Isle of Man: Europe’s Most Cost Effective Captive Domicile

Last Updated: 8 September 2006

The Island’s reputation for attracting high quality captive business has been endorsed by a large tranche of the UK’s Top 100 companies for more than two decades. Business today is generated from all over the world and changes to the Insurance Act are set to further inflate the volume of business undertaken by the sector.

There are currently 165 Isle of Man based captives writing £1.5bn premiums annually with £6bn funds under management. ‘Captives remain an increasingly important component of the risk management and risk financing strategy of their parent,’ pointed out David Vick, Chief Executive of the Insurance and Pensions Authority. ‘Continued difficulties in obtaining cover for certain types of risk, differences in coverage available across various parts of the world and insufficient credit for deductibles and/or loss control efforts, remain key drivers for the continued and increasing use of captives.’

LEADING MANAGER

Insurance giant Aon is the biggest player in the Isle of Man captive sector in terms of both number and premiums under management. The group, recently voted in Reactions as the world’s leading international captive manager, handles over 1,350 vehicles worldwide, equating to over 28 per cent of the global captive management market. It has had a presence in the Isle of Man for more than 25 years and chose to headquarter its international captive operation on the Island.

Aon Insurance Managers (Isle of Man) Limited manages 35 captives on behalf of some of the world’s biggest corporations and trans-nationals. Reactions also voted the Isle of Man as Europe’s most cost efficient domicile and the company is confident the Island’s focus on attracting new technology business will further enhance its attractiveness in the captive marketplace.

‘We have found the Isle of Man historically a very attractive location in terms of both the provision of reliable excellence it has shown in captive solutions and the depth of resource in professional services,’ said Managing Director Mike Henthorn. ‘Accounting, legal, corporate, insurance/reinsurance and investment management services are all of a very high calibre.

ESTABLISHED CENTRE

‘The Isle of Man was chosen over a number of other potential domiciles for these very reasons. It was essential for the nature of our specialised client base that we set up our captive HQ in an established domicile. We have greatly benefited from particular expertise in the management of captives in the energy and utility fields and related industries.

‘Our clients have also been impressed with the efficiency, pragmatic approach and general ‘’can do’’ attitude of the Insurance and Pensions Authority in aiding the smooth formation of new captive operations here.

KEY MARKET

‘We have also found the Isle of Man an ideal location geographically in which to base Aon’s global captive services. A great deal of insurance broking and risk management business is undertaken in the City of London and the Island is very close to this key market.’

Amendments to the Island’s Insurance Act provides for the relatively easy re-domicile of captives from other jurisdictions. The introduction of Protected Cell Companies has further enhanced its position to offer alternative means of risk management. The IPA is currently considering the introduction of Incorporated Cell Companies (ICCs), which would give large groups and trans-nationals even greater legal certainty over the separation of assets and interests of individual cells.

‘Ease Of Incorporation’ For Global Captives

The Isle of Man’s success as a premier captive domicile is underscored by the industry’s effective working relationship with the Island’s regulatory authorities. Its ability to ensure that relatively simple, but highly effective legislative provisions are in place is largely due to the way this professional partnership has been forged over more than two decades.

‘The Insurance and Pensions Authority’s approachability and pragmatic style is very attractive to our clients,’ said Derek Patience, Deputy Chairman of the Manx Insurance Managers Association. ‘Managers here enjoy a good, open relationship with the IPA. This has contributed to the relative ease of incorporation in the Isle of Man. We can have a captive set up and licensed on the Island in six weeks, whereas in domiciles throughout the EU the same process can typically take up to six months.’

Derek Patience heads Marsh Management Services (Isle of Man) Limited, a subsidiary of the world’s leading risk and insurance services firm. Marsh is a leader globally in helping create innovative strategies that have significantly expanded captive insurance companies. Its Manx operation manages 28 Isle of Man based captives, mainly of UK parentage, covering a diverse spread of industries.

‘The fact that Isle of Man captives can write directly into the UK market for non-statutory lines of business is a big advantage to UK clients. In addition, there are no restrictions on the mix of insurance and reinsurance business written by an Isle of Man captive and it is not encumbered by over burdening regulatory requirements experienced in captive domiciles in the EU,’ he added.

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.

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