A small town mayor from southern Spain is offering Gibraltar-based insurers a way to retain access to the European Union single market after Britain leaves the bloc next year.
Juan Franco of La Linea on the southern tip of the Iberian peninsula is inviting insurers based across the border in the British enclave to set up units in his municipality of about 63,000 people so they can continue to service EU clients. He’s even offered to provide them office space.
“If necessary we could adapt the convention center to host the companies temporarily,” said Franco in a telephone interview. “Other measures can be explored in the longer term.”
There are more than 60 insurance companies operating out of Gibraltar who could benefit from setting up units on the Spanish mainland, according to Nigel Feetham, a partner of Hassans International Law Firm, which is also based in the enclave. Feetham’s firm has already held two meetings with Spanish regulators about the plan, which would allow the firms access to the EU market while keeping most of their operations in Gibraltar.
“This could be a good example of cooperation between two communities which have been embroiled in disputes for a long time,” Feetham said in telephone interview from Gibraltar. “It is also a potential solution for insurers based in the City of London.”
Indeed, the Bank of England has been warning for months about the potential Brexit threat to financial contracts, including insurance policies, since British firms may not have the necessary permissions to pay claims or to receive premiums from customers in the EU after the U.K. withdraws. The rupture could affect about 55 billion pounds ($78 billion) of insurance liabilities and 38 million policy holders in the European Economic Area, the BOE said last month.
Gibraltar’s Ties to Spain
Lloyd’s of London Chief Executive Officer Inga Beale said last month that insurance contracts across Europe will remain at risk unless there’s an agreement on how they should be treated in post-Brexit Europe. Lloyd’s is setting up a European headquarters in Brussels.
With a population of 33,000, Gibraltar has remained British since 1713 despite Spanish claims to the territory. Even so, Spain enjoys close economic ties with the community and more than 13,000 Spanish residents, many from La Linea, cross into Gibraltar each day to work.
“My next step will be to discuss this concept with the insurers based in the City of London,” said Feetham, adding that he knows of at least one Gibraltar-based insurer that plans to request a license from the Spanish regulator.
Gibraltar has 1,175 people employed in the insurance sector of which 873 are British citizens and 172 are Spaniards, according to Gibraltar government data.
“We want a pragmatic solution, which prioritizes the future of the frontier workers,” Spanish Foreign Affairs Minister Alfonso Dastis told lawmakers in Madrid last month.