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Insurance
The Future of MGA’s in Gibraltar
Should there be a separate licensing and regulatory regime? David Coupe, Senior Partner, EC3 Legal, an insurance law firm based in the City, reports
Whilst insurance businesses in Gibraltar have achieved prominence in the UK market, (around 27 % of the UK motor risks are underwritten by Gibraltar insurers), the Managing General Agents (MGA) market has not seen much traction until recent years. With the recent Gibraltar Government’s legislative changes in respect of the intermediated market in the juristiction, could a new dawn be rising which will be exciting for the Gibraltar insurance market and, in particular, the MGA market?
Why Gibraltar? Why now? As Brexit occurs, the EU door closes – but opportunities in the UK increase. Both governments have announced the continuation of a single market between Gibraltar and the UK in respect of financial services which means there is a guaranteed access to the UK market, and vice versa.
There are many existing positives for the juristiction. It is currently undergoing legislative reforms on financial services with
the enactment of a comprehensive new legislation to provide a sound base across all financial services, aiming to be comparable to that of the UK. It has an insurance sector with many experienced professionals who know the UK market well. It has the relevant insurance infrastructure. There is a favourable tax regime with no VAT. It also has a well- developed regulator (the GFSC) offering “right touch” not “light touch” regulation (to quote the minister of digital technology and financial services).
And with a new insurance intermediary regime as announced, there really won’t be much not to like.
The opportunity
The regulation both in the UK and in Gibraltar of the insurance sector has been (and will probably remain to a large extent) highly influenced by EU rules. Solvency II Directive and, in the last year, the IDD were introduced to prevent systemic failure in the insurance industry across the EU and to enhance consumer protection. As a result, regulation and supervision of insurance activities can be challenging, not only for the regulators, but also for market players.
It is widely recognised that the UK offers a slow and sometimes inflexible regulatory regime as regards the setting up and on-going supervisory regulation of these businesses. For instance, applying for a UK regulated intermediary status can typically be an 8 (or longer!) month process, often full of questions that have little benefit to the process, and cause immense frustration to the applicant. Indeed, because the UK insurance market changes so quickly, by the time the business is regulated, it often needs a whole new business plan since the original opportunity has gone. Sometimes funding evaporates in the meantime.
The same applies for the vast majority of on-going conduct enquiries where one has no direct reporting line, no continuity of approach, and, sadly, rarely much appreciation of the issues. To be fair to the UK regulators, they have a vast number of
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