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Insurance
deemed equivalent by the UK regulator to its own rules.
For insurers who are considering writing business into the UK, Gibraltar therefore arguably offers a greater level of certainty compared to that provided by other EU jurisdictions, until such time as the results of the negotiations become clearer.
Indeed, should the worst case scenario unfold, Gibraltar could be well placed to facilitate through, inter alia our re- domiciliation legislation, access into the UK as a solution for those EU insurers without a presence in the UK.
Whether ‘hard’ or ‘soft’, changed Gibraltar legislation through Brexit might in addition stimulate some innovative regulation attractive to new entrants. For example, a two track regulatory system with insurers opting for either a SII/UK equivalent regime or an alternative set of regulations, may prove attractive to new licensees who do not require direct access to UK or EU consumers or whose relations with UK or EU insurers will be unaffected by any lack of ‘equivalence’.
Such an alternative ‘non-equivalent’ regime may prove attractive for those captive
owners whose appetite for reputational risk process relating to establishing a branch or
means that they want to be fully ‘onshore’ but without the capital burden of Solvency II. Reinsurers, side cars and other special purpose vehicles may also see benefits in a more tailored set of rules.
What Next?
Brexit is clearly a risk event for insurers, not just in terms of its effect on passporting, but also for the effect that the general uncertainty has had on financial markets, in turn affecting investments, long term technical provisioning, and ultimately solvency assessments. Good governance requires that the risk event should be considered appropriately.
With regard to passporting, insurers will have by now looked at their portfolio in terms of where the majority of their book is written and should have considered appropriate solutions should a hard or soft Brexit happen.
Given the recent announcements, contingency planning should work towards the maximum two year timeframe. It is impor- tant to understand the resource requirements and timescales involved, in particular with regard to any licence application and legal
re-domiciliation. A watching brief should be maintained,
in particular whilst the UK Treasury Committee enquires into Solvency II. The Terms of Reference include an assessment of the impact of Solvency II on the competitive- ness of the UK insurance industry as well as the options that are created by the decision to leave the EU.
Therefore, while interest in Gibraltar remains strong and it remains business as usual for the majority of our Gibraltar based insurers, there is uncertainty over the exact nature of what form of regulation will continue post Brexit. However, the potential to create an attractive regulatory system that affords equivalence with the UK and EU, as well as affording innovation plays to the strengths of Gibraltar. Ironically, Brexit might be a catalyst for longer term growth in the insurance sector across a broader portfolio.
www.willistowerswatson.com
These are the personal views of the author and are not necessarily the formal view of WTW
www.gibraltarinternational.com
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