Gibraltar Insurance – The Jurisdiction of Choice

Insurance & Reinsurance Regulation in Gibraltar – An Interview with Christian Caetano, Partner at ISOLAS LLP

Christian, what makes Gibraltar so attractive for companies operating in the financial services sector, particularly banking and insurance (writing over £7 billion of insurance premiums in 2022)?

Gibraltar is widely regarded as an innovative, yet robustly regulated, financial centre of excellence. The jurisdiction’s insurance sector is particularly prominent given the important role which it exercises within the UK’s insurance market. In this respect, Gibraltar continues to be a domicile of choice for open market insurers, captives, intermediaries, MGAs and Insurtech firms, all of which operate under the supervision of the Gibraltar Financial Services Commission (GFSC).

The GFSC is widely praised for its collaborative approach and deep understanding of the business needs of firms under its supervision. The GFSC itself plays a crucial role in Gibraltar’s overall attractiveness as a financial centre by applying the highest of international standards whilst, at the same time, enabling speed-to-market for prospective licence applicants. As a smaller and nimbler territory, Gibraltar is able to offer potential new market entrants significantly shorter licensing timeframes than larger jurisdictions. Coupled to this is the unique ability of GFSC authorised firms to passport their services directly into the UK pursuant to bilaterally agreed ‘single-market’ access arrangements agreed between the respective Gibraltar and UK Governments. No other country or overseas territory enjoys a similar capability to passport services directly into the UK market.

Another key component of Gibraltar’s attractiveness is the jurisdiction’s highly experienced insurance managers which provide an array of compliance, accounting and other functions to Gibraltar insurers, intermediaries and MGAs. The services offered by insurance managers therefore attract particular interest from new insurance start-ups and insurtechs seeking assistance with licence applications and ongoing operational support. 

Can you provide our readers with an overview of the market trends and regulatory framework in the insurance and reinsurance market for Gibraltar?

The GFSC is responsible for the supervision of all (re)insurers in Gibraltar pursuant to the Financial Services Act 2019 (“FSA”). Under the FSA, any person who either effects a contract of (re)insurance or carries out a contract of (re)insurance in Gibraltar must (unless otherwise exempted) be authorised by the GFSC to undertake such ‘regulated activity’.

All (re)insurers are therefore required to obtain permission from the GFSC under Part 7 of the FSA to undertake the regulated activity of effecting and carrying out contracts of (re)insurance (as the case may be) in the particular classes of business (whether general, life or both) which they propose to do business in and in accordance with their respective business plans.

Once issued with their Part 7 Permission by the GFSC, the (re)insurer would be subject to the provisions of not only the FSA, but also all applicable insurance regulations and other cross-sectoral legislation. Gibraltar’s principal piece of legislation governing the prudential, conduct and other business of (re)insurance companies is the Financial Services (Insurance Companies) Regulations 2020 (the “IC Regulations”).

Is authorisation or a licence required and if so, how long does it take on average to obtain such permission? What are the key criteria for authorisation?

As regards key criteria for authorisation, these can be distinguished between those which are specific to certain regulated firms/activities and those which are largely cross-sectoral in nature. On the latter, these include certain ‘Threshold Conditions’ and other requirements applicable to all categories of firms in Gibraltar. The Threshold Conditions themselves are prescribed by the FSA and include the requirement for a firm to have its statutory seat and “head office” in Gibraltar, as well as for its business to be conducted with appropriate financial and non-financial resources.

In addition, key criteria for the authorisation of (re)insurers specifically can be found within the IC Regulations which, currently, preserves the regulatory capital and other provisions largely equivalent to those under the Solvency II Directive. However, since Brexit, the IC Regulations have been subject to some amendments which reflect Gibraltar’s move towards alignment of its laws and regulatory outcomes with those of the UK.

In terms of timeframes for obtaining GFSC permission, these will be largely dependent on the quality of the submission/application. However, it is possible to obtain permission from the GFSC for an insurer within a year or two whereby an equivalent application process in the UK, for example, could take approximately twice as long. It should also be noted that the GFSC has also recently issued a consultation paper aimed at establishing an even more streamlined application/authorisation process.

Are there restrictions or controls over who owns or controls insurers (including restrictions on foreign ownership)?

There are generally no restrictions under Gibraltar law on the foreign ownership of Gibraltar-based insurers. However, any person which proposes to either hold or acquire ‘control’ over a Gibraltar insurer must apply for and obtain the approval of the GFSC prior to acquiring such control. The GFSC’s approval process, as established under the FSA, is therefore applicable to all natural persons or body corporates, regardless of nationality or domicile.

Is it possible to insure or reinsure risks in your jurisdiction without a licence or authorisation? (i.e. on a non-admitted basis)?What penalty is available for those who operate in your jurisdiction without appropriate permission?

In a financial services context, the FSA contains a general prohibition against any person carrying on, or purporting to carry on, by way of business, a regulated activity in Gibraltar, unless that person is either exempt or authorised. This is known as the ‘General Prohibition’ and any person which contravenes the same (subject to some caveats) commits an offence and is liable:

(a) on summary conviction, to imprisonment for six months or the statutory maximum fine, or both; and

(b) on conviction on indictment, to imprisonment for two years or a fine, or both.

There are also restrictions on financial promotions and other similar prohibitions under Gibraltar law but the primary restrictions/penalties for operating without permission under the FSA would relate to contravention of the General Prohibition.

Over the next five years what type of business do you see taking a market lead?

The volume of business undertaken by Gibraltar insurers continues to grow with latest estimates being that Gibraltar insurers wrote approximately £7 billion of gross premium income in 2022. It has also been widely reported that around 30% of all UK-based motor insurance premiums are now underwritten by Gibraltar insurers. Substantial growth is also being seen in other areas, such as travel insurance and pet insurance.

This amount of business has only been possible due to Gibraltar/UK single market ‘passporting’ arrangements, previously established under the ‘Gibraltar Order’. Presently, a regulatory alignment process is underway in order to fully implement the long-term market access framework between the jurisdictions, known as the Gibraltar Authorisation Regime (the “GAR”). The unique market access granted by the GAR will ensure that interest in Gibraltar remains for those applicants seeking to service UK customers whilst also benefitting from the speed-to-market and other advantages which Gibraltar offers.

The Gibraltar Government has however also indicated its ambition to further diversify and promote Gibraltar as a hub for other classes of insurance business, such as in the life and pensions business sectors. It is, therefore, expected that the Gibraltar insurance industry will focus on greater diversification in the coming years. Gibraltar is also home to a number of technology-driven companies, including the first insurtechs to establish their own carriers to underwrite UK business. Gibraltar is uniquely positioned to attract insurtechs due to the synergies between its vibrant insurance and fintech communities.

The Gibraltar Government is also finalising legislation for a new Dual Captive Regime aimed to be implemented during 2024. The proposed dual captive regime is being designed to sit outside of the more onerous requirements of the Solvency II regime and should, therefore, prove a more attractive proposition for prospective captive owners. The new regime will, in particular, focus on international businesses and markets other than the UK (although there may also be potential to integrate the regime with the UK under certain circumstances). The Dual Captive Regime will provide for a lower overall cost base, with reduced reporting and other regulatory obligations, as well as lower minimum solvency capital requirements than those required by Solvency II jurisdictions.

About Christian

ISOLAS Partner, Christian Caetano is a Partner at ISOLAS LLP specialising in Insurance & Financial Services, serving both local and international firms. His clients include insurance companies, insurtechs, MGAs, insurance managers, and intermediaries. He provides expertise in licensing, regulatory, and corporate matters. Christian actively advises on mergers and acquisitions, including due diligence and change of control approvals from the Gibraltar Financial Services Commission (GFSC).

Christian’s extensive experience extends to Mergers & Acquisitions, supporting clients with change of control applications, corporate restructuring, redomiciliation, and insurance portfolio transfers.

Beyond client representation, Christian actively contributes to shaping the legal landscape. He has drafted legislation related to the EU Directives and Gibraltar’s withdrawal and played a key role in the single largest review of its financial services legislation.

About ISOLAS LLP

ISOLAS LLP combines unparalleled legal expertise with practical guidance, earning the trust of clients and partners who value our confidence and practicality. Our award-winning lawyers provide a comprehensive range of personal and business legal services, both locally and internationally, with a focus on the financial services sector.

ISOLAS played a key role in developing Gibraltar’s insurance legislation, including through the Legislative Reform Programme (LRP). The LRP, the largest review of Gibraltar’s financial services laws, involved the ISOLAS team in implementing sector-specific insurance regulations.

ISOLAS expertise extends beyond legal practice as the also contribute to several authoritative insurance publications, including:

• The Gibraltar Chapter of Thomson Reuters’ “Comparative Overview of Insurance and Reinsurance Law and Regulation”
• Law Business Research’s Gibraltar Chapter for “The Insurance and Reinsurance Review”
• The “Gibraltar Insurance Guide,” part of Thomson Reuters Country Guides Series

Christian Caetano

ISOLAS LLP

Portland House, Glacis Road PO Box 204, Gibraltar, GX11 1AA

Tel: +350 2000 1892

Email: info@isolas.gi

www.gibraltarlawyers.com

 

Published by: www.lawyer-monthly.com