Insurtech startups appear to prefer to set up shop from Gibraltar than the UK – Insurance Times takes a closer look at this trend, dissecting the pros and cons

There is nothing particularly new about the idea of insurance being sold into the UK from Gibraltar.

Indeed, according to insight platform Insurance DataLab, the territory already accounts for 29% of all UK motor premiums – equating to around £4.5bn in gross written premium.

The advantages offered by Gibraltar include a robust, accessible and efficient regulator, unusual financial services passporting rights into the UK, a Mediterranean lifestyle only three hours from Heathrow Airport, a corporation tax rate of 12.5% and no capital gains tax or tax on investment income for individuals.

But for insurtechs, which appear to be writing the next chapter of this bilateral love affair, regulatory considerations carry the most weight.

Zego and Marshmallow are the only two UK insurtechs authorised in Gibraltar so far, but a number of others are in the pipeline.

Rory Tanner, government and external affairs manager at trade association Insurtech UK, said: “There has been a growing trend for insurtech businesses looking to become authorised insurers through the Gibraltar Financial Services Commission (GFSC), attracted by its speed and tech-friendliness.

“It will be interesting to see if this pattern continues and whether this will be limited to purely motor-based insurtech businesses.”

‘Nimble’ regulation

Getting permission to trade in the UK from the UK regulators – such as the FCA – often takes 18 to 24 months, but the GFSC is committed to getting this process done and dusted within six months.

Paul Harvey is chief executive of Adiona Insurance, a technology-driven UK motor startup hoping to be regulated in Gibraltar during the first half of 2022.

He said: “I’m burning cash to build this business and so I want certainty. Gibraltar has a clear regulatory review process with clear service level agreements to review applications.

“In practice, you will get regulatory approval in four months, [with] another two months to arrange passports to the UK.

“Its government is very supportive of strong applications. We’ve even had [its] senior finance centre executive attending our launch reception in London.”

The innovative nature of insurtechs makes them more likely than traditional insurers to make changes requiring regulatory approval, so they also need the ability to engage with regulators on an ongoing basis.

Michael Ashton, senior executive at Gibraltar Finance, a department within the Gibraltar government, explained: “Normally someone in Gibraltar can see the regulator within 48 hours if something is urgent. If you’re a fast-moving insurtech business, you need to be nimble, so you also need a regulator that’s nimble.”

Gibraltar’s existing vibrant and close-knit insurance community is also invaluable for recruitment purposes and for accessing back-up services.

Matt Scott, co-founder at Insurance DataLab, said: “The requirement to have a substantial presence with regard to directors actually being based in Gibraltar makes the availability of a ready-made local talent pool crucial. And, there are a lot of support services out there, such as actuarial and outsourcing facilities, to support underwriting.”

Attracting entrants to the UK

The downsides of being regulated in Gibraltar, other than the fact that it is logistically easier to get on a train to Bristol that on a plane to Gibraltar, appear relatively minimal.

However, it is not impossible that the legal relationship permitting Gibraltar-based insurtechs to trade in the UK could become impaired and there is also perennial political friction between Spain and Gibraltar.

The UK Treasury’s stated objective of spurring a vibrant, innovative and internationally competitive insurance sector could also have an impact.

Ashley Prebble, co-head of the global insurance sector group at international law firm Clifford Chance, explained: “The Treasury is telling the UK regulators to attract more entrants to the UK market and, if this gathers momentum, it could offset the attractions of being elsewhere.

“It’s not inconceivable that further down the line, the balance could be shifted back in favour of the UK away from Gibraltar for insurtechs.”

But no one should underestimate the ability of Gibraltar’s government to fight back.

With some of its businesses having switched to being based in Malta and with Brexit ending passporting to the European Union, Gibraltar has never needed UK insurtechs more.