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liabilities on its books. There are two key attractions of Gibraltar for insurers. “The relationship with the regulator and the speed to license are critical”, Ashton said, “because in a small jurisdiction unless you can offer that differentiation, businesses will stay within a larger domicile.”
He stated an ability to easily access the Regulator, raise questions and meet the licensing team could normally be achieved in a matter of days, “rather than have to wait weeks or even months in other jurisdictions before you can get to see the regulator; this is a big plus.”
The government is seeking to ensure “a business-friendly environment” and application timescales can be kept low “provided we receive the highest quality in applications – ones that are completed fully and do not leave open questions about the business approach, or how it will be run.” Ashton maintained: “In the past this has not always been the case. We are saying to insurance managers that when working with these potential new clients, it will delay things if the FSC thinks that people are not paying attention to the detail; it may raise questions about how they run their businesses.”
standards, however, Ashton emphasised! After years of lobbying, Gibraltar hopes soon to accept Part VII transfers that in particular would facilitate run-off or legacy business, from UK insurers’ portfolios under
the Financial Services & Markets Act 2000. “When large insurers begin to look at their discounted liabilities – books of discontinued business for which they are still accountable - on which they may no longer be making money, or have only marginal profitability - it is possible they will decide to sell to a specialist run-off business at a discounted rate and produce capital,” explained Steve Quinn, chief executive of
Gibraltar insurance manager, Quest.
Test case progresses
An insurer can with regulatory approval, make an application to the UK Court for transfer of an insurance portfolio to another insurance company. Quinn reckoned: “There is a thriving run-off market in the UK worth billions of pounds in liabilities that could be
approval prior to a High Court test case. However, Ashton believes that in a Brexit situation, Part VII transfers could proceed, because there would be no need to refer back to Gibraltar not being an EEA state in its own right. “I think it could become very attractive in terms of the assets and liabilities involved”, he concluded.
No Gibraltar firms have revealed plans to quit the jurisdiction, because Brexit might mean an end to passporting of services between Gibraltar and EU countries. Elite Insurance, which specialises in legal expenses, professional indemnity and general insurance, located in 2011 its business to Gibraltar from the UK where it retains an office. Revealing in September that it had decided to set up a subsidiary in Luxembourg, Elite’s chief executive Jason Smart, explained: “The issue for us is that we cannot afford to let our customers just wait and see what happens between the British government and the rest of Europe, we do not feel that is fair.” However, Elite already has offices in Spain, Italy and France.
Red Sands, the territory’s broad-based insurance company since 2004 with £103m written premiums in 2015 from pet, ancillary motor products and insurance backed guar- antee markets, is possibly the largest with overseas interests. It declared shareholder dividends of £15m, five times greater than a year earlier and is expanding its European business beyond the 15 EU countries, includ- ing the UK, that it operates in. The Red Sands website claims it is “the fastest grow- ing whole-life insurers in eastern Europe”.
Insurance-linked securities (ILS), essentially financial instruments sold to investors whose value is affected by an insured loss event (frequently described as catastrophe bonds), and other forms of risk- linked securitisation, is a market Ashton still sees as offering potential, although only two deals have been completed so far.
Gibraltar’s fast-growing Lottoland business, renewed its €100m ILS two-year funding after two large pay outs this year totaling €36m failed to fase investors renewing their support with a fresh ILS deal to protect the firm from both large jackpots and any accumulation of small wins over multiple lotteries.
“We are still looking to promote ILS business, but it takes time partly because most of these transactions relate to north America and it is why Bermuda has been most successful,” Ashton reported.
Ray Spencer
It usually takes six months from beginning to end to process an insurance company application, but the FSC service level standard is to provide an in principle decision within 18 weeks, assuming all required has been supplied.
Gibraltar forgotten
Quest insurance manager, Steve Quinn, see potential in thriving UK run-off market
accessible to us. Most of the large firms [insurers] have big chunks of business in dormant portfolios, for example.”
But Gibraltar was ‘for- gotten’ when the UK drew up its Part 7 agreement, but every other EU and EEA territory can take on that work. In mid-2014 the Gibraltar Government confirmed that it had received written confir- mation from the UK Treasury,
In response to sector demands application ‘firepower’, Kristian Menez, a Partner at accountants, PwC (Gibraltar) specialising in financial services regulatory requirements, has been seconded to work two days a week with the FSC for six months.
The FSC, in a statement, said that Menez “possesses sound knowledge of the local insurance market and is able to process insurance applications with limited assistance and also provide key input into the current authorisations process”, and added: “This will, of course, be beneficial with regards to time pressure; however it is his insurance expertise which is of most value for us at this time”.
There will be no dilution of regulatory
that Part VII transfers can take place between UK and Gibraltar insurers without a change of law, subject to Court and regulatory approval.
That remains the Treasury position today, but uncertainty revolves around the different constitutional status of Gibraltar as an associate member within the EEA. UK lawyers have pointed out there was no certainty that insurers disposing of their run- off business to a Gibraltar company would not still be held liable within the UK if something went wrong – and importantly, that the full liability of that insurance busi- ness under Solvency II would still be count- ed against the original insurer and add to that company’s retained capital requirement.
Test case attraction
Now a large UK insurer proposes to transfer a small part of its business to a Gibraltar entity and it is with UK regulators for
for greater
Gibraltar International

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