There are no minimum capital requirements. However, there are complex rules governing solvency margins, guarantee funds, and technical reserves.
Insurers are required to maintain a solvency margin, for both general and long-term business. The level required may vary depending on the class of business being undertaken. If the solvency margin falls below the required amount, the insurer is required to submit a plan for approval to restore the financial position. The Commissioner has powers to prohibit the disposal of any of the insurer's assets in such a situation.
Non-EU insurers carrying out business in Gibraltar but which are supervised by agreement in another Member State are not required to maintain solvency margins in respect of the Gibraltar business.
Every licensed insurer is required to maintain a guarantee fund equivalent to not less than 7 of its relevant solvency margin or such higher amount as may be prescribed by regulation. Insurers with their head office outside the EU are required to keep assets to the value of the guarantee fund in Gibraltar. They are also required to make a deposit in sterling with the Accountant General as part of this arrangement equivalent to a half of the minimum guarantee fund.
In the case of a company whose business in Gibraltar is restricted to reinsurance, the minimum guarantee fund is restricted to half the prescribed amounts both for general and long-term business.
"Technical reserves" is the generic description for reserves set aside to meet underwriting liabilities and in the case of long term business are quantified by reference to prescribed mathematical formulae. The legislation requires these technical reserves to be expressed or realisable in the same currency as the underwriting liabilities which they are intended to meet.
The information in this article was correct on January 1997.
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