Isle of Man: FTSE Leaders Attracted By Flexible Funding Rules

Last Updated: 10 August 2008

The Isle of Man's reputation for attracting high calibre captive business has been further enhanced with the rolling out of new legislation governing solvency requirements.

The new rules afford greater flexibility to the Insurance & Pensions Authority, particularly in the area of inter-company loans. The move has attracted considerable interest from the international industry with companies seeking to set up new captives or relocate their captives to the Isle of Man from other jurisdictions. Several have already completed the process.

The new regulations allow inter-company loans from a captive to be fully admissible when calculating the captive's solvency margin. In addition, certain financial liabilities may revert to shareholders' funds for the purposes of calculating the insurer's margin of solvency. This particular measure requires written approval from the Insurance Supervisor and, in effect, results in such liabilities being treated as equity capital of the insurer for regulatory purposes.

Keller Group moves

The first company to be attracted by the changes is Keller Group plc, a FTSE 250 ranked company, which has established a new Isle of Man based captive, Capital Insurance, to replace its former EU captive company.

Jackie Holman, Keller's Company Secretary, said: 'The increasing level of regulation in Dublin was a concern for Keller. The Isle of Man provides us with a level of flexibility which we didn't have before.'

Derek Patience, Chairman of the Manx Insurance Managers Association (MIMA) said the Island's success in attracting such a prestigious company to the Island was an example of the 'healthy cooperation' that existed between the industry and the regulator. MIMA and the IPA have worked closely together for the past year to improve the environment for the captive insurance industry.

Increased sector power

John Spellman, Director of Isle of Man Finance, added: 'We are delighted that Keller has decided to form an Isle of Man captive to replace its Dublin company. It is a demonstration of the Island's renewed power in this sector that it has been able to reap such a rapid reward following the recent regulatory changes. We firmly believe that other captive owners will now follow suit as they observe the pragmatic changes we have implemented.'

At the end of 2007 there was a total of 155 authorised insurers and seven PCCs. These represent premiums in excess of £1 billion and funds under management totalling £5 billion. Amongst those major names which have followed Keller to the Island are Vaultex UK, a joint venture between two high street banks, BAE Systems and Millea Holdings. The full impact of the latest changes will be aired at MIMA's annual spring seminar to be held in April.

High calibre operations

Mr Patience added that the increasing number of high calibre companies choosing to set up captives in the Isle of Man was a testament to the success of developments in general introduced in the sector during the past year. He expressed confidence that the most recent changes would now set the Island on a path of accelerated growth.

The Isle of Man has been the quality jurisdiction of choice by a large tranche of the UK's Top 100 companies for more than two decades. And as the Island has extended its global reach in financial services, insurance business today is generated from all over the world.

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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