Solvency II has changed Gibraltar. Can it continue to attract insurance firms? 

By Content Director Saxon East


Saxon East

MCE chief executive Julian Edwards is fuming. He feels that MCE’s treatment from the Gibraltar regulator has not been in the best interests of customers and that things could have been handled differently.

He’s not alone. Other insurance chiefs have had run-ins with the Gibraltar regulator. 

Arron Banks threatened to sue the Gibraltar Financial Services Commission (GFSC) back in 2014 after it claimed that his business Southern Rock put undue pressure on professional services firm PricewaterhouseCoopers (PWC) after commissioning an independent report into reserving issues.

Solvency II

The big change in Gibraltar has been the implementation of Solvency II.

MCE boss Edwards called Solvency II ”incredibly onerous”.

Before Solvency II, Gibraltar had a lighter capital requirement regime, making it an attractive destination for those desiring lower startup costs. 

The flip side to this was a series of failed insurers on The Rock, giving it a reputation as a graveyard for poorly set up carriers. 

Last decade kicked off with the failure of Aldgate, for example, while Enterprise’s failure in 2016 is still fresh in the memory. 

Then, former GFSC chief executive Sam Barrass arrived. She moved away from the light-touch model and embraced Solvency II. From then on, Gibraltar has seen numerous carriers having to plough in more capital.

Many Gibraltar insurers took advantage of the transition period, which gave them more time to implement the capital rules - but even with this grace period, some had to leave the market. 

This begs the question: if Gibraltar can’t offer lower capital requirements, what is the point of it?

One of the supposed big attractions is startups getting greater access to decision-makers at the Gibraltar regulator. 

This has not been lost on some startups, such as Adiona, a motor insurer launching in March next year.

It was attracted to Gibraltar by the responsiveness and flexibility of the region’s regulator.

However, Edwards would argue the opposite, namley that the regulator is not flexible. 

He is furious that MCE cannot even carry out mid-term adjustments and warns that customers will suffer.

The Gibraltar regulator in the MCE case, ‘strongly denies’ Edwards accusations. It says it is following due process after an application by the company to an administration order. 

The one other advantage to Gibraltar is lower tax rates, both to businesses and individuals.

This is not to be underestimated and provides a big plus to working in the region.

In summary, Gibraltar may have lost some of its lustre, but there remains advantages. 

Whether that is enough to continue attracting insurance companies in the long run is another story.