Gibraltar is planning to introduce a levy on insurers to cover its costs for implementing Solvency II, but captives will receive a 50 percent discount.
The island’s Financial Services Commission (FSC) issued a consultation paper on 9 June in which it detailed the costs it will need to cover, which it expects to be around £750,000, as it works towards implementation of Solvency II in January 2016.
The levy will be used to cover “extraordinary and one-off expenses” to be incurred during the periods 1 June 2014 to 31 March 2015 and from 1 April 2015 to 31 December 2015. Annual licensing fees were increased by 12 percent in March.
“Now that there is certainty as to the implementation date of the new Solvency II regime, the commission has to ensure that its staff are suitably prepared to supervise under that regime and that it is able to provide suitable guidance and feedback to the insurance industry,” said the FSC in the consultation paper.
“The additional costs that it will incur will exceed those that it has been able to cover by way of annual licence fees.”
The levy will be worked out using two elements—gross written premiums (GWP) and gross technical liabilities (GTL)—with bands of: < £5 million; ? £5 and < £25 million; ? £25 and < £100 million; ? £100 and < £250 million; and ? £250 million.
Insurers falling within the first three bands will have to pay a levies of £2000, £3000 and £4000, covering GWP and GTL.
The levies climb to £7500 and £10,000 for the final two bands.
The FSC said: “The commission considers that the proposed levy is merited and a proportionate response to the need for the commission to dedicate resource to preparing itself and the industry for operating under the new Solvency II regulatory regime.”
Captive insurers and reinsurers are “generally less complex entities and present a lower regulatory risk”, according to the FSC, so they have been given a 50 percent reduction.
A captive that writes premiums of £50 million per annum and has £20 million of technical liabilities would receive a £3500 discount on its GWP (£4000) and GTL (£3000) levies, meaning it would have to pay £3500.
The levy for the period from 1 April 2015 is yet to be calculated. The FSC must receive responses to the consultation by 5pm on 30 June.
