By Erika Pozo, Director, Kroll (Gibraltar) Limited

In an evolving regulatory landscape, insurance firms must be prepared not only for growth and resilience… but also for a ‘final chapter’ of a book of business, ‘The Solvent Exit’.

A solvent exit in the industry doesn’t always mean a full exit from the market. It can involve a structured withdrawal from a particular line of business, undertaken to release trapped capital and redeploy resources into more profitable or strategic areas. In either case, whether leaving the market entirely or streamlining operations, the regulator now expects insurers to demonstrate that the process can be carried out in an orderly, well governed, and policyholder focused manner.

Thanks to the Gibraltar Financial Services Commission’s (GFSC) a new Guidance Note on Solvent Exit Planning for Insurers, published on 13 June 2025, outlines the expectations for insurers to plan and execute an orderly wind-down while remaining financially solvent.

From the PRA to the Rock

Solvent exit planning has its roots in UK regulatory policy. Back in 2021, the Prudential Regulation Authority (PRA) introduced requirements for solvent exit planning, with its final policy (PS20/24, SS11/24) being issued on 18 December 2024. The rationale was straightforward: if an insurer decides to leave the market while solvent, it should be able to do so orderly, responsibly, and without destabilising policyholder protection mechanisms. The PRA’s framework placed exit risk on the same footing as entry and operational risks.

Given Gibraltar’s close regulatory ties to the UK through the Gibraltar Authorisation Regime (GAR), it was only a matter of time before the GFSC followed suit. The June 2025 guidance now makes solvent exit planning a standard expectation for all Gibraltar insurers.

Core requirements – The Solvent Exit Analysis

The GFSC’s guidance lays out a structured, technical approach. At its heart, it requires all insurers to build credible, proportionate exit strategies. In meeting the expectations within the Guidance Note, firms must produce a Solvent Exit Analysis (SEA) as part of its BAU activities, which outlines and sets out a firm’s run-off / exit options, regardless of how unlikely or distant the prospect of an exit may seem.

The SEA is not a box-ticking exercise. Every insurer authorised in Gibraltar must maintain one, with the level of detail tailored to the firm’s size and complexity. It must be refreshed at least every three years, or sooner if the risk profile changes. While it can be integrated into existing governance tools such as the Own Risk Solvency Assessment (ORSA), the GFSC is clear that it must stand up as a practical roadmap for an orderly exit.

Insurers are expected to map out credible exit routes, from policy run-off to portfolio transfer, restructuring or sale, and must spell out the actions, resources, and timelines needed. Each analysis must also identify indicators and trigger points that signal when it is time to act, helping firms avoid leaving it too late.

Potential barriers, whether market-wide or firm-specific, must be considered in detail. These range from gaps in policyholder data and operational dependencies to external risks such as market volatility or stakeholder reaction. Resource planning is critical: firms must not only demonstrate they have sufficient capital and liquidity to execute an exit but also allow for added costs such as redundancy payments, advisory fees, or asset write-downs.

Clear governance and accountability are nonnegotiable. A senior regulated individual must oversee the SEA, supported by transparent decision making and robust assurance.

For Gibraltar, this move signals a proactive stance: embedding exit preparedness into day to day business to safeguard policyholders and maintain confidence in its insurance market.

SEEP: Turning Exit Planning into Execution

Unlike the SEA, which is a standing requirement, the Solvent Exit Execution Plan (SEEP) is only triggered when an insurer’s exit from the market becomes a reasonable prospect.

The SEEP translates theory into action. It is designed to show, in real time, how an insurer will implement an orderly and solvent exit, whether through run-off, transfer, sale, or restructuring. Once triggered, the SEEP must be delivered to the GFSC within a specified period and updated as circumstances evolve.

Key elements of the SEEP include a detailed timeline of actions, allocation of responsibilities, resource mobilisation, and communication strategies to manage policyholders, staff, creditors, and counterparties. The SEEP also addresses the barriers identified in the SEA, showing how they will be overcome in practice. With a regulated individual accountable for execution, ensuring governance remains clear at any critical juncture.

For Gibraltar insurers, the SEEP requirement underscores the regulatory message: planning alone is not enough. Firms must be ready to act decisively to protect policyholders and market stability if an exit becomes inevitable.

What matters?

For Gibraltar as a jurisdiction, solvent exit planning strengthens alignment with the UK PRA and reinforces the credibility of GAR. Boards are now expected to take ownership of exit strategies, pushing exit planning firmly into the boardroom agenda rather than leaving it as an operational afterthought. The message is clear, exit planning is now a core regulatory expectation, designed to protect policyholders, preserve market confidence and prevent disorderly failures in Gibraltar’s insurance sector.