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Insurance
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will need to ensure that the GFSC can access its systems, records and other relevant information. This necessarily means that control of these operations needs to occur in Gibraltar, and hence the importance of local insurance managers now being permitted to assist with this. However, this will not remove the need for experienced local directors and also non-executive directors (although these need not be local) to be appointed in order to satisfy the “four-eyes principle” of corporate governance.
In terms of board members, the GFSC have expressed that it will take a pragmatic, holistic and proportionate approach to this issue, taking into account the intermediary’s size, nature and complexity of its business model and structure. There is to be no minimum or maximum number of directors on the board, but there needs to be an executive director who is approved individually under the relevant Gibraltar legislation and a local non-executive director on the board.
The GFSC place equal emphasis to the FCA on making sure that the intermediary is able to ensure a good customer experience for consumers, and to have adequate business continuity plans. This requirement is one that the board of the intermediary consider carefully in planning its risk conduct framework.
Outsourcing to insurance managers will be important to the development of the market. Continual assessment of the agent’s ability to provide the agreed services to the correct level will be required, and service standards with regular review meetings will be needed. Outsourcing to insurance managers of accounting, risk and regulatory requirements will be acceptable. However, dealing with complaints should not be outsourced, and the intermediary will need to determine how these will be best dealt with.
Applications in Gibraltar
All applications by Intermediaries for Gibraltar permissions must comply with the requirements imposed under Part 7 of FSA 2019. This involves a considerable amount of preparation and prior consultation. It is expected that once a completed application is received by the GFSC, the relevant period of determination by the GFSC is c3-4 months. The applicants are expected to satisfy and demonstrate that they can comply with the
threshold conditions under Schedule 12 of the FSA 2019, such as: (a) location of offices (in respect of insurance distribution, its registered office must be in Gibraltar and if no registered office, its head office must be in Gibraltar);
(b) appropriate resources (the business of the firm must be conducted in a sound and prudent manner); (c) effective supervision (the firm must be capable of being effectively supervised having regard to all the circumstances);
(d) suitability (the firm concerned must be a fit and proper person), and (e) a business model (the firm’s strategy for doing business) which is suitable and compatible for the person carrying on the regulated activities and how the affairs are being conducted, continuing to be conducted in the interest of consumers, and the integrity of the Gibraltar financial system; and
(f) fees – the firm concerned must pay such periodical and other fees as the Minister for Financial Services may by regulations prescribe.
Applying to operate in the UK under a cross border services basis and/or via a UK branch basis
Application by a Gibraltar licensed entity to operate in the UK will be under a new framework known as the Gibraltar Authorised Regime (GAR) which is created under the Financial Services Bill. The Gibraltar licensed entity will be required to notify the GFSC of its intention to operate in the UK, who, assuming that they consider the application to be in order and consent, then pass this to the FCA. The notification process is expected to be similar to the current EU Single Market notification, although the UK Government has expressed its intention to simplify the existing notification arrangements and it is proposing that new Gibraltar firms will be able to access the UK market within two months from the date on which the UK regulators receive the GFSC notification with all required information (including confirmation that the GFSC has given firm consent to access the UK market). The FCA will, inter alia require the following: (a) The identification of the person responsible for managing the Gibraltar entities affairs in the UK, and describe such responsibilities;
(b) Details of the UK branch structure; and (c) Rather obliquely, such other information as it may prescribed from time to time. This can be presumed to include all other information that a UK authorised intermediary may be required to provide (especially in relation to retail consumer business).
Undoubtedly, the outsourcing of compliance requirements (perhaps to a manager operating in both Gibraltar and the UK) will be required.
Proposed amendments to the Protected Cell Companies Legislation Gibraltar has a protected cell company (PCC) regime which allows for cell insurers to be set up under the control of the PCC’s board of directors. It is only currently used by captive insurers. It is hoped that in 2021, the PCC legislation will be extended to include allowing cells for brokers and MGAs. This will allow managers to offer integrated insurance solutions going forwards, perhaps with further alignment into the reinsurance market.
Conclusions
Gibraltar insurers already account for over a quarter of the premiums paid in the massive UK motor market. Gibraltar already has a number of brokers and MGAs actively participating in the UK markets. Since the announcement of the new regime in November 2019, and in anticipation of the new changes, there have been a number of applications for registration of new MGAs and insurers. Setting up a Gibraltar intermediary will not be for all. However, throughout the COVID pandemic, Gibraltar has remained open for business, has pushed through the changes, signed a beneficial tax treaty with the UK, and now has become a viable alternative from which to base an intermediary authorised to do insurance business in the UK.
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