Two employers' liability (EL) insurance companies are setting up in Gibraltar. And it is understood that they will be writing cover in the UK by the end of the year.
A senior source based on the Crown colony said the applications are just two of at least half a dozen being looked at by the Financial Services Commission (FSC) in Gibraltar. The FSC is the authority that grants licences to trade and thereafter regulates the market.
The companies are following UK motor underwriters Admiral, Hastings Direct, Markerstudy and Zenith who are all writing UK private motor cover from Gibraltar. It is understood that more than £300m of gross written premium is being written out of Gibraltar into the UK market this year.
Much controversy has surrounded the establishment of the Gibraltar-based companies, with rival insurers criticising the moves because the FSC requires lower solvency margins than the FSA. They argue that in the event of a collapse, policyholders have a reduced level of protection.
The source confirmed that the EL insurers were being asked to meet solvency margins of 40%-50%. This, said the source, compared to a like-for-like FSA requirement of 70%-80%.
While this was an attraction, the source said that the FSC could bring a company to market in six to 12 months. This is understood to be quicker than the FSA.
While the Gibraltar insurers are currently covered by the FSCS in the UK, it is understood that talks are underway to create a Gibraltar compensation scheme.
Andrew Stone, BDO operations director in Gibraltar, said that there were now so many companies looking to set up insurance companies in Gibraltar that the FSC was starting to raise barriers to entry.
"The FSC is now looking at solvency margins of 25% for motor underwriters. We have helped seven or eight insurers to come to market in Gibraltar already. We have another four applications in and another four clients taking a serious look," he added.
Markerstudy chief executive Kevin Spencer said that the IMF had recently given Gibraltar a clean bill of health on a recent inspection.