Guernsey's decision not to seek equivalence with Solvency II will act as a differentiator that encourages increasing numbers of captives to domicile in the Island, according to Aon.
The firm said that the number of captives domiciled in Guernsey – already Europe's leading captive insurance domicile – is expected to increase significantly as the implications of compliance with Solvency II become better understood.
It suggests that while the capital requirements of Solvency II may be appropriate for commercial insurers dealing with the general public, many captive managers and owners believe the International Association of Insurance Supervisors' (IAIS) international regulatory standards will be sufficient for most traditional captives.
Paul Sykes, Managing Director of Aon Insurance Managers in Guernsey, said: "Guernsey offers a stable and solid political and regulatory regime while not forcing captives to adhere to the disproportionate demands and excessive capital requirements of Solvency II.
"Increasingly this will differentiate Guernsey from other domiciles and we fully expect businesses with captives to see Guernsey as the place to do business. Aon is committed to Guernsey, and we are actively advising new and existing captive insurance company clients to help them achieve better capital efficiency and cost savings through restructuring their captives and reducing collateral requirements."
Mr Sykes added that Guernsey's long experience had helped develop a pool of talent and expertise that will help ensure its position as a top captive domicile despite increased competition for other jurisdictions.
"The captive industry is a jewel in Guernsey's crown, given that some hundreds of household name companies from the UK and the rest of the world choose to base their captive insurance companies in Guernsey, due to our industry expertise and Guernsey's world-renowned reputation for robust but responsive regulation," said Mr Sykes.
"We are, however, constantly aware of the competition to Guernsey from other jurisdictions seeking to overcome the Island's position as the premier European domicile for insurance company management. I believe that we will sustain our position as European leader and one of the top four captive jurisdictions globally by embracing international regulatory standards without at this point seeking equivalence under Solvency II."
Mr Sykes was speaking ahead of an event hosted by Aon at the Chartered Insurance Institute (CII) iin London. The series of presentations included a speech by Guernsey's Chief Minister, Lyndon Trott.
The Chief Minister emphasised the global nature of Guernsey's captive insurance industry and the Island's position as a leading international finance centre. He also highlighted recent reports from the IMF and OECD which have commended Guernsey's standards of regulation and commitment to tax transparency, respectively.
The Chief Minister also noted that changes in global thinking had extended to the regulatory and fiscal areas. Guernsey is reviewing its 'zero-10' corporate tax regime but any alternative must be: internationally competitive; internationally acceptable; promote a sustainable economy in Guernsey; based on simple, solid rationale; and give rise to reciprocal benefits.
"And at the risk of overkill, at the forefront of our deliberations is the need to retain the competitive edge of our insurance industry and that we fully appreciate the need to retain tax neutrality for the captive industry," said the Chief Minister.
He added that Guernsey was also conscious of developments in the regulatory sphere and in particular Solvency II. However, the Island is not part of the European Union and it has a substantially different insurance industry from that area. Solvency II is designed for commercial insurers and reinsurers and how it will treat captives remains uncertain. As such, Guernsey is not seeking equivalence under Solvency II but will monitor developments and focus on the evolving international standards being developed by the IAIS.
"It may be that at sometime in the future there is clear advantage for Guernsey in seeking equivalence under Solvency II. But until we are satisfied that there is clear advantage to Guernsey or at the very least no disadvantage to Guernsey, then we will not be seeking equivalence," added the Chief Minister.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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