James Tipping says Gibraltar has evolved into a well-regulated, low cost financial centre that is attractive to insurance companies

Insurance continues to be the fastest growing sector in Gibraltar’s booming financial services market. The number of licensed insurance companies operating in the territory has surged from just 13 in 2000 to 57 today.

Gibraltar is a parliamentary democracy within the EU, giving it passporting rights throughout the EU in all financial services matters including insurance, insurance mediation and, shortly, reinsurance.

A Gibraltar-licensed insurer therefore has access to a market in excess of 450 million people.

The territory has recently seen a number of significant political developments including a new constitution, which came into effect on 2 January this year.

Also there were historic agreements between Gibraltar and Spain permitting, among other things, the establishment of daily direct flights to Madrid.

This improvement in relations has opened the door to increased commercial investment in Gibraltar from the Spanish financial services sector.

The government has also announced plans to quadruple the size of Gibraltar’s air terminal to cope with the expected influx of flights.

As in previous years, Gibraltar enjoyed strong GDP growth of an estimated 10.8% in 2006/2007, while inflation remains at 2.7%. In addition, the government has announced that it will introduce an across-the-board, low corporate tax rate in 2010, that it has indicated will be set at 10%, but in any event will not be higher than 12%.

Although the traditional trust and corporate services work is still important, Gibraltar’s financial services centre has been exhibiting fast-growth trends in a number of different areas: captive and third-party direct-writing insurance, protected cell companies, and fund management and administration, including the new experienced investor funds.

There has been a marked increase in the past few years in insurance companies writing third-party business directly into the EU.

Direct writers moved their businesses to Gibraltar for a number of reasons including the efficiency with which the Gibraltar Financial Services Commission (FSC) is able to license an insurance company, and the opportunity to obtain security of capital rather than relying on funding from third parties.

This robust but responsive regulation, combined with a strong professional infrastructure, has underpinned the momentum of the insurance sector.

In addition to the existing captive insurance companies present in Gibraltar there are a significant number of cell captives within the four existing protected cell company insurance structures. In total, these number about 40.

The granting of insurance passporting rights in 1997, coupled with the enactment of the Protected Cell Companies Ordinance in 2001, means that Gibraltar is one of only a few EU jurisdictions that can offer passporting of insurance services throughout Europe in combination with a protected cell structure.

After being the first jurisdiction to volunteer to undergo the full range of Module 2 assessments on banking, insurance, investment services, and trust and company management in October 2000, Gibraltar’s robust regulatory environment and anti-money laundering regime were once again endorsed by the International Monetary Fund in a second report

The IMF conducted an extensive review of the FSC’s regulatory and supervisory practices in the fields of banking and insurance as well as a Gibraltar-wide review of anti-money laundering and counter-terrorist financing regimes. The review covered the FSC as well as enforcement agencies and other government departments.

In all three areas, Gibraltar was judged by the IMF to have attained the international standards demanded of reputable international financial centres.

The insurance assessment was conducted against the recently revised and strengthened International Association of Insurance Supervisors standards and Gibraltar was found to be on a par with or ahead of the largest European and international financial capitals.

James Tipping is director of the Gibraltar Finance Centre

The IMF’s assessments on Gibraltar are available online at www.imf.org, www.gibraltar.gov.gi and www.fsc.gi