Gibraltar Financial Services Market

22/08/2017 Christian Caetano

The summer months have seen a number of interesting developments for Gibraltar’s financial services industry. A brief summary of some of these noteworthy stories is set out below:

Gibraltar’s access to the UK market in financial services

It is evident that Gibraltar has established itself as a gateway to the United Kingdom for insurance, financial and other professional services. Indeed, it has been widely reported that approximately 90% of Gibraltar’s business is done with the UK. As confirmed by Gibraltar’s Chief Minister, the Hon. Fabian Picardo QC MP, in his 2017 Budget Address, there is a commitment from the UK Government to maintain, and potentially expand upon, Gibraltar’s unique access to the UK market for financial services. Whilst the finer details of this arrangement are yet to be ironed out, Gibraltar’s continued access to the UK, as the world’s fifth-largest economy, is already attracting new insurance and financial services businesses to relocate to the Rock.

Insurance and Protected Cell Companies (PCCs)

In the insurance sector, there has been increased interest in the establishment of life insurance business focusing on bulk annuity transfers and pension transactions. Most recently, Gibraltar’s Minister for Commerce, the Honourable Albert Isola MP, has also announced the expansion of insurance business permitted by Gibraltar licenced Protected Cell Companies (“PCCs”). Gibraltar was the first EU jurisdiction to introduce PCC legislation back in 2001 and has seen many insurance companies, investment funds, and most recently, bond/debt issuing special purpose vehicles, established during this time. This announcement concerns the opening up of third party business to insurance PCCs established in Gibraltar. This had previously been restricted by the Gibraltar Financial Services Commission (“GFSC”). Therefore, whilst Gibraltar PCCs have historically been used for captive and life insurance business, there is now a process allowing the GFSC to approve qualifying third party business on a case-by-case basis. An exciting innovation which will combine the existing benefits of operating insurance business from the jurisdiction with the added advantages of PCCs.

Memorandum of Understanding between GFSC and UK FSCS

In early June 2017, the respective CEOs of the GFSC and UK Financial Services Compensation Scheme (“UK FSCS”) signed a memorandum of understanding designed to facilitate the lawful disclosure of information between the two bodies (“MOU”). Although the GFSC and UK FSCS already act in close cooperation, the MOU sets out specific responsibilities in respect of a number of areas, primarily with regards to the flow of information concerning GFSC regulated firms, where these are covered by the UK FSCS. In this regard, it is important to note that Gibraltar firm’s passporting into the UK do contribute to their respective UK compensation schemes.

Fintech and Distributed Ledger Technology (DLT)

2017 has also seen rapid development in fintech and DLT business, particularly so following the proposal for a Distributed Ledger Technology Framework from the Government of Gibraltar and the GFSC. Just some weeks ago, HM Government of Gibraltar announced that Xapo (Gibraltar) Limited (ably advised by ISOLAS Partner, Joey Garcia and the ISOLAS Fintech team) had been granted an E-money licence by the GFSC. Xapo are a premium global fintech business, and just the type of high calibre business which Gibraltar will undoubtedly be seeking to attract in this quickly emerging area.

Legislative Reform Programme (LRP)

Although a topic worthy of further analysis (perhaps in a future article), it is worth providing a quick update on the Legislative Reform Programme (LRP) given its potential significance to Gibraltar’s financial services industry. For those unfamiliar with the LRP, it is a joint project by HM Government of Gibraltar and the GFSC designed to deliver a streamlined legislative and regulatory framework for financial and professional services in Gibraltar. The project seeks to consolidate over 80 different pieces of primary and secondary legislation, as well as regulatory guidance notes and notices, into one single piece of law (and accompanying regulations). It will therefore affect the entire spectrum of regulated firms, from insurers to company managers, auditors, and everything in-between. Having been directly involved with the early stages of this project, it is apparent that a modern and cohesive legislative framework will have many benefits for the jurisdiction. The LRP’s first public consultation is expected to commence over the next few months and will give all stakeholders an opportunity to consider and comment on the proposed legislation.

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