A company wishing to set up a branch in an EEA state, or to provide insurance services there, has to notify the Gibraltar Financial Services Commission and provide them with certain information (including a full business plan in the case of a branch operation). Once they have considered the application, the FSC will notify the company, within certain well defined time limits, that it may (assuming the FSC approves the application) start business in the EEA state. The full process is described in the FSC’s Guidance Note No. 10 here. Clearly local insurance legislation in the EEA state in question (such as policy language, premium taxes etc.) has to be complied with.

Minimum share capital for an insurance company is specified in regulations issued under the legislation, and follows EU Directives on Minimum Guarantee Fund. The amounts are increased regularly in line with inflation, and the FSC issues newsletters advising the market of the current levels, and the official Euro exchange rate applying to them. These are at present

  • General Business Insurers not writing Classes 10-15 (Liability, Credit and Suretyship) – EUR 2,500,000 (£2,183,000)
  • General Business Insurers writing all classes – EUR 3,700,000 (£3,230,000)
  • Long-Term Insurers – EUR 3,700,000 (£3,230,000)

Financial resources available to the company in the early years is an important factor examined by the FSC when considering a licence application, and a company would normally need to demonstrate that it can comfortably exceed the solvency requirements at all times.

On European basis i.e. 18%/16% of Gross Written Premiums (adjusted for Liability business and depending on overall volume), proportionately reduced according to likely reinsurance recoveries on claims incurred. After three years the claims basis is applied (26% of three year average claims), the required solvency margin being the greater result of the two calculations. The FSC will usually require a margin above the minimum solvency margin, which can vary according to the nature of the business, and is discussed openly with the applicant from the outset.

In common with the rest of Europe, Solvency II regime is expected to come into effect in 2014. It is likely that the FSC and the industry will make substantial use of partial internal models, and both, in conjunction with the GIA, are studying the methodology of implementation of Solvency II in Gibraltar.

Under the terms of the Peace of Utrecht 1713 (which ceded the territory of Gibraltar to the British Crown in perpetuity) and the preambles to the 1969 and 2006 Constitutions of Gibraltar, the guarantee given to the Gibraltarian people by the British Government is that they will only become Spanish subjects if they freely and democratically express their desire to do so, which they are highly unlikely to do at any time in the foreseeable future. Most recently, the Gibraltar Government held a referendum on the subject in 2002, where the concept was decisively rejected by the Gibraltarian people, and as a corollary the British Government now refuses to discuss the topic of sovereignty without the consent of the Gibraltarians.

Spain’s position on Gibraltar, without relinquishing their ultimate claim to sovereignty, has become more conciliatory in recent years, and in September 2006, a communique was issued by a Tripartite Forum attended by Miguel Angel Moratinos, Spanish Minister for Foreign Affairs, Geoff Hoon, UK Minister for Europe and Peter Caruana, Chief Minister of Gibraltar, which is commonly known as the Cordoba Agreement. This contained a package of agreements designed to improve day-to-day relations between Spain and Gibraltar, adopted without prejudice to the respective Governments’ positions on sovereignty and jurisdiction.

Far from being politically unstable, therefore, Gibraltar has legal and political reasons in terms of its relationship with Britain and Spain to consider itself safe from anything other than an act of aggression from the Spanish government, which is obviously unthinkable in the context of those relationships.

Firstly it should be noted that the “FSC” is a statutory body corporate, formed under the Financial Services Commission Act 1989. It consists of seven members, from whom a Chairman is elected and a Chief Executive. Its regulatory activities are independent of the UK FSA, although the forerunner of the latter body was charged to carry out an audit prior to the FSC being recognised as a competent authority within Europe by HM Government.

The FSC applies UK regulatory standards, as it must do to be considered a competent authority however its scale of operations enable a speedy and reasoned approach to all applicants, including insurance entities, provided that is entirely consistent with credible regulation. The FSC is overseen but not controlled by the UK, and to this end regular reviews have been carried out:

–    FATF Money-laundering Review 2002
–    Statutory review ordered by HE the Governor 2004              
–    IMF Review 2006           

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.

More information about Gibraltar’s position in Europe and the FSC is available here.

Gibraltar has put in place the most comprehensive legal framework and the most rigorous regulatory system in the EU with regard to money-laundering. Local legislation has been regularly enacted to maintain Gibraltar in the forefront of well-regulated territories with strong Anti Money-Laundering deterrents. All requirements of the EU Directives on Money Laundering have been fully complied with in Gibraltar, Financial Action Task Force recommendations have been followed, and the Basle Principles and Vienna Convention have been adopted.

In addition, the Gibraltar Financial Intelligence Unit (GFIU) has been established, a joint venture between the Royal Gibraltar Police and the Gibraltar Customs Service, and a member of the Egmont Group of Financial Intelligence Units. The GFIU maintains a close working relationship with the Financial Services Commission, who also ensures compliance with money-laundering legislation as part of its regulatory procedures.

More information on Anti Money-Laundering measures in place in Gibraltar is available on the FSC website here.

Companies most likely to be interested in using Gibraltar as a European base will include:

  • organisations considering the establishment of an open market insurance company within the EU, whether wide-ranging or niche in nature
  • organisations considering the establishment of a captive insurer within the EU
  • excess of loss or financial reinsurance companies
  • international insurers wishing to have a regional base within the EU
  • insurance intermediaries looking to established a Managing General Agent for specific portfolios of business in EU territories
  • insurance services companies (e.g. international insurance brokers, claims managers, loss adjusters) contemplating an EU offshore cross-border base.

As Gibraltar has been an offshore financial centre for many years the infrastructure in terms of professional services is of a high standard. Over 60 insurance and reinsurance companies of various different types already exist and therefore Gibraltar is not a green-field environment.

There are number of legal firms on the Rock, including several with worldwide connections.

Three of the “big four” international accountancy firms are directly represented, as well as there existing a number of well-established local firms, to provide pure accounting or audit facilities.

There are a number of well known international banks in Gibraltar providing onshore and offshore services using the Swift and BACS systems to ensure the rapid transfer of funds. The Financial Services (Banking) Act 1992 reflects the requirements of the E.U. Banking Directives in licensing and control requirements.

The legal system in Gibraltar is based on English Common law and Statute laws and local Ordinances. The unit of currency is the pound sterling although there is local currency which is at par with sterling. There are no exchange control restrictions and as such there is complete freedom to remit funds into or out of Gibraltar and to convert funds into other currencies.

  • Gibraltar insurers are able to underwrite risks in Europe direct
  • In common with all Gibraltar companies, insurers will pay a low rate of corporate tax on profits (10%) effective 1 July 2010
  • Gibraltar has no job quota requirements for insurance companies or managers, meaning cost base is highly competitive
  • Legal system is based on English law, with local statutes
  • Official currency is the Gibraltar pound, on a par with sterling, and with no exchange controls
  • Official language is English, though the local population is bi-lingual, speaking also Spanish
  • As a long-standing financial centre, Gibraltar offers a developed professional infrastructure
  • Assets representing shareholders funds must be maintained in the EEA, but need not be held in Gibraltar nor need they be managed there.