The reasons for this growth are several, but certainly all stem from the accession of Gibraltar to the single European market at the end of the 1990s.
The principal driver for the establishment of companies like Admiral, Zenith, Markerstudy to name but a few, was the ever-increasing weight of regulation in other domiciles, compared to the no less stringent, but much more accessible and human approach to regulation displayed by the Gibraltar Financial Services Commission. This, allied to the developing service provider infrastructure, relatively low costs of operation, favourable fiscal regime and of course the ability for Gibraltar insurers to passport their services into other European territories, made Gibraltar a logical and attractive choice for the shareholders of those companies.
Many of the new entrants focused on the UK motor sector, some decamping from the over-regulated Lloyds market, others from the company market in the UK. Some focused on niche motor products, for example taxi risks, where the traditional market had withdrawn many lines of cover in a scenario where rates and terms were rising; others were based on more mainstream portfolios, but keen to maximise capital usage and take advantage of the more agile regulatory and professional response they experienced on the Rock. However this was not the whole story. A number of other specialised non-motor insurers were established, writing for example legal expenses risks, casualty and liability portfolios, as well as contingency and financial product risk.
Open Market Insurers, or OMIs as they are commonly referred to, will establish their head office in Gibraltar, and maintain a management and underwriting staff at a high level in Gibraltar. All high level underwriting decisions will be taken here, and certainly any corporate and significant contractual decisions. If their client base is high volume, the OMI’s route to market will usually be by a service company in the clients’ territory, and claims would also be handled by a third party company, which could be the same as the service company.
An OMI’s passporting strategy will depend on what level of decision-making is delegated to the intermediaries who cede business to the OMI from the target territory, as well as the ownership/control of those intermediaries.
The two concepts under which insurance business can be written are Freedom of Services, where a risk in one state is written in another in a pure cross-border transaction, and Establishment, where a branch of the insurer is established.
In an InterpretatiWWI memorial at sunsetve Communication issued by the EC in February 2000, it was clarified that, for a third party operation ceding business to an insurance undertaking to be considered a branch of that undertaking, three criteria had to be cumulatively fulfilled: