'It is the intention of the UK Government to preserve financial services market access for Gibraltar into the UK.' This was the first part of a response given last month in the House of Commons by Stephen Barclay, Economic Secretary to the United Kingdom Treasury, in reply to a question regarding UK Government policy on Gibraltar's barrier-free access to the UK following Brexit. Mr Barclay further stated how 'The UK Government and the Government of Gibraltar are in ongoing discussions on how to achieve this, looking first at insurance where cross-border trade is most significant.'.
Even those who are only tangentially familiar with the Gibraltar insurance industry will be acutely aware of its close links with the UK market. In fact, Gibraltar is an established gateway to the UK for insurance business, with an estimated one in every five cars on UK roads already covered by a policy underwritten by a Gibraltar based motor insurer. More generally, the Gibraltar Government in collaboration with various sector specific industry groups has estimated that approximately 90% of Gibraltar's financial services business is done with the UK. However, as highlighted by the Economic Secretary himself, it is in insurance where most of the cross-border trade is done.
With Brexit looming ever closer, an increasing number of contingency plans of insurance groups in the UK seeking to secure access to the European Economic Area (EEA) are now being implemented. Chubb, AIG, RSA, Standard Life are some of those which have already announced their plans to set up new subsidiaries in other European Union countries, such as Ireland, Luxembourg or Belgium.
On the other hand, EEA insurers' which sell insurance on a freedom of services basis into the UK are now also taking concrete steps towards securing their own access to the UK market. The UK remains one of the world's largest economies meaning that EEA insurance groups face losing substantial revenue unless they secure UK access for a post-Brexit scenario. This arises due to the real possibility that passporting of insurance services from the EEA into the UK under the framework of the European Single Market will cease once the UK withdraws from the EU.
The Gibraltar option
The obvious option for some of the aforementioned groups would be to establish a new insurance subsidiary in the UK itself, but Gibraltar offers an alternative route to the UK market. The legal basis for this being that direct UK access for Gibraltar insurance firms derives from a bilateral treaty (the 'Gibraltar Order') between Gibraltar and the UK (rather than under the EU/EEA passporting framework). As the UK Government has declared, bilateral arrangements will continue post-Brexit therefore safeguarding UK market access for Gibraltar firms. For the Gibraltar Government's part, it has confirmed that it will continue to meet UK standards of regulation, supervision and enforcement.
These developments are therefore generating increased interest from insurers, intermediaries and insurtech firms looking to relocate to Gibraltar, and particularly so for those with UK facing business. In a previous article dealing with the European framework for cross-border mergers it was noted that such mergers are largely ineffective for insurance companies (See http://www.gibraltarlawyers.com/news/what-impact-will-brexit-have-on-gibraltar-cross-border-mergers ).
Instead, any EEA insurer seeking to migrate its base of operations to Gibraltar would be best placed in exploring a possible redomiciliation. One of the advantages of redomiciliation is that only the statutory seat of the company is actually transferred. There is therefore continuity of the insurer and no transfer of any insurance business or assets. A statutory insurance business/portfolio transfer is not therefore necessary, whereas this would be necessary under a cross-border merger.
The Gibraltar Companies (Re-Domiciliation) Regulations
Below is a general outline of the redomiciliation process and salient features of the legislative framework, in the form of the Companies (Re-Domiciliation) Regulations 1996 (the "Regulations"). Under the Regulations a company domiciled in a 'relevant State' may, in principle, apply to establish its domicile in Gibraltar. Prospective applicants should however first check whether their articles of association, or equivalent constitutional documents, permit their redomiciliation.
In terms of the redomiciliation process itself, an application needs to be made in the form prescribed by the Gibraltar Registrar of Companies (the "Registrar"), and must be accompanied by a members resolution or equivalent document in that domicile containing at least the following:
- the name of the applicant company and the name, if a different one, under which registration as a company domiciled in Gibraltar is being sought;
- the domicile of the applicant company, and the name and address of the competent authority of that jurisdiction;
- the date of incorporation of the applicant company;
- the address of the proposed registered office in Gibraltar; and
- any amendments to the memorandum and articles of association (or other instrument constituting or defining the constitution of the company) that are to take effect on the registration of the company as a re-domiciled company.
The Registrar must also receive a certificate of good standing (or equivalent) issued by the competent authority of the applicant company to the satisfaction of the Registrar that the company is in compliance with registration requirements of that authority. In the case of public companies, any company quoted on a recognised exchange would similarly need to supply evidence to the satisfaction of the Registrar of the consent of the regulatory body of that exchange to the redomiciliation. The Registrar will also require satisfactory evidence that no insolvency proceedings have been commenced against the company in the jurisdiction in which it is incorporated.
Most significantly, when the applicant company is an insurer (or indeed any other financial services firm authorised under an EU Community law requirement), then it will also need to obtain evidence of the consent of the relevant financial services competent authority to its redomiciliation. Furthermore, the redomiciling insurer would need to successfully obtain an insurance company licence from the GFSC before conducting any insurance business from or within Gibraltar. There can be no interruption in the insurance cover provided by the migrating insurer, meaning that close control over the timing of the separate regulatory applications will be the vital component in any proposed redomiciliation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.