The basic steps involved in taking a decision to set up a Guernsey captive are outlined within a comprehensive brochure entitled the Guernsey Insurance Guide, copies of which are available free of charge from the Financial Services Commission.
A potential applicant should first undertake, preferably with the help of a member of the Guernsey Insurance Company Managers Association, an in-depth, risk management analysis of their insurance business over at least the last five years detailing premiums paid per class of business and claims per underwriting year for each class of business. An analysis of what are known as 'iceberg costs' is also needed.
To identify whether all or some of an applicant's particular risks might be better managed through a change of policy the following should be considered: rapidly fluctuating premium levels; escalating costs; difficulties in placing risks; potential for future risks; constantly changing insurers; an excellent low claims history; a new insurance need.
The results should be further discussed with insurance experts in order to formulate a detailed risk management plan using elements of commercial insurance, self-insurance, captive insurance and risk control which can then be used to obtain quotations from primary insurers and/or reinsurers.
If the proposed new risk management plan indicates that a captive insurance element might be financially or socially advantageous, the next step is to consult at least two firms that are qualified to carry out captive feasibility studies. Ideally, these should be companies or brokers that already manage Guernsey captives and who can take the remainder of the process to a conclusion.
For further information contact Peter Crook on Tel: +44 (0) 1481 712 706 or Fax: +44 (0) 1481 712 010.
The contents of this article are intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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