Guernsey's position as one of the leading captive insurance domiciles globally has been reinforced by the results of a new study into the sector.
Trade magazine Strategic Risk has carried out a practitioner survey and published the results in a special supplement which accompanies the September 2011 issue.
The results show that more respondents have their captives in Guernsey than any other domicile; captive owners who use Guernsey recognise the Island's expertise in the sector, its strong links to London and the pragmatic attitude of the regulator, the Guernsey Financial Services Commission (GFSC); and Guernsey's decision not to currently seek equivalence with Solvency II has the backing of owners with captives in the Island.
Peter Niven, Chief Executive of Guernsey Finance – the promotional agency for the Island's finance industry internationally, said: "The results of this survey are very positive for Guernsey. We regularly see tables which show Guernsey as the largest captive insurance centre in Europe and number four globally in terms of the amount of business in the Island but this goes further by seeking qualitative material which answers the question 'why?'. What we can see is that captive owners recognise Guernsey's experience and expertise, the convenience of our close proximity and good links with the City of London and that the GFSC has built a reputation for a robust yet pragmatic approach to regulation."
Mr Niven said it was interesting to note that captive owners regarded the regulatory environment as the most important consideration in selecting a captive domicile, followed jointly by tax and reputation of domicile. For captive managers, tax was most important, then regulatory environment followed by reputation of domicile.
Mr Niven added: "It is often perceived that captive insurance is simply a mechanism employed by large organisations to limit their tax liability. However, this research shows that particularly the captive owners themselves view tax as only one part of the overall decision making process.
"In fact, captives are established for a variety of reasons, including the ability to insure risks that would not be covered conventionally, direct access to reinsurance markets, greater control of premium and providing an internal focus on risk management.
"As such, we can see that domicile reputation and the regulatory environment are also key considerations to location choice and therefore it is not surprising that Solvency II is potentially a key issue which could influence domiciliation or re-domiciliation. I am glad to say this research shows that captive owners using Guernsey are very much supportive of our decision not to currently seek equivalence with Solvency II."
Strategic Risk carried out online research with 107 individuals. Of those, 55% were captive owners, 12% were risk managers who may consider a captive in the future and 33% were captive managers. Geographically, 49% were based in Europe, 36% in the UK and 15% in the rest of the world. More respondents had their captive in Guernsey than any other domicile. This was 24%, next highest was 'other' on 22%, followed by Bermuda 14%, Ireland 12% and Luxembourg 10%.
In-depth telephone interviews were also carried out with four senior risk managers from global firms. The survey results show that respondents using Guernsey are "impressed by the quality of local management available, familiarity, proximity to London and the pragmatic/helpful attitude of the regulator."
The document also includes a section called 'Guernsey merits' and quotes one owner explaining the reasons for choosing Guernsey as the captive's location: "Guernsey was familiar to us and we had a history there which made the move to establish a new captive quicker, easier and relatively inexpensive, which is why we chose that domain."
This was echoed by another respondent who remarked: "[We are] currently in Guernsey due to start-up cost and speed. Speed was the main thing. We like Guernsey because of their pragmatic approach and they are commercial, they do listen and they try to understand on a business by business sense – they don't just take a holistic approach."
Guernsey's decision not to currently seek equivalence with Solvency II has been viewed positively, as one manager with clients in Guernsey explained: "The majority of our Guernsey-based captives are very happy Guernsey has decided not to seek equivalence at this time."
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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