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Gibraltar plans to introduce a levy on insurers to cover the costs for implementing Solvency II, but captives will receive a 50 percent discount.
The island’s Financial Services Commission (FSC) has issued a consultation paper in which it details the costs it will need to cover, expected to be around £750,000, as it works towards implementation of Solvency II in January 2016.
The FSC has specified that the levy will be used to cover “extraordinary and one-off expenses” to be incurred during the periods 1st June 2014 to 31st March 2015 and from 1st April 2015 to 31st December 2015. Annual licensing fees were increased by 12 percent in March.
“Now that there is certainty as to the implementation date of the new Solvency II regime, the commission has to ensure that its staff are suitably prepared to supervise under that regime and that it is able to provide suitable guidance and feedback to the insurance industry,” says the FSC in the consultation paper.
It adds, “The additional costs that it will incur will exceed those that it has been able to cover by way of annual licence fees.”
The levy will be worked out using two elements—gross written premiums (GWP) and gross technical liabilities (GTL)—with bands of: < £5 million; ≥ £5 and < £25 million; ≥ £25 and < £100 million; ≥ £100 and < £250 million; and ≥ £250 million.
Insurers falling within the first three bands will have to pay levies of £2000, £3000 and £4000, covering GWP and GTL. The levies climb to £7500 and £10,000 for the final two bands.
The FSC says: “The commission considers that the proposed levy is merited and a proportionate response to the need for the commission to dedicate resource to preparing itself and the industry for operating under the new Solvency II regulatory regime.”
According to the FSC, captive insurers and reinsurers are “generally less complex entities and present a lower regulatory risk”, so they have been given a 50 percent reduction.
For example, a captive that writes premiums of £50 million per annum and has £20 million of technical liabilities would receive a £3500 discount on its GWP (£4000) and GTL (£3000) levies, meaning it would have to pay £3500.
The levy for the period from 1st April 2015 is yet to be calculated. The FSC in Gibraltar must receive responses to the consultation by 5pm on 30th June.
Solvency II, Gibraltar, levy, insurance, reinsurance, captives, FSC