An unlikely story: how did this historic rock become a dynamic and modern financial centre? (Shutterstock)
Show Hide image

Rock steady: the story of Gibraltar’s booming insurance sector

Gibraltar’s insurance sector has seen explosive growth since joining the single market: one in six UK motorists are now covered by a company on the Rock. Yet, as in the UK, it remains a challenge to convince young people that insurance is “as glamorous as being a barrister”, says Chris Johnson, chairman of the Gibraltar Insurance Association

Gibraltar in the late 1990s accommodated no more than a dozen insurance companies. Remarkably, this has now grown to over 50 companies with more than £3.5bn of premiums written here, and nearly £10bn of assets in insurance companies.

What, then, has driven the growth of Gibraltar’s insurance industry over the last 20 years, and what does it look like now?

Gibraltar is an unusual community - a British Overseas Territory located at the southernmost tip of Europe. It can be slightly odd sometimes to arrive here, driving in from Spain, and see British policemen’s helmets and red phone boxes. The place is full of history, having been ceded to the British crown in perpetuity by Spain over 300 years ago. Today it is home to colonies of tailless monkeys that are fiercely protected (it is a popular local myth that if the monkeys leave, Gibraltar will cease to be British). But it also has a less whimsical side – Gibraltar has always been a mini-nation of merchants and traders and it takes its business seriously.

In 1997, Gibraltar acceded to the Single European Market for Insurance, its regulatory body (the Financial Services Commission) having been recognised as a competent regulatory authority within the EU. This meant insurers that had their head office on the Rock would be regulated by the FSC, and could now “passport” (carry out its activities) into other European Economic Area territories, either under the doctrine of “Freedom of Services” or “establishment”.

But what exactly do these terms mean? Well, establishment involves setting up a branch in the country where the insurance company wants to insure risks – Freedom of Services means that the insurer can underwrite risks in the other country on a cross-border basis. Under EU law, the insurer can do this without needing to apply for a licence in that country, provided they follow passporting procedures and complies with the law of the country where they are insuring.

So in the early part of the 21st century, Gibraltar embarked on a series of initiatives to take advantage of its new status and enhance its offering for insurance.

Most notable of these was the passing of the Protected Cell Companies Ordinance in 2001, a piece of legislation that enabled companies to segregate into divisions focused on different types of insurance. A simple way to imagine this would be to think of a flower – with the core company in the middle and a variety of petals (divisions) surrounding it, financially independent from each other (and therefore safeguarded from liability for another division’s risks or losses) yet benefitting from the strengths and securities of the whole.

Over the next few years Gibraltar’s insurance industry grew and grew – today there are some 57 insurance companies fully operative on the Rock, as well as the various service providers that support the industry. There are a variety of insurers in Gibraltar, including captives, Protected Cell Companies, liability insurers, and property insurers. But the biggest success story has been in motor insurance, especially doing business in the UK market. Its 25 motor insurers cover one in six UK motorists, almost double the market share of Lloyd’s of London.

Gibraltar’s biggest challenge has probably been in terms of skill shortages. The community of the Rock numbers no more than 30,000 people, the size of a small market town, and often punches above its weight in terms of the talent it produces in politics and the arts. The legal and accountancy professions are popular choices among teenagers leaving school and going to further studies, and insurance works hard to attract leavers to the industry. Recent studies have shown however that insurance is one of the least popular graduate career choices in the UK and Gibraltar seems to be no different.

When I arrived in Gibraltar in 1987, there was a very small indigenous industry with a tiny international dimension – I was one of only two qualified insurance persons on the Rock and the other was a colleague of mine, also from the UK. Over the years though, we have drawn more young Gibraltarians into the industry. The establishment by the GIA in 2008 of the Gibraltar Insurance Institute both vastly improved educational standards within the industry, and helped bringing young people in. We’re still not quite as glamorous as barristers, but we’re getting there!

The GIA today has an excellent relationship with our regulator, the FSC, and with government. We speak loudly when issues arise, and we like to feel that we are listened to. Our community is one that listens and responds to its industries.

It’s a bit of an unlikely story; a rock steeped in history becoming the base for a dynamic and modern financial centre. But the insurance industry, and other branches of the finance centre in Gibraltar, are living proof of the forward-looking and proactive business attitude that has infused this little bit of Britain at the foot of the Iberian Peninsula.

Chris Johnson ACII is chairman of the Gibraltar Insurance Association (GIA) and director of the Robus Group

Gibraltar return to European Championship qualification this weekend. (Photo: Getty)
Show Hide image

Promoted

Morning Call: The best from Gibraltar

A selection of the best articles about politics, business and life on the Rock from the last seven days.

 

We start with a crime story this week – London’s “most wanted” man has given himself up to police after a pub shooting in the capital, but he gave himself up in Gibraltar, says the London Evening Standard. It was the result of a joint operation between British and Spanish police.

Does this mean more co-operation around the Rock is on the cards? Not necessarily. The Independent reports on a war of words between Spanish foreign minister José Manuel García-Margallo and Gibraltarian Chief Minister Fabian Picardo. One says talks to get control of Gibraltar to Spain are bearing fruit, the other says this is a lie and the peninsula is permanently British. There are no prizes for guessing which is which.

This incident coming as another incursion into Gibraltar waters and airspace hits the pages of the Gibraltar Chronicle suggests the friendly pills may be malfunctioning. Even La Linea, which has been noticeably warm towards the Rock recently, is going to make its own duty free zone to compete with Gib pricing according to the Olive Press – although fair competition is hardly an act of hostility.

Finally there’s this football match on, and the Irish Independent has a blog which…er…look, if you’re a Gib footie fan just don’t read it, enjoy the weekend instead. The Irish News has Gib manager Martin O’Neill talking up the Rock’s chances, but we have to acknowledge that even when the team gave Germany a “good run for its money” earlier this year, said the pundits, it lost 7-0.

If you’re a fan, enjoy the match regardless!

Guy Clapperton is the freelance journalist who edits the New Statesman’s Gibraltar hub. You can also find him in the Guardian, Computer Business Review and Professional Outsourcing which he edits.