Gibraltar's efforts to become an alternative insurance market may now be coming to fruition.
Gibraltar is finally beginning to show signs of realising the potential it has always been recognised as having, as an alternative insurance domicile. Five new companies have been licensed in the last twelve months, bringing the total of insurance companies in Gibraltar to 19 – still a way to go to catch up with the larger domiciles, but a step in the right direction.
Most of these companies have been in the pipeline for some time, but the hardening market in the UK is provoking movement, and new enquiries. The main focus is now not so much on pure captive business as on customer and niche insurances, such as mobile phone coverage, travel schemes and so on.
Some challenges do face the domicile. The OECD tax initiatives, seen by many offshore domiciles as bullyboy tactics and now dismissed by the US, will combine with European tax harmonisation moves to persuade Gibraltar to amend its tax regime. However, the Gibraltar Government is determined only to do so if a level playing field is maintained between all the territories involved, whether offshore domiciles or major nations. The US reaction has to call into question whether these moves will, in reality, have any teeth.
Another challenge is the advent of increases in the minimum guarantee fund for insurance companies, which will affect the level of assets that have to be held by an insurer in any European territory, including Gibraltar. This is a challenge that also faces other European territories with direct-writing facilities, such as Ireland. Gibraltar market players take the view that with transition periods and delays in legislation, it will be up to ten years before these measures bite, in which time there is ample opportunity for small captives still to take advantage of Gibraltar's position in the EU, and indeed to build up the necessary assets to meet what are likely to be the new requirements.
Gibraltar managers are also busy establishing protected cell company (PCC) facilities to enable future smaller captive clients to buy into a larger structure that already meets the future minimum requirements. Promising to enhance Gibraltar's attraction even further is the imminent enactment of PCC legislation.
This has been much talked about in recent months, and the Gibraltar Government admits there have been delays. Nevertheless, the law is now on fast track and should pass through the local legislative body (House of Assembly) during the summer. Gibraltar is happy to admit that its Ordinance is based on the Guernsey model, which has been proven as an effective marketing and legal tool.
The enactment was even held up to incorporate the Gibraltar version of the recent Guernsey regulations on repackaging and securitisation into Gibraltar's original legislation. Once it is enacted, Gibraltar will be in the unique position of being the only domicile to combine the highly successful PCC concept with the ability to underwrite directly risks in other European territories. A persuasive argument.