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Insurance
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book into Spain in January, at a reported cost of £4-5m, including transfer of several hundred thousand policyholders also from the UK.
Whilst some of Gibraltar’s EU insurance business have sought to move to Malta, others, such as Red Sands (RS) with operations in five European countries and one of the fastest growing whole-life insurers in Eastern Europe, have faced difficulties in doing so.
RS found Malta’s position in respect of licensing altered after starting its application in May 2018, including a change in risk appetite for Gibraltar-based insurance portfolios and required three rather than five key locally-based personnel supported by a number of established local outsourcing arrangements.
Moving back
Cawdery, who is also RS managing director, explained: “After discussions with the Malta regulator, it seems they still have a number of issues with Gibraltar transfers, possibly as a result of pressure in the background from the European Insurance and Occupational Pensions Authority, which oversees EU regulators, and has expressed views on the substance of UK and Gibraltar transfers into the EU post-Brexit to ensure that they are not simply letterbox arrangements.”
It was a reputational risk issue around past failed Gibraltar and UK insurers, he declared and “although perhaps understandable in the past – say 15-20 years ago when there may have been less substance to some businesses in Gibraltar- that perception is outdated and unjustified”, Cawdery emphasised.
Ironically, Red Sands took on 8,365 customers of now4cover, a UK home insurance intermediary that was part of Gibraltar’s Lamp Insurance, which went into administration at end-April.
In 2016, Enterprise, a motor insurer, became the largest to cease trading with a claims bill exceeding £157m, and Elite followed a year later.
Jay Gomez, a senior associate specialising in insurance at law firm Triay & Triay (T&T), said: “Failure is never good for any jurisdiction, but what we have to be conscious of, given the amount of business written from Gibraltar, is the amount of failures we have experienced is not that large: failures happen all over the world; they are bound to happen – it is a reality.”
Paul Cole, managing director of, Artex Risk Solutions, a leading insurance manager, said failures happened across Europe, and that all jurisdictions had their failures and issues, but he conceded: “In a small jurisdiction like Gibraltar it is painful.”
Red Sands has now decided to concentrate on its general insurance offering into the UK and not to proceed with Malta. The company is looking either to agree a portfolio transfer of about £25m European annual premiums from 140,000 policyholders in the Red Sands Life Insurance Company that accounts for some 10% of RS Group business, or to go into run off.
Some Malta-based insurance businesses have re-domiciled into Gibraltar: Caversham gave up its Malta license in April, and Bray Insurance did similarly in June. Earlier, St Julien, in which Markerstudy and Zenith had an interest, re-domiciled its insurance business from Malta into Gibraltar in mid-2017 and then was put into run-off as there was a local company already writing UK business.
Global advisory, broking and solutions company, Willis Towers Watson’s Gibraltar arm has also reportedly re-domiciled a couple of captive insurers, including for the UK’s Bifa Waste Management company.
Cole revealed: “We are in preparations for a new motor insurance company from the UK to be set up, along with enquiries from other established businesses that value approachability of the regulator in a proven market for the motor industry. We are assisting a reasonable size insurer to re-domicile from Malta.”
Artex has grown in Gibraltar this year and in a mature motor insurance market, Cole believes “that it is not going to grow significantly in the coming years, but given it is an established market, there still will be the odd one or two newcomers, because it remains a stable jurisdiction with passporting access into the UK in a competitive marketplace.”
Hedgehog set up this year in Gibraltar as a specialist insurance managing general agent focused on the UK motor market, and is the only private UK business to be granted 100% of the UK’s Berkshire Hathaway’s underwriting capacity.
Newcomers too
“We are on target to write about £35m [premiums] in the next 12 months, across most of the market and looking to grow substantially over the next few years”, reported Hedgehog chief executive, Pete Storey.
He declared: “Our background is technology and our USP is that as a digital broker, we’ve built a platform specifically designed for aggregator-driven UK motor market business, and as a result can take advantage of data, scale, and processes that are available starting in 2019 without having a hangover of
legacy processes, staff overheads and technological ‘debt’ that prevents moving quickly to take advantage of the market conditions.”
Storey emphasised that Gibraltar had been chosen for its “straightforward regulatory approach, leadership in the UK motor market, supply of professionals and professional service companies, and strong, UK-like legal system”.
Also new to Gibraltar is Extracover, part of the UK’s Zego, specialising in paperless cover for private hire, scooters and vans, but targeting in particular, part time drivers and riders, and Masbro Insurance is a new licensed broker this year.
Vigilis Services, a general insurance intermediary was set up in Gibraltar in 2016 initially involved in transacting commercial, ultra High Net Worth household and art/specie classes of insurance, which Minister of Commerce, Albert Isola, described as “a strong vote of confidence in the jurisdiction ahead of Brexit”.
Unexpectedly, Brexit provides an insurance boost. Gibraltar’s insurance community is getting excited over a little-noticed UK Statutory Instrument, passed by the Houses of Parliament in March that post-Brexit ensures Gibraltar can participate in Part VII transfers under the UK’s Financial Services and Markets Act (FSMA) 2000 – lucrative and large-scale insurance and pension run-off business that hitherto had been effectively out of bounds for the jurisdiction, in part because of English High Court legal uncertainties, with EU implications and high costs.
Run-off certainty
“There was a transfer from Gibraltar to the UK in 2012, when Judge Henderson found that the FSMA and the Gibraltar Order interacted to permit transfers of insurance business from Gibraltar to the United Kingdom within the scope of Part VII, but the implication was that a transfer from the UK to Gibraltar would fall outside of Part VII,” explained Michael Ashton, insurance expert at Gibraltar Finance, the government body.
Although Gibraltar’s Minister for Finance, Albert Isola, had been assured by the UK government in 2014 that such transfers of books of business could be made, subject to usual regulatory approvals, “professional services firms in the UK who advise on such transfers have remained cautious”, Ashton reported. “There has been many transactions in recent years with some very significant amounts.” Transfers include both life and general insurance. “It would be great to attract new business to Gibraltar and even a slice of the total business would be positive”, he mused.
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12 Gibraltar International
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