Page 24 - Layout 1

Insurance
Continued from p22
diverse businesses to regulate, and the ability to offer a “bespoke” service is nigh on impossible for all of them.
Could Gibraltar offer a speedier and better solution in terms of regulation, in particular to smaller intermediaries operating in the UK market? Should the MGAs and others in the intermediated market be subjected to same rigid cumbersome regulatory regime as larger players, when they do not carry the insurance risks for their own account, nor where they are not end user/consumer facing?
Due to its size, Gibraltar has often prided itself as being nimble in terms of its ability to adapt to market needs. Its regulator (the GFSC) has a “speed to market” policy, and is often known for being approachable on short notice. This makes it a responsive regulator and should tick the boxes of UK businesses.
Going forwards
Gibraltar Finance has announced that significant changes are to occur in the intermediated insurance market. Insurance companies in Gibraltar often operate on an outsourced business model whereby most of their operations in Gibraltar are outsourced to reputable insurance managers (the likes of Aon, Artex and Robus). These managers have not previously been able to manage intermediaries. this will now be able to occur. The appointed representative (AR) regime will also be introduced to allow insurance intermediaries to be AR’s of “hub” intermediaries like in the UK – but this is likely to be restricted to those whose primary business is insurance (to stop e.g. 2nd hand car dealers being AR’s).
On licensing, the MGAs and brokers are currently licensed and regulated under the same Financial Services (Investment and Fiduciary Services) Act 1989. The writer would like to see that they are regulated separately.
Firstly, there is a need to look at what should be defined as an MGA. It is suggested
that this should be an agent whose sole contractual responsibility is to the insurer (although this will inevitably cut out “retail” MGA’s dealing directly with consumers). An MGA’s clients are its producing brokers which are already licensed and regulated. As such, why do such MGA’s need to be licensed
under the same licensing regime when they are in fact dealing with professional regulated entities? It is an unnecessary duplication, doubles regulatory burden and cost, and ultimately delivers little or no benefit.
On the other hand, brokers are consumer/end user facing and surely, their regulation should be different from that of MGAs since they owe a higher duty of care than an MGA. The same applies to “retail” MGAs too. A more prescriptive regulatory regime, perhaps with a higher compensation levy for those dealing with consumers is surely correct?
MGA’s that have no direct contact with consumers/insureds should not be regulated on the same basis, nor carry the same duty of care to consumers with whom they are often allowed no direct contact with through distributing brokers. UK regulation does not
provide this distinction – and the FCA will not regulate them separately (despite other countries such as Belgium doing so). If Gibraltar were to provide this distinction it could attract a large amount of interest from UK MGA’s, since the MGA market in the UK has grown enormously. This is reflected by the fact that the UK Managing General Agents’ Association had 30 members writing £1.2bn when it set up in 2012. It now has some 140 members writing £6.3bn, of which only c12% is “retail” (i.e. directly sold) to the consumer. The model is now well-established.
Many MGA’s are operating under an incubator model (where they are
AR’s of a hub regulated intermediary). They would dearly all like to be autonomous. However, the cost and complexity of UK regulation is prohibitive. Gibraltar needs to offer better – not soft, not easy.... just better and easier access to regulation and services.
Hold your horses is the message to all. It will be a short while in coming through, whilst the new financial services legislation beds down.
The Gibraltar Government has backed this initiative. The laws can be changed. The tax environment is stable. The skill set is there. The question is: When will this all come to fruition? Who in Gibraltar is ready for the challenge?
Sooner rather than later please!
‘As Brexit occurs, the EU door closes – but opportunities in the UK increase
www.ec3legal.com
24 Gibraltar International
www.gibraltarinternational.com
‘