Insurance business conducted in Gibraltar is governed by the provisions of the Financial Services (Insurance Companies) Act, and by rules and regulations made thereunder. Legislation has been put in place to implement all the EU directives that apply to this sector. The day-to-day supervision is carried out by the Head of Prudential Supervision.
The UK Government has agreed that Gibraltar has implemented standards with regard to the supervision of insurance companies that match UK practice. As a result, Gibraltar has the approval from the UK Government to take advantage of the single European passport for insurance. This means that an insurance company licensed in Gibraltar can, with the approval of the Commissioner of Insurance, do business in EEA states either by setting up a branch in those states or by providing insurance from Gibraltar to residents of those states.
The fiscal and legal advantages of using Gibraltar as a jurisdiction for setting up and administering captives and other types of insurers include the following:
The number of registered insurance companies in Gibraltar has increased significantly in recent years from 13 in March 2000 to 62 currently.
In July 2007, the European Commission published the draft Solvency II Framework Directive. The framework directive presents the preliminary views of the European Commission on the supervision of insurance and reinsurance undertakings, which is intended to replace the current Solvency I framework. As opposed to Solvency I, the new approach emphasizes an economic or risk-based methodology to assess the capital requirements of insurance companies. The framework includes not just underwriting risk, but operational, investment, currency and other risks as well. Similar to Basel II for banking, there are three pillars in Solvency II — qualitative & quantitative, governance & risk management and disclosure & transparency.
The effective date of the directive is 1 January 2016.