The last decade of the 20th century saw a rapid growth in the cross-border life market. The first fe...
The last decade of the 20th century saw a rapid growth in the cross-border life market. The first few years of the 21st century, however, have been significantly more challenging. Was the growth in cross-border business simply a bubble or does it have a long-term future?
The market has had to adjust to a number of fundamental changes which will affect both companies' business models and their future profitability. The growth in regulation worldwide means it is no longer viable or commercially acceptable to underwrite business from jurisdictions all around the world, particularly through non-regulated intermediaries. Consumerism generally means investors are demanding products that offer better value for money, reinforced by the lower investment returns expected in the future. So companies are faced with growing compliance costs and reducing margins.
Both offshore and cross-border companies have responded effectively to these challenges. Most now have far more focused distribution and marketing strategies aimed at a smaller number of regulated markets. There has also been significant investment in systems and new technology, coupled with outsourcing, which has reduced costs and improved value for money, creating products which compete in cost terms with the domestic competition. At the same time, cross-border products can offer advantages in terms of structures and features, fund choice and tax efficiency.
Demand for these products is increasing in parallel with the growth of high net worth investors both in the UK and elsewhere. Combined with this are other growth-promoting factors - specific tax planning opportunities such as inheritance tax planning, pension planning for high earners and and demand from the increasing number of individuals wishing to work or retire abroad,
2004 AILO statistics showed the market as a whole growing by nearly 25%. All the indications are that there will be further significant growth in the years to come.
Stuart Fairclough, chief executive, AILO
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