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Insurance
Prospecting for business set to pan out
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the third Chinese insurance MoU {for financial services] with the Bailiwick in nine months, “signalling an increased level of cooperation between the regulatory bodies of both markets”, the Channel Islands finance centre said and it was “symbolic of the openness of Guernsey's insurance sector to Chinese-led business.”
“Guernsey has been busy in this area for many years because they have had an office in Hong Kong and now opened one in Shanghai, which Gibraltar’s budget doesn’t yet stretch to”, Callaghan observed “but we also are in the process of agreeing an MoU with the Chinese Regulator and it is just about ready to be signed.”
Return to China
Gibraltar’s Ashton has been asked to return to China for a seminar focusing on the benefit of overseas captives for large Chinese businesses and State-owned enterprises.
establish financial investment or holding companies’, and once that happens Gibraltar’s local [financial services and legal] community can service some of their future activity and requirements.”
One suggestion is to utilize a Gibraltar Protected Cell Company (PCC) as an initial step; “overseas businesses already use Gibraltar PCC cells for a variety of reasons and the Gibraltar structure often permits a new cell to be established in a short time frame subject to regulatory approval”, Ashton maintained. A cell could offer the full solution or it could be an initial step towards establishing a new Gibraltar insurance company.
In terms of establishing an insurance company, Chinese applicants would need to meet the existing requirements in exactly the same way as any other insurance company applicant. With management and control of the business in Gibraltar.
Being part of the EU, a Gibraltar captive has a €3.7m minimum capital requirement – whereas, the requirement in a number of other captive domiciles maybe a headline figure of just £100,000. “I personally think that for Chinese businesses €3.7m would not be a factor that would deter them from establishing in Gibraltar. It will take time, but we are prepared to make the necessary investment and work over a number of years to build relationships and confidence in
setting up a new insurance company in the UK or in Gibraltar would probably not be economic”, Ashton rationalises.
“So what they almost certainly will look to do is either, stop writing that business – seen as a cost of Brexit and they’ve lost out – or they may look to some kind of fronting arrangement, whereby they get another insurance company in the UK to write the business and then reinsure out - but fronting can be expensive, and may not be an economically viable model in the long term.
However, Gibraltar maintains that subject to the class(es) of business being underwritten, those mainland European businesses could instead establish within a few months a new Gibraltar PCC cell from which to write insurance into the UK.
In August, Minister Isola, announced the expansion of insurance business permitted within Gibraltar licenced PCCs to include third party business, opening up “new opportunities for Gibraltar’s insurance sector in a safe and robust manner”.
EU opportunity
The opportunity for Gibraltar is to contact those European businesses and ensure they are aware that Gibraltar is an option, because it can passport into the UK.” Whether consideration is given to a new Gibraltar insurance company or a new Gibraltar PCC cell, the jurisdiction can gain credibility through demonstrating the success of passporting over 15 years with a core group of motor insurers - Admiral, Advantage, Acromas and Marketstudy were some of the first to establish on the Rock - and the 20-22% share Gibraltar firms now have of the UK motor insurance market.
“For some, Gibraltar won’t be the right answer, but I want to at least be on the shopping list, so that Gibraltar is considered as an option.” Advantages of the territory include: having a single insurance regulator; ease of access to the Regulator, because if needed meetings can be achieved normally in a matter of days, which is not always the case in larger jurisdictions; and speed to market for applications.
“It would be a success if we can encourage a handful of these firms to establish in Gibraltar,” Ashton noted. “We are considering mini-road shows or seminars for invited groups of insurance professionals and their clients and maybe the sweet spot for Gibraltar PCC cells is for [overseas] insurers with say £10-20m premium income in the UK.”
Mike Ashton (4th from left) next to pioneering broker, Bruno Callaghan, and Chinese business professionals in Beijing
Gibraltar.”
“We are encouraged by the fact that we hear from our contacts in China that the use of captives to support the one belt, one road strategy and all the investment that is taking place, is a very positive development”, Ashton reported. That could result in formation of a Chinese captive insurer, and then a subsidiary captive that would sit below it in Gibraltar.
Gibraltar’s pitch is to attract Chinese owned captives in the jurisdiction particularly for European infrastructure investments and acquisitions. In addition, “Gibraltar is a great jumping off point for north Africa, because of our proximity, but also because in Gibraltar there is English law, a bi-lingual workforce, etc”, he enthused.
“If Gibraltar can attract captives, we could then say ‘what about using Gibraltar to
Appealing cells
Creation of a Gibraltar PCC is also an approach that might attract European insurers to set up locally as a hedge against the possibility of not being able to write business in the UK if Brexit results in a loss of freedom of services across borders.
The Bank of England publishes a list of around 750 EEA insurers that write insurance business in the UK of which about 75 have set up branch offices, the rest are all passporting into the UK from their home territories under freedom of services.
“There is a group of companies in Europe – I don’t know if that’s 50, 100 or 200 – which are passporting into the UK from a number of locations such as Ireland, Germany, France and Italy, with quite small books of business, and the cost to them of
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