Vol 1 (2004) - Issue 1

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Gibraltar Insolvency Regime for Insurance Companies

Introduction

Gibraltar is part of the EU by virtue of UK membership pursuant to Article 227(4) of the Treaty of Rome. A legal practitioner in England and Wales will find a familiar insolvency environment in this jurisdiction: the insurance legislation incorporates the relevant EU directives and is almost identical to the Insurance Companies Act of England, the main insolvency provisions in the Companies Ordinance are very similar if not identical to those in the Companies Act 1929 of England, with subsequent modifications and amendments, and, although judicial authorities in England and Wales are not binding in Gibraltar, they are highly persuasive, particularly when based on equivalent UK statutory provisions.

The status of Gibraltar in the European Union

Gibraltar’s status in the European Union can be described as follows:

“Gibraltar is a dependent territory of the United Kingdom with a separate constitution granted to it by the British Parliament. The Government of Gibraltar exercises self government except in matters of defense, internal security and foreign affairs which are reserved to the UK. Gibraltar laws are promulgated by its own elected parliament (House of Assembly).

Gibraltar entered the EU together with the UK upon its accession in 1973. It is a European territory for whose external arrangements a Member State (UK) is responsible…

Article 28 of the UK Accession Act provides that there shall be certain exceptions from Community measures with respect to Gibraltar, i.e. the Common Agricultural Policy, VAT and the Common Customs Tariff do not apply. Subject to these explicit exceptions, all legislation adopted by the Community since 1973 has been applicable to Gibraltar... [and all applicable Directives have been transposed].

[it is not] a separate Member State … [but] it is none the less a separate legal jurisdiction for the purpose of Government legislation and judicial authority…"

Broadly speaking, Gibraltar law follows English principles of law and EU Directives tend to be enacted in Gibraltar as they are in the UK (the Member State responsible for Gibraltar), although often later, in view of the pressure on the local administration to process them.

Gibraltar regulatory environment

Since 1997 significant progress has been made for Gibraltar’s legislative and regulatory regime in insurance to match that in the UK. The Insurance Companies Ordinance 1987 (as amended) and its subsidiary legislation regulate the conduct of insurance business in Gibraltar. The Commissioner of Insurance, who is the insurance regulator, and the Financial Services Commission are responsible for its implementation. The terms of the legislation, both primary and subsidiary, are based substantially on the Insurance Companies Act. Gibraltar has therefore implemented EU Insurance Directives in a manner almost identical to the UK, and, in particular, insurance companies incorporated in Gibraltar are subject to a supervisory regime intended to match UK standards of supervision.

On 11 June 1997, following an audit by the UK Review Team, the UK confirmed that Gibraltar’s supervisory regime for insurance matched the standards of supervision in place in the United Kingdom. As a result, insurers licensed in Gibraltar became entitled to cover risks in Member States without being obliged to seek a separate license. This has resulted in a substantial increase in the number of insurance companies licensed in Gibraltar and now writing business across the EU.