Gibraltar as an Insurance Domicile

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Gibraltar has been a recognised financial centre for over 30 years, and has developed a reputation for firm but fair regulation, and a well-developed mature infrastructure of professionals in a wide range of fields.

In 1997, Gibraltar acceded to the Single European Market for Insurance, its regulatory body (the Financial Services Commission) having been recognised as a competent regulatory authority within the EU.

Since then a number of insurance institutions of different types have made their home on the Rock, and enjoyed the benefits of being based here, among them:

Companies like these establish in Gibraltar to take advantage of the various advantages Gib offers:

Passporting

Under the second and third life and non-life EU insurance directives, insurers and intermediaries based in Gibraltar can provide insurance in other Member States using itsMain Street Gibraltar licence and without having to apply for a separate licence in the other territory. This can happen under either the Establishment or Provision of Services regimes.

Establishment enables a Gibraltar company to set up a branch in an EEA territory, and write business in that territory, without the need to apply to the host state regulator for a new licence. Its home state regulator, the Gibraltar FSC, notifies the host state regulator of the company’s wish to transact business in this way, having received and approved a business plan from the insurer.

The host state has a right of reply within 2 months from the notification, although objections can only be made on the basis of a breach of “general good”, which has a narrow definition. Once the 2 months have elapsed, or indeed as soon as the host state regulator replies in the affirmative, business can start.

The insurer’s branch will be taxed on the basis of the branch profits, and the branch will of course have to follow host state legal requirements such as compulsory insurance, insurance premium tax etc.

Provision of Services allows the Gibraltar insurer to write insurance business cross-border, i.e. without a branch establishment in the host state. Again the process is one of notification by the Gibraltar FSC, though business can start as soon as notification is deemed to have been made.

Provision of Services is suitable where no management or underwriting functions are carried out in the host state, and as before, host state legal requirements have to be complied with.

The FSC describe the regulatory notification process to be followed in some detail in their Guidance Note No. 10 here.

Regulation

Financial services regulation in Gibraltar, including insurance, falls under the Financial Services Commission (FSC), a statutory body independent of Government, and therefore free of the possibility of any political influence.

The FSC maintains a firm regulatory stance, ensuring Gibraltar is regarded as one of the better regulated financial centres, and in keeping with the requirement of its statute to “match” UK regulatory standards and practices. The FSC does however have the option to exercise a degree of flexibility and discretion, especially in the way it goes about dealing with regulated firms.

This accessibility and approachability makes the Gibraltar regulatory experience a much more palatable and responsive one than in many other territories.

The FSC is overseen but not controlled by the UK, and to this end regular reviews have been carried out:

All reviews have endorsed the quality of Gibraltar’s regulation, making the Rock a blue-chip domicile in which to do business, but with a human face.

Solvency

The FSC maintains as an absolute minimum the solvency levels required under EU legislation, and usually in excess of the minimum. The FSC’s adaptive approach ensures, however, that the solvency levels applied in each case are appropriate to the size and nature of the regulated firm, and fully discussed with and understood by the firm’s shareholders.

Solvency II, due to become effective in 2012, will bring additional challenges to the insurance industry across Europe, but the Gibraltar FSC intends to maintain a tailor-made approach as much as is possible, and is already working with the industry and in particular the GIA, to find the best way forward within Solvency II.

Costs and Taxation

Gibraltar’s cost base has proved a popular attraction for a number of insurers. Office rents are not high compared to other potential locations, salaries of local office staff are not excessive, due to relatively low living costs, and cost of other services are competitive. Gibraltar has no job quota or property ownership restrictions.

Corporate taxation changed from the 2010 tax year to a flat 10% on taxable profits for all companies. For insurance companies there are opportunities within the new legislation to reduce the effective rate, particularly due to the tax-free treatment of investment income for insurers.

Other Advantages

Apart from these principal benefits, Gibraltar has other merits to consider:

  • Legal system English Law with local statutes
  • Currency pounds sterling (Gibraltar pound)
  • Official language English
  • Bi-lingual local staff (Spanish)
  • Other languages spoken by locally–based employees
  • Developed telecommunications and internet technology
  • Developed professional infrastructure (lawyers/auditors/banks etc.)
  • Solvency assets can be held outside Gibraltar (within EEA)
  • Easy access from UK and other European centres
  • Wide range of accessible leisure activities