Jamaica
Country Risk Tier 5 (CRT-5)
Very High Level of Country Risk
Country Risk Tier 4 (CRT-4)
High Level of Country Risk
Country Risk Tier 3 (CRT-3)
Moderate Level of Country Risk
Country Risk Tier 2 (CRT-2)
Low Level of Country Risk
Country Risk Tier 1 (CRT-1)
Very Low Level of Country Risk
Puerto
Rico
British
Virgin Anguilla
Islands
St. Maarten
St Kitts & Nevis
Honduras
Antigua & Barbuda
Dominica
Nicaragua
St Vincent & the Grenadines
Curacao
Grenada
Costa Rica
Panama
St Lucia
Barbados
Trinidad & Tobago
Venezuela
Colombia
Guyana
Suriname
Copyright © 2016 A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED. No part of this report or document
may be distributed in any electronic form or by any means, or stored in a database or retrieval system, without the prior written permission of
A.M. Best. For additional details, refer to our Terms of Use available at A.M. Best website: www.ambest.com/terms.
AMB Country Risk Report
British Virgin Islands
Regional Summary: Caribbean
Vital Statistics 2014
Nominal GDP
Population
GDP Per Capita
Real GDP Growth
Inflation Rate
Literacy Rate
Urbanization
Dependency Ratio
Life Expectancy
Median Age
USD bn
mil
USD
%
%
%
%
%
Years
Years
0.9
0.03
32,111
2.0
1.9
n.a.
46.2
n.a.
75.5
35.9
Insurance Statistics
Financial Services Commission
Insurance Regulator
Premiums Written (Life)
Premiums Written (Non-Life)
Premiums Growth (2013 - 2014)
USD mil
USD mil
%
6
135
23.4
Regional Comparison
Country Risk Tier
CRT-2
CRT-4
CRT-3
CRT-3
CRT-2
CRT-3
British Virgin Island
Antigua & Barbuda
Bahamas
Barbados
Cayman Islands
Trinidad and Tobago
• The tourism sector is expected to improve
due to a healthy North American economy
and strong US dollar, where the majority
of tourist originate. Over a third of total
employment comes from the tourism sector.
Economic Growth
CPI Inflation
5
2007
2008
2009
2010
2011
2012
• The Eastern Caribbean Currency Union
(ECCU) is making progress towards
strengthening weak local banks, however,
additional progress is needed to strengthen
the general legal and regulatory framework
to enhance supervision and facilitate crisis
management in the future.
• The economy of the BVI’s is based upon
financial services, which generates
approximately 60% of government
revenues, and tourism which generates
nearly all the rest of the balance.
10
-
• Economic prospects should improve for
the Caribbean, especially for tourismbased economies that depend on U.S. and
European visitors. Additionally, lower oil
prices will support growth and subdue
inflation. Trinidad and Tobago is the only
Caribbean island that is a net oil exporter.
Economic Risk: Low
Source: IMF, World Bank, Swiss Re, Axco and A.M. Best
Real GDP
• The countries of the Caribbean vary in
cultural origin, economic foundation and
population affluence. However, in all
cases, their long-term growth and stability
is highly dependent upon their larger
regional neighbors.
2013
2014
2015
• While growth in financial services has
slowed in recent years, the sector continues
to be the island’s most important. Company
incorporations grew from 100,000 in 1993
to over 478,000 in 2015, five times any other
offshore jurisdiction.
%
• The government has incorporated and
raised new taxes, such as a sea tourism
departure tax, in order to combat higher
wages introduced in the private sector.
(5)
(10)
• The UK’s departure from the EU leaves
material uncertainty of how greatly it will
impact tourism, trade and finance in the BVI’s.
(15)
Source: IMF World Economic Outlook and A.M. Best
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AMB Country Risk Report
British Virgin Islands
Political Risk Summary
Political Risk: Low
Score 1 (best) to 5 (worst)
British Virgin Islands
World Average
• The British Virgin Islands is a British
Overseas Territory. Its relationship with
the United Kingdom remains very close, as
the UK is responsible for BVI’s international
relations, security and defense.
International Transactions
Policy
5
Legal System
4
Monetary Policy
3
• The government is run by an elected
Premier, Governor and House of Assembly
which consists of 15 members and follows
the English common law legal system.
2
1
Regional Stability
Fiscal Policy
0
Social Stability
• The latest governor, John Duncan, was
appointed by the Monarch on August
2014. Elections for the House of Assembly
were held on June 2015. Over 90% of the
assembly seats are held by the two main
political parties, the National Democratic
Party and the Virgin Island Party. Political
parties are not generally formed on an
ideological basis and do not normally
affiliate with a political school of thought.
Business Environment
Government Stability
Labor Flexibility
Source: A.M. Best
Financial System Risk: Low
• The Financial Services Commission (FSC)
is responsible for the regulation of all
financial services companies in the British
Virgin Islands. The FSC has very broad
powers that have been subject to numerous
improvements and have been strengthened
in recent years.
GDP Per Capita and Population
for Selected Countries
60,000
1.6
GDP Per Capita
Population
1.4
50,000
1.2
40,000
• New legislation has been enacted that
insures deposits in the country’s banks.
Enacted in June 2016, the Virgin Islands
Deposit Insurance Act of 2016 insures that
depositors that cannot assess the risks of
the banks they are depositing into will be
insured against loss of deposits.
USD
Millions
1
30,000
0.8
• For the first quarter ending 2015, the BVI
International Finance Center has over
478,000 companies on its register.
0.6
20,000
0.4
10,000
0.2
0
0
British Virgin Islands
Antigua & Barbuda
Bahamas
Barbados
Cayman Islands
Trinidad & Tobago
Source: IMF and A.M. Best
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• As of October 2015 there are over 145
licensed captive insurance companies
domiciled in the British Virgin Islands.
AMB Country Risk Report
British Virgin Islands
GUIDE TO BEST’S COUnTry rISk TIErS
A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims-paying ability of an insurer. Country risk is
evaluated and factored into all Best’s Credit Ratings. Countries are placed into one of five tiers, ranging from “CRT-1” (Country Risk Tier 1), denoting
a stable environment with the least amount of risk, to “CRT-5” (Country Risk Tier 5) for countries that pose the most risk and, therefore, the greatest
challenge to an insurer’s financial stability, strength and performance.
A.M. Best’s Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and
willingness of a government to service its debt obligations.
Country risk Tiers
Country risk Tier
Definition
CRT-1
Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial
system regulation with deep capital markets; mature insurance industry framework.
CRT-2
Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system
regulation; mature insurance industry framework.
CRT-3
Developing legal environment, legal system and business environment with developing capital markets; developing
insurance regulatory structure.
CRT-4
Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital
markets; partially to fully inadequate regulatory structure.
CRT-5
Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low
human development and social instability; nascent insurance industry.
Country risk reports
A.M. Best Country Risk Reports are designed to provide a brief, high-level explanation of some of the key factors that determine a country’s Country
Risk Tier assignment. It is not intended to summarize A.M. Best’s opinion on any particular insurance market or the prospects for that market.
Categories of risk
Country Risk Reports provide scores for three categories of risk for each country. These scores are (1) Very Low; (2) Low; (3) Moderate; (4) High
and (5) Very High.
Category of risk
Definition
Economic Risk
The likelihood that fundamental weaknesses in a country’s economy will cause adverse developments for an insurer.
A.M. Best’s assessment of economic risk evaluates the state of the domestic economy, government finances and
international transactions, as well as prospects for growth and stability.
Political Risk
The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or
international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the
government and society, the effectiveness of international diplomatic relationships, the reliability and integrity
of the legal system and of the business infrastructure, the efficiency of the government bureaucracy, and the
appropriateness and effectiveness of the government’s economic policies.
Financial System Risk
Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that financial
volatility may erupt due to inadequate reporting standards, weak banking system or asset markets, and/or poor
regulatory structure. In addition, it includes an evaluation of whether the insurance industry’s level of development and
public awareness, transparent and effective regulation and reporting standards, and sophisticated regulatory body will
contribute to a volatile financial system and compromise the ability of an insurer to pay claims.
Political risk Summary
To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk
Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of one to five with one being the least
amount of risk and five being the highest amount of risk.
Category
Definition
International Transactions
Policy
Measures the effectiveness of the exchange rate regime and currency management.
Monetary Policy
Measures the ability of a country to effectively implement monetary policy.
Fiscal Policy
Measures the ability of a country to effectively implement fiscal policy.
Business Environment
Measures the overall quality of the business environment and ease of doing business.
Labor Flexibility
Measures the flexibility of the labor market, including the company’s ability to hire and fire employees.
Government Stability
Measures the degree of stability in a government.
Social Stability
Measures the degree of social stability, including human development and political rights.
Regional Stability
Measures the degree of stability in the region.
Legal System
Measures the transparency and level of corruption in the legal system.
Country risk Tier Disclosure
A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Best’s Credit Rating Methodology that is applied to all
insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation
issued by a government, an insurer or other rated issuer, nor does it address the suitability of any particular policy, contract or other financial
obligation for a specific purpose or purchaser.
Version 091714
Copyright © 2016 by A.M. Best Company, Inc.
Copyright © 2016 A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED. No part of this report or document
may be distributed in any electronic form or by any means, or stored in a database or retrieval system, without the prior written permission of
A.M. Best. For additional details, refer to our Terms of Use available at A.M. Best website: www.ambest.com/terms.
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