As part of the arrangements for its attachment to Britain within Europe, Gibraltar was granted derogation from three principal elements of European law – the Common Customs Tariff. the Common Agricultural Policy (Gibraltar has no agriculture as such) and the Value Added Tax rules. The latter can, in the right circumstances, lead to fiscal advantages for insurance operations.
Otherwise Gibraltar has to act as a member state, albeit elements such as regulation of financial activity in theory fall under the remit of the appropriate UK authorities.
Her Majesty’s Government’s response to this situation has been to grant a degree of autonomy to the Gibraltar regulatory authority, the Financial Services Commission, albeit with the prerequisite that UK standards of regulations are applied. In 1996 The UK Foreign and Commonwealth Office declared the GFSC to be a competent authority in Europe, giving it full authority to regulate financial activities and therefore for Gibraltar to access the single European Market for Financial Services.