Brexit creates uncertainty for insurers domiciled in Gibraltar, according to a report from A.M. Best.
A.M. Best’s market segment report noted that the domicile’s insurance market has enjoyed solid performance, and significant development over the past decade–currently having approximately 60 insurers generating premium revenue of around £4 billion.
Though the conditions of the UK’s exit from the EU, and whether it will indeed happen at all, still remain unknown despite the UK Government publishing its draft Brexit withdrawal agreement last week, it is extremely likely that EU passporting rights will be lost.
As a British overseas territory, Gibraltar is a member of the EU by virtue of UK membership and therefore will lose all benefits of EU membership, including passporting, following Brexit.
A.M. Best said: “The UK’s decision to leave the EU creates some uncertainty for Gibraltar-domiciled insurers.”
“However, with almost 90 percent of business coming from the UK, A.M. Best expects companies to be largely unaffected by the loss of EU passporting rights.”
The ratings agency added that Gibraltar-based insurers that write do write business in the EU “will have to make contingency plans or cease to underwrite this business”.
Alternatively, Brexit could provide the domicile with an opportunity. Nigel Feetham, partner at Hassans International Law Firm, suggested that Gibraltar could be a solution for EU-based insurers that will need to write UK business post-Brexit.
Feetham suggested a strategy of “two-way movement” was likely between Malta, which will retain EU passporting rights, and Gibraltar.
He explained that this “collaborative approach” would “make the most of any opportunities for mutual benefit”.
Feetham commented: “Gibraltar companies doing EU business (needing an EU solution) would relocate to Malta and Maltese companies doing UK business (needing a UK solution) would relocate to Gibraltar.”
“The strategy was further developed to include relocation of Gibraltar companies to La Linea, in Spain.”
Feetham broke down the potential impact of Brexit on Gibraltar in July.