Your articles "EL insurers head for Gibraltar, (Insurance Times, 26 June) and "UK economy under threat" (22 August) imply that the growth of the insurance industry in Gibraltar presents a major challenge to the UK economy.

This is incorrect. Many Gibraltar insurers write non-UK business. The level of business written out of Gibraltar also only represents a relatively small proportion of the business written by UK insurers.

There is no risk of unemployment in the UK resulting from Gibraltar's recent successes. If anything, a number of jobs would likely be created to support the activities of Gibraltar insurers providing insurance in the UK. In this respect, the major global challenge over the coming years for the UK service industry will not come from Gibraltar, but low cost countries with their well-educated work force, such as India.

It should also be noted that the development of the local insurance industry was encouraged by the UK following implementation of the EC Insurance Directives into local law. Gibraltar is part of the European Community by virtue of the UK's membership. While insurance regulation in Gibraltar is the statutory responsibility of the Gibraltar Commissioner of Insurance, the UK is responsible for ensuring that Gibraltar legislation transposes Directives in fulfilment of EC obligations.

Gibraltar has therefore implemented EC Insurance Directives in a way almost identical to the UK, and in particular, insurance companies incorporated in Gibraltar are subject to a supervisory regime intended to match UK standards of supervision. UK appointed teams also carry out periodic reviews of procedures and standards of the Financial Services Commission to ensure that supervisory standards match those in the UK.

Solvency requirements are based on EC Directives but the Commissioner of Insurance will invariably apply a higher solvency capital ratio than the EC minimum. The position under EC law is therefore quite clear. Having satisfied himself that an insurance company with its head-office in Gibraltar is solvent and that the criteria of sound and prudent management would continue to be met, the company can cover risks in any EEA State.

The single market for the provision of financial services involves the right of a national in one member state to exercise a free choice as to where in the EC he obtains a particular financial services product. It is a challenge which also results in opportunities for the entire European based insurance industry.

Nigel Feetham
Hassans International Law Firm