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Insurance
An increase in activity for the Gibraltar insurance market
By Andy Matthews, Managing Director, Robus Gibraltar and John Harris, Business Development Consultant, Robus Group Robus Risk Services’ Managing
Director, Andy Matthews believes that the current challenging UK insurance market will give rise to further opportunities for Gibraltar
to set itself apart as a domicile which encourages innovation, and which enables growth. “Despite the challenges we have all faced this year, new enquiries have led to an increase in licence applications across the market”.
Covid-19 has been dominating insurance industry agendas for many months now, but even before this unprecedented situation, the insurance market was showing significant signs of hardening. The hardening or, as some commentators would say, “harsh” market is going to be here for some time to come.
The compounded effects on the current environment have seen significant price increases in many business lines, restrictions in coverage and in some cases the removal of insurance capacity altogether.
Maintaining security of capacity The knock-on effects for carriers, brokers and Managing General Agents (MGAs) have, in many cases, required a significant review of strategic direction and the need to have fresh thinking on how to maintain business as usual, let alone strive for growth.
Maintaining security of capacity, whether for direct insurance or reinsurance, has become ever more critical to ensure the ability to trade effectively and plan over time.
As a result, Gibraltar has seen a significant increase in demand for insurance managers to support new clients with feasibility studies, business plans and new licence applications for authorisation
from the GFSC. In the UK insurance broker market,
sustaining long term growth can be a challenge. Many successful insurance broking firms have built strong books of business through the distribution of non-standard motor insurance products, whether through direct distribution, via aggregators or, by designing unique (often InsureTech driven) products and marketing them to niche customer bases.
However, challenges such as securing longer term capacity agreements under binding authority schemes, ensuring stable pricing on profitable books of business and maintaining revenues where commissions have come under pressure from carriers, have led to the desire to build more robust businesses for the future.
Protected Cell Company legislation Trying to find an alternative way to control their own destiny has led to a sharp rise in inquiries from brokers wishing to consider capitalising their own risk baring vehicles – hence the need for the services of professional insurance managers.
Currently we have three very strong prospects that are looking to utilise Gibraltar’s Protected Cell Company (PCC) legislation. Their business models are completely different from each other and hence are all exciting opportunities for the domicile. Two would be non-life entities and the other a life entity. Of the non-life propositions, one would offer more traditional insurances for selected books of business and the other a new type of venture.
The latter intends to use innovation specific to Gibraltar. The prospect is looking to lead the way by establishing a new to market SPV PCC. The SPV legislation was established some 5 years ago with the objective of attracting fully collateralised (re)insurance vehicles. Not only will the prospective vehicle be a fully collateralised
insurance structure, they aim to attract new entities to participate in their insurance structure, with a view to encouraging additional businesses to be set up in the jurisdiction, supporting growth in the economy. If successfully established, it will be the first vehicle of its type in Gibraltar and it will be testament to the sound SPV regulation strategy introduced by the government.
Other Gibraltar based PCC’s have seen increases in cell applications, these are being driven by the hardening market. Those current market conditions could well give rise to the prospect of direct writing captives being established. Traditionally, such entities have been established in non-Solvency II (SII) jurisdictions using fronting insurer’s for compulsory lines. Market changes including increasing fronting fees charged by direct markets are making Gibraltar increasingly appealing.
Revision of regulation enabling insurance managers to support the set-up and management of new MGAs has featured heavily in the press recently. The regulatory regime has a great deal to offer the MGA sector, delivering robust regulation whilst aiming to provide an application process which is more efficient than in the UK. The number of inquiries is increasing, and new applications are in the pipeline. The GFSC has consulted with the insurance sector and taken account of the views of the industry to establish a pragmatic supervisory approach.
Simply put, insurance managers are seeing increasing levels of interest, which in turn will help to build the economy and support the government in its ambition to grow and continue to attract new business to this thriving domicile.
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