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Will insurance in Gibraltar be rocked by Brexit?

This morning, Gibraltarians woke to a reality that 96% of them had voted against. The UK will be exiting the EU. With thoughts turning to consequences, it’s likely – for the most part – that the territory’s insurance center will be unscathed.

Up until now, Gibraltar’s insurance industry has relied upon the EU right of freedom to provide services for its businesses to trade on the continent. With the UK’s exit, so too goes Gibraltar’s membership rights to “passport,” at least until a likely negotiation with the trading bloc concludes to replace this (which is unlikely to occur within the two years it will take to transition out of the EU). A big question remains on what will be allowed to occur in the interim.

This will certainly impact on those Gibraltarian insurers conducting non-UK business. For both UK- and Gibraltar-based businesses post-referendum, the requirement would now be to open a separately capitalized subsidiary in a country remaining within the EU. For the low-cost business model of Gibraltar operations, this could be a huge obstacle.

However, the impact on the peninsula is largely mitigated by the fact that an estimated 80-90% of its insurance business is conducted with the UK mainland. While Gibraltar business in the UK has, until now, been treated just as if the former were a separate EU entity and “passported”; the arrangements in place are in fact bilateral and not reliant on EU law. It’s unlikely this would change except to operate outside of the EU framework. Therefore, for a large number of insurers in the territory, the blow of Brexit is considerably weaker.

Two further elements are worth mentioning. First is the concern around rights of movement of people and geo-political tension with Spain. This falls outside the scope of this article but could have serious repercussions. Second is a factor that, pre-referendum, framed the biggest story regarding the business model for Gibraltar-based insurers: the impact of Solvency II. Given the cost already expended to adopt this, and the need to remain consistent with UK and European regulation to trade, it’s unlikely this will shift.

As a result, conditions have certainly been made more complex – particularly for any business intending to trade internationally – but for the most part we are unlikely to see huge change in Gibraltar’s insurance market.

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