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Insurance
Surprise insurance sector growth extends appeal
Two life insurance companies, including a large international entity, are planning to begin operations in Gibraltar, projecting this aspect of the insurance business within the jurisdiction from “tiny” to “significant”, it can be revealed
A Deloitte (Gibraltar) motor insurance seminar in early October disclosed that the territory’s motor insurers account for 21% of the UK market, up slightly from last year’s 20%figure. Some92%ofthosecompanies’ premiums in the period 2010-14 were generated in the UK, and these account for the bulk of Gibraltar’s insurance market at present.
Strong links impress
Despite Brexit-prompted uncertainty in some areas, realization of Gibraltar’s strong UK links has helped crystalise the thinking of insurers that are either predominantly or completely UK-focused. “They think ‘why should we wait; let’s get on with it now’. There’s sufficient certainty about the future for us to get on and get these structures set up, so they are working on applications”, Ashton insists.
He sees it as “a great opportunity for MGA’s” – Insure The Box, a specialist car insurance large MGA that targets new drivers with use of telematics, opened in Gibraltar in 2010. Another similar enterprise, Smart Driver Insurance, gained its Gibraltar operating license in the last six months.
Admiral Insurance is understood to be the largest motor underwriter in Gibraltar, accounting for more than £932m in total gross written premiums last year.
Gibraltar is home to almost half of the foreign insurers that operate in the Irish market, but the largest, Zenith Insurance, has decided to end writing motor business there from February 2017 with “high claims” said to be amongst the principle reasons, as well as an increasing regulatory burden and an uncertain legislative climate.
Another MGA licence application is understood to be in progress with the applicant aiming to be in business by the year-end. It reportedly will start with a core team, which is expected to grow significantly as, even though an MGA, it will have wide authority in respect of underwriting and claims handling making it as near to being an insurance company without actually becoming one with the
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They are the latest in a growing line of insurance firms showing interest in establishing businesses, which Mike Ashton, the specialist insurance business senior finance executive at Gibraltar Finance, describes as “a level of activity greater than at any time in the last 18 months”.
He said: “Since mid-August there has been an unexpected increase in the number of people contacting me and expressing an interest in Gibraltar in respect of insurance structures - potential applicants looking to set up a company or MGAs (managing general agents).
[MGAs are specialised type of insurance agent/brokers that, unlike tradi- tional agents/brokers, have underwriting authority from an insurer and are responsible for some functions ordinarily handled by insurers including settling claims.]
“I think previously there was a reticence to do anything, people held back – a wait and see attitude – but once the UK’s referendum on the EU was announced last year, it crystalised their think- ing about making their busi- ness plans, particularly when they either are predominantly or completely UK-focused”, Ashton explained.
UK links appealing
“It’s become quite appealing to people looking at Gibraltar that we have these bi-lateral trading relations for insurance with the UK – the Gibraltar Order, referring to EU legislation and Directives – but it’s now apparent that those relationships will continue after any divorce, whether it’s a hard or soft Brexit.” It’s expected that the Gibraltar Order will be slightly amended to refer back to the UK legislation, and that this will be done swiftly to enable insurers to continue to write business into the UK.
In the year to April, the Financial Services Commission (FSC) licensed ten insurance entities, and in the six months to end-September a further eight license applications have been approved. There has been no new insurance company license granted this year so far, compared with two – AA and Watford - in the year to April. However there have been a number of exten- sions to existing licenses granted to the 51 active insurance companies, reflecting exist- ing insurers going into new areas or types of business.
In both periods there have been two new general insurance intermediaries, and in the six months to end-September, one new life intermediary bringing the total to four.
Life interest
There is also serious interest from two insurance entities in extending the jurisdiction’s life insurance sector, which at present is restricted to just four firms,
representing only a very small part of Gibraltar’s insurance business – life- insurance gross premium income was just under £100m in 2014 (the latest figures available), compared to £3.6bn for non-life busi- ness, including captives. One of the new life insur- ance businesses is “at a very early stage in its license application” with the intention of getting an application submitted before
the end of the year, but the other has an application that is close to being granted, Ashton confirmed.
“It is an area that has lots of potential to make a very significant impact [on the territory’s insurance sector] and this would help diversify our insurance potentially the market that is dominated by motor insurance.”
Life insurance gain will help diversify sector, predicts Finance Centre executive, Mike Ashton
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Gibraltar International
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