The British overseas territory has been evolving as an insurance ‘centre of excellence’ with a fantastic support network for insurtechs, but is keen to diversify away from its most dominant line of insurance 

Gibraltar, known affectionately as the Rock by its inhabitants and many of those working in the insurance sector, is a territory with designs on becoming a centre for innovation.

For example, it was one of the first regions in the world to introduce a Distributed Ledger Technology (DLT) regulatory framework in January 2018, laying the groundwork for insurtechs and startups to make use of the technology.

DLT is a platform that uses ledgers stored on separate, connected devices in a network to ensure data accuracy and security and Gibraltar’s regulation established an efficient and secure regulatory environment for companies using this technology.

However, the breakthrough moment occurred back in 2001, when the first open market insurers began setting up on the Rock – kickstarting its journey to an important player in the UK insurance sector.

Since 2001, the British overseas territory has become the domicile for a significant amount of the insurance carriers providing services to the UK market. Motor insurance remains the most dominant line of insurance in Gibraltar, with its insurers exceeding a 30% collective share of the UK market.

Insurance operations also account for 25% of the jurisdiction’s gross domestic product. 

Despite this significant share of market, minister for justice, trade and industry of Gibraltar, Nigel Feetham is keen to diversify away from a focus on motor and move towards creating a captive regime.

During his opening speech at InsurConnect Gibraltar on 25 January 2024, Feetham announced that the UK Treasury had granted Gibraltar approval for this regime.

He told Insurance Times: “A major aspect of my policy is that we diversify away from motor insurance. I want niche, experienced and tech savvy businesses only licensed in Gibraltar.”

A captive firm is a wholly-owned subsidiary insurer formed to provide risk mitigation services for its parent company or related entities. 

The new regime will sit outside the Gibraltar Authorisation Regime (GAR) arrangements, which are intended to provide a long-term legislative framework for financial services between Gibraltar and the UK. This means that captive insurers setting up in Gibraltar will need not comply with Solvency II reserving regulations, allowing more flexibility when beginning to trade.

Feetham explained: “[The regime] will allow us to disapply the onerous requirements under Solvency II that have no place in a captive arrangement.” 

He added that his mission, since he was elected back in October 2023, was to have the country “seen as the centre of excellence and a driving force behind innovation” in the insurance sector, he explained.

Pretty nimble

Being a small jurisdiction has its advantages. One advantage Gibraltar enjoys due to its small size is agility where the regulator is concerned.

Referring to the market in Gibraltar, Adam Knight, partner in insurance, audit, risk and regulation at financial and risk management advisory firm Deloitte, noted that it was smaller than the UK insurance market and focused on “certain segments” such as motor and gambling.

He continued: “What that means is that they are able to be pretty nimble in the way that they market themselves as a jurisdiction.”

For example, as well as a significant motor segment, it is estimated that Gibraltar-based pet insurers collectively hold a 20% share of the UK insurance market, while travel insurance platforms in the region intermediate more than 30% of all policies sold in the UK.

Historically, however, Knight explained that Gibraltar has always underwritten around a third of the UK motor market.

“About two years ago, there was a real push to attract MGAs [rather than] just carriers into the territory, that was successful. All you have to do is look at the history,” Knight added.

He explained that Gibraltar has always “strategically” identified areas it wants to move into, communicated these clearly to the market, set up regulation to support it and subsequently secured regulatory approval.

“This takes much less time than in mainland UK,” Knight said.

Speed to market

Another of Feetham’s policy commitments is to grow the insurance sector in Gibraltar and, having started his journey in insurance in 1996, he is heavily involved.

There are many pros for insurance firms and insurtechs setting up in Gibraltar, including tax advantages, better access to the regulator than in the UK and ”speed to market”.

EICL Extracover Group was set up in 2019 and was the very first insurtech to be based in Gibraltar – it provides underwriting capacity to insurtech unicorn Zego. 

“It’s the ease of access to the regulator that supports a frictionless and speedy route to market,” Knight said. 

Many insurtechs in the UK that Knight works with were established as brokers or MGAs looking to make the move to being full stack insurers. He noted that Gibraltar is set up really well to allow for this sort of development.

“That’s a real opportunity – for insurtech or insurance firms and for Gibraltar,” he added.

Likewise, Melissa Collett, chief executive of Insurtech UK, said: “Insurtech UK’s mission is to make the UK the global hub for insurance innovation and to help our members thrive. Some of our insurtechs are opting to take advantage of the opportunities of the Gibraltar insurance regime to do business in the UK.

“The length of time to get authorised in the UK is a factor in this decision for our members and makes Gibraltar a bit more of an attractive market. As an organisation, we are interested in increasing our understanding of the opportunities in Gibraltar and how they impact on our members.”

However, Knight noted that Gibraltarians are keen that the country is “not used to play regulatory arbitrage, as it is lighter touch regulation than the UK”. 

Future on the rock

Knight continued: “The reason why insurtech firms could have a boom is because, when you look at their business models, most deliver a better outcome or a better experience for customers.”

For Knight, that feeds right into the heart of what the FCA’s Consumer Duty regulation is all about, as many insurtech’s business models are more suited to this.

The FCA’s flagship Consumer Duty regulation calls for all insurance firms to ensure products and services offer customers “fair value”.

Speaking during a panel at the InsurConnect Gibraltar conference, Paul Harvey, chief executive of Adiona, said he believed that “Gibraltar is the perfect bridge” for attracting insurance and insurtech talent, given the current state of the market in terms of technology trends such as artificial intelligence.

On a similar note, Collett said Gibraltar “challenges traditional insurance to embrace technology”.

Going forward, Knight said Gibraltar would be an “important part” of the UK personal lines market. 

One thing is for certain – a more joined-up approach between the UK and Gibraltar is afoot.