Gibraltar is becoming a haven for a growing number of insurers, but the regulator is keen to maintain the colony’s reputation for quality businesses. Anita Anandarajah reports
The quaintness of Gibraltar greets visitors upon landing – where an arterial road crosses the runway. Couple that with 24,000 cars owned by its 30,000 residents and hundreds of locals and tourists crossing on foot to the frontier just five minutes away – that sums up an economy ripe for expansion.
Plans for a new air terminal four times the size of the current one with its single conveyor belt and 10 new residential and commercial developments dotting the peninsula are in the pipeline, signaling a surge in growth in the next five years.
The Gibraltar of today is undergoing major property developments to meet an urgent need for space.
A new development is in the midtown area, which sits between the historic town and the Europort business district. The project, which is due for completion in five years, will free up 24,000 square metres of residential accommodation and office space.
The government is also trying to address the tiny country’s traffic issues – its 30,000 residents are owners of 24,000 cars. The solution thus far has been an investment in a new fleet of buses, three years ago, aimed at encouraging locals to park their cars outside the town centre.
Growing insurance presence
The insurance sector has experienced constant growth in Gibraltar, charting a minimum rise of 8% in the number of new licences year on year.
In 2000 they numbered 13. As at 31 March this year, there were 56 licencees, including life, non-life, reinsurance and captives. A fourth protected cell company, Martello Insurance, recently made Gibraltar its home.
While this pales in comparison to other jurisdictions like Bermuda which hosts 1,312 companies, Marcus Killick, chief executive of the Financial Services Commission (FSC), is adamant that it is quality rather than quantity that Gibraltarians are after.
Joking that there are some insurance companies that are bigger than Gibraltar, Killick says: “There is a limit to our growth. Our objective is to be highly selective and highly competitive. All we have to do is create a positive environment and the industry will come.”
The FSC is proud of the results of the recent International Monetary Fund review in May, which concluded that Gibraltar has a well-regulated financial sector.
One of the recommendations was to increase the number of supervisors and the quality of training of supervisors to achieve a higher rate of on-site inspections.
Chris Collins, head of insurance supervision at the FSC, confirmed that additional supervisory staff are currently being sought for all FSC divisions, with one further appointment for the insurance division to be taken up shortly. Another appointment will be made later in the year.
To date, the majority of non-life insurance consists of motor. The other specialist companies are represented by a small group of after-the-event (ATE) insurers.
“There is a limit to our growth. Our objective is to be highly selective and highly competitive. All we have to do is create a positive environment and the industry will come
Marcus Killick, FSC
As is the case with other jurisdictions, most of the applications for business licensing go through insurance managers, which Killick likens to a “nursery”.
The FSC is in constant communication with the eight insurance managers, including the likes of Aon, Marsh, Willis, Caledonian and Quest.
Killick said: “By using them we can deal with the needs of the industry more effectively. From a regulatory point of view, they know what the regulator wants, can help firms set up and steer them through the formative phases.”
Much of the regulatory regime is aimed at competence and management control skills. The other half relates to solvency and risk profile.
Reputation seems to be the drumbeat of the FSC. Time and again it re-emphasises that it will not compete at “lower levels”. Killick alludes to this, commenting that “being competitive and maintaining national standards is a fine line to tread”.
Killick points out that as a small jurisdiction, this could be a testing time for the FSC.
The biggest challenge the FSC faces in the coming year is the juggling of the Reinsur-ance Directive, Capital Requirements Directive and the Markets in Financial Instruments Drive (MiFiD) which will be implemented on 1 November.
Looking further into the horizon, Solvency II doesn’t look to be a major problem for insurers on the Rock.
Penny Hudson, who heads the Gibraltar Insurance Association, believes that it will not be a worry as the main issue is defining parameters of risk assessment. “It is the uncertainty which is difficult to plan for.”
Collins says: “Our concern is that small and medium sized companies be treated in a way that will not mean that they will have to incur additional expense in complying with the new set of rules.”
The calm blue waters surrounding much of territory is rippled only by the question of what Gibraltar’s chief minister Peter Caruana has up his sleeves for the tax regime.
At a meeting in his office recently, he hinted to journalists that he would not be revealing his tax strategy for corporations just yet. Currently that figure sits at 35%.
While industry spokesmen do not expect a lower corporation tax to have a big impact on new businesses, Caruana said that when he does cut rates, it will not be done in half measures.