Morgan Peters, Head of Compliance, Artex Risk Solutions, reports
In March, the Gibraltar Financial Services Commission (GFSC) held their 2023 Insurance Industry event, providing an opportunity to update the industry on their prior year thematic reviews, while also setting out their key regulatory priorities for the year. This was the first in-person industry event held post-Covid and, in a time of great global political and economic uncertainty, was attended with a keen sense of intrigue by over 100 Gibraltar based insurance professionals.
Continuing to trade with the UK
One of the key topics on everyone’s mind was the latest information regarding the ongoing regulatory alignment work with the United Kingdom via the Gibraltar Authorisations Regime (GAR), which will set out the long term framework for Gibraltar firms to continue to access the UK financial services markets in a post-Brexit world.
While the discussions are still progressing well, this may now not come into force until 2025. That said, the relationship between the UK and Gibraltar remains strong and the existing arrangements will remain in place until the GAR is implemented.
During an insightful opening address, the CEO of the GFSC, Kerry Blight, was quick to highlight that the GFSC’s key objective was to ensure that Gibraltar-based firms are subjected to the same high standard of regulation and supervision as those directly supervised by the Financial Conduct Authority (FCA)/Prudential Regulation Authority
(PRA), whilst maintaining the flexibility and approachability that has become one of the unique selling points for Gibraltar as a financial services domicile over the years1
Regulation tailored to Gibraltar
The focus is on “equivalence of outcomes” in a way which responds to the unique position of Gibraltar and the individual firms who operate in the jurisdiction. Gibraltar will, during the course of this year, be introducing its own version of the Consumer Duty and Operational Resiliency regimes already being implemented in the UK. In a world where Gibraltar accounts for 30% of the UK motor insurance market 2 3 and the fair treatment of customers is at the forefront of everyone’s minds, the GFSC have reiterated their commitment to ensuring that UK-based policyholders are afforded the same protection and care from Gibraltar- based insurers as they would if their insurer was under the direct supervision of the FCA.
The GFSC’s recent upscaling of its own Conduct of Business team is a testament to this and also demonstrates the importance of firms having effective compliance functions in place to monitor these positive customer outcomes and keep up with emerging regulation.
It is also important to note that the GFSC’s approach is not solely limited to implementing Gibraltar equivalence of UK regulations, but also to focus on identified risk areas specific to Gibraltar-based firms. Recent examples include the thematic review of premium debtor balances and the Dear CEO letter in relation to Independent Claims Reviews. During her update, Head of Insurance, Monika Sookhee highlighted the fact that a number of the firms who had completed these reviews had found them insightful and valuable in identifying areas of improvement, resulting in significant claims cost savings. This is a prime example of how a close relationship between regulator and industry can be to the benefit of all.
Speed to market
One of the questions often posed is whether Gibraltar remains an attractive domicile for new start-up insurers, MGAs and intermediaries to look to establish their business. Those firms considering setting up in Gibraltar will be comforted to hear that the GFSC are currently looking at their approach to authorisations in order to live up to the mantra of “speed to market” for good quality business.
The exact details of this revised approach are still being developed, however the intention is for a defined three-stage application process with a reintroduction of the “Minded to Approve” letter. This will greatly assist applicants with obtaining their capital and/or capacity. Artex looks forward to working alongside the GFSC to ensure that Gibraltar remains an attractive jurisdiction for high-quality applicants looking to establish an insurer, MGA or intermediary in an efficient and proportionate manner.
Substance and Regulated Individuals
The need for efficiency and proportionality within the insurance sector leads us to one of the GFSC’s other key focus areas, their Dear CEO letter on Regulated Individuals, Governance and Substance. With the expectation now being that the majority of an insurer’s Regulated Individuals need to be based in Gibraltar for the majority of their time, this represents an area of great trepidation within the local market given the relatively small pool of insurance professionals based in the jurisdiction.
This will result in a considerable change for a number of well-established Gibraltar domiciled insurers, however there was a welcome update on this score with the news that the GFSC will be looking to adopt a proportionate approach to this requirement and will allow the outsourcing of a number of the Regulated Individual roles, which is
an area where Gibraltar domiciled Insurance Managers can provide real value.
The outsourcing will be subject to a number of considerations including fitness and competence, conflicts of interest, contractual arrangements, and segregation of duties, but represents an important change in ensuring that sufficiently experienced and qualified personnel are in the right positions.
The GFSC’s messages were loud and clear. Gibraltar is a place in which to base your insurance business if you wish to trade into the UK. Clients will be reassured by the quality of the regulatory regime, and insurers will be pleased that this is tailored to their needs and the nuances of the Gibraltar market. The GFSC are committed to improving speed to market, and allowing insurance managers to add significant value to the industry.
1 Artex attendee commentary of opening address by Kerry Blight, CEO, GFSC, at the 2023 Insurance Industry event
2 GBC https://www.gbc.gi/news/30-all-motor-insurance-uk-now- underwritten-brokers-gibraltar-increase-11-ten-years-ago
3 HM Government of Gibraltar https://www.gibraltar.gov.gi/press-releases/minister-isola- hosts-insurance-breakfast-at-the-gherkin-in-the-city-of- london-8172022-8415