Originally Published in Captive & ART Review Guernsey supplement, May 2007

Can Guernsey attract capital and create a reinsurance market to mirror or complement that established in Bermuda and what does Guernsey offer investors and reinsurance companies? These are questions that are being considered by the Guernsey Financial Services Commission (GFSC), the Guernsey Insurance Company Managers Association (GICMA) and the Island’s promotional body, GuernseyFinance, who has published a promotional document titled Reinsurance in Guernsey, which can be found on the publications page of the regulator’s website at www.gfsc.gg. Some of the content of this article has been taken from that publication with its permission.

Bermuda has a specialised finance industry, dominated by insurance in its various forms. There are other types of finance activity on the Island, but the reality is that insurance is the engine that drives Bermuda’s economy. By comparison Guernsey has a very substantial finance business with a depth and breadth that has developed since the early 1960s, consisting of banking, fund management, trusts, insurance and life assurance.

Some readers may not appreciate the scale of Guernsey’s finance industry so a few facts should help to put it into context.

  • Banking: 50 international banks holding deposits of US$180bn.
  • Fund management: 950 funds with assets of US$260bn under management.
  • Trusts: 145 licensed fiduciaries employing 2,500 staff and with estimated assets of US$400bn under their care.
  • Insurance and captive management: 27 licensed insurance management companies managing 312 pure captives plus 68 PCCs with 243 cells. These vehicles write premiums of US$6bn and have assets of US$30bn. The insurance sector employs 700 staff. Guernsey is also host to several subsidiaries of international companies operating in the insurance and life assurance sector.
  • Channel Island Stock Exchange: based in Guernsey, the exchange is recognised by international exchanges such as London and New York and offers a cost-effective platform for listing.

Having a large and sophisticated finance industry in Guernsey means that there is an infrastructure of quality service providers. There are 25 accounting practices, and 300 qualified and practicing lawyers on the Island operating from 11 practices. All the large audit firms have a substantial presence.

You may already be asking yourself what is missing.

Free of EU directives

Guernsey is self-governing and is not a member of the EU. In light of this, EU directives do not apply to the Island unless adopted through local legislation as best practice.

The Island has a respected regulatory body in the GFSC. Guernsey’s regulation has been favourably scrutinised by external agencies such as the International Monetary Fund (IMF), the Organisation for Economic Co-operation and Development and the Financial Action Task Force.

Following an in-depth evaluation by the IMF in 2003, the Island was commended for meeting international standards for banking, insurance, securities dealing, anti-money laundering and combating the financing of terrorism.

The Island’s insurance law is modern (last reviewed in 2002) and user-friendly. Guernsey led the way by introducing PCC legislation in 1997 and this law has been adapted so that PCC vehicles can now transact insurance, reinsurance and investment contracts from one cell. They can be used for securitisation and swaps requiring insurance and ISDA form contracts and other derivative business. In 2006 the incorporated cell company was introduced. This offers another alternative form for those wishing to structure deals on the Island.

The Guernsey law does not distinguish between insurance and reinsurance activities. This differs from the Bermudian Law, which categorises business into classes I to IV and imposes differing levels of regulation and capital requirements accordingly. This should not be an impediment to Guernsey developing an offshore reinsurance business. Rather, it allows the regulator to be flexible and to consider each licence application on its merits instead of being constrained by the law.

Some of the reinsurance activity that Bermuda has seen in 2005 and 2006 has been in a form where the vehicles utilised have been fully collateralised, and so the issue of regulatory capital requirements fall away in any event.

Quick to adapt

As a self-governing jurisdiction Guernsey can introduce enabling legislation. If the regulation needs to be adapted to attract reinsurance business to the Island this can be done quickly.

Guernsey has a tax regime in which international insurance and reinsurance business may elect to be tax-exempt. From 2008 all such companies will be zero-rated for tax purposes. There is a subtle difference between an elected zero rate and a standard zero rate, but it is not thought that the current form is an impediment to doing business.

It is clear that the vast majority of investors entering the reinsurance market via vehicles in Bermuda are US-based and this would appear to be the one reason that Guernsey has not attracted the business to its doorstep. US investors feel comfortable with Bermuda. It is close to New York and trusted by US investors.

Guernsey is not in the hunt for US investors’ funds but what of those available in London, Paris, Frankfurt and Zurich, or indeed those funds on its doorstep? Collectively these markets represent a massive pool of untapped capital.

Guernsey is already a trusted market for upwards of US$850bn of international investments. Jersey, just 20 miles away, has an equally large fi nance sector although insurance is much smaller there.

The Island is just one-and-a-half hours’ travel time from an insurance market that can compete both in size and in expertise with Bermuda – the London/Lloyds market.

One therefore has to ask: "Why do the London and European insurance and reinsurance markets not already make use of Guernsey to raise new capital and establish innovative vehicles to bring that capacity to bear?" We think they do not realise the Island’s capabilities. Considered alongside the benchmark offshore domicile, Bermuda (see table below), Guernsey scores well on all counts.

The domicile is keen to diversify its insurance business and add reinsurance to its portfolio. In Guernsey the concept of managed insurers is commonplace.

The licensed insurance management companies on the Island such as JLT Risk Solutions are well placed to assist general or niche reinsurers in establishing and operating on the Island, with many aspects of the operation outsourced to the management company.




Independent government



Stable government

Yes – self-governing

Yes – self-governing

Attractive corporate tax regime

Yes – zero corporation tax; payroll tax applies at 13.5%

Yes – zero corporation tax; no payroll tax

Personal taxes


20% on salary with allowances

Sales tax


No sales tax and no VAT

Exchange controls

No – own currency on par with US$

No – own currency on par with sterling

Good-quality and flexible regulation



Internationally acceptable



Capable and professional insurance sector



Strong and appropriate support services



Ability for key staff to move to the Island

Yes – requires approval of immigration department

Yes – requires approval of the housing department

Large expatriate community


Many ex-pats but well mixed into Island community

Spouses able to work

Often difficult



Rental sector only during period of work permit; London rates++

Purchase or rental during period of housing licence; London rates and prices

Quality schooling and places available

Can be difficult to secure spaces


Senior schools for 15 years+

No – boarding in US or UK required

Yes including A-levels, then to UK

Proximity to major insurance markets

Yes – US

Yes – London Europe

Proximity to major investment markets

Yes – US

Yes – London EU, Zurich plus Guernsey and Jersey funds

Insurance company law modern/appropriate



Island exposed to natural catastrophe perils

Yes – hurricane


Single source of power on Island


No: own-power generation plus cable link to European Grid


Satellite plus cable link to US

Satellite plus cable links to UK and France


Daily to US

Daily to UK



Daily to UK and France

For more information about Guernsey's finance industry please visit www.guernseyfinance.com .

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.