Guernsey: The Most Popular Captive Insurance Domicile In Europe – Guernsey

Last Updated: 22 March 2012
Article by Martin T. Le Pelley

Most Read Contributor in Guernsey, September 2016

Originally published in the Captive Review, Guernsey Special Report, January 2012

Martin Le Pelley looks back at his first year as chairman of the Guernsey International Insurance Association (GIIA).

The Guernsey insurance market is well placed, thanks to its reputation for quality and robust regulation, to endure the economic and political storm that is engulfing the rest of Europe.

In fact, the uncertainty created by the credit crunch and subsequent recession, emphasises how important proper risk management is within companies operating in the European market. However no one in the local industry is complacent and, in my first year as chairman of the Guernsey International Insurance Association (GIIA), the association has seen an unprecedented list of threats and opportunities, partially caused by the changing political and economic landscape.

In this article, I will discuss some of these challenges, and how the association has addressed them, as examples of how the insurance industry in Guernsey works together to ensure that we all collectively take responsibility for the enduring appeal of the captive industry and the wider insurance market on the island.

Rising to challenges

One of the first challenges that I faced as incoming chairman was the issue of changes to the accounting rules for insurers caused by the proposals for Phase II of International Financial Reporting Standard 4 (IFRS4) on the accounting for insurance transactions, coupled with the proposals for small and medium-sized companies which did not include provision for small and medium-sized insurers.

Captive insurers are not like normal commercial companies, and therefore a requirement for captives to comply with international reporting standards for commercial companies would have been inefficient and unnecessary.

GIIA put together a response to the Accounting Standard Board (ASB) consultation on the financial reporting for small and medium-sized companies to emphasise the need to allow some carve-out for captives. This has been met with a favourable, sympathetic response from the ASB who were overwhelmed with over 200 responses.

Why is this important for Guernsey's insurance market? Well it is important that we can continue to provide cost-efficient and pragmatic accounting solutions for the large number of small insurers under management in Guernsey, so any change to accounting standards which increases the level of reporting unnecessarily (because there are only a very limited number of readers of captive accounts) would impact the efficiency of our market, which is unattractive at the best of times, but more so in a recession.

The next big challenge which came our way was the consultation from HM Treasury on the changes to the Controlled Foreign Company (CFC) legislation. Captives are, in the main, controlled foreign companies, many of whom have UK parent companies. Some 40% of FTSE 100 companies with captives have them domiciled in Guernsey. The current UK coalition government is quite focused on restoring the UK commercial competitiveness, so it was important that any changes to the CFC rules did not have a detrimental impact on the ability of UK companies to continue to use Guernsey captives.

The proposals are still being finalised, but in December the Treasury announced the draft legislation that will form part of the Finance Bill 2012, which appears to offer some opportunities for smaller captives. The government has tried to make the rules simpler, and has introduced a low-profits exemption for CFCs of £500,000, which means that smaller captives with accounting profits below this level will not have to account for UK tax in their parent's tax computation. Larger captives only suffer tax on the profits of underwriting UK-based risks, so international captives of UK parents will fare better under the new rules.

Furthermore, non-captive insurers may be able to avoid the CFC rules altogether, as long as they can prove that the mind and management and "significant people functions" relating to the company are located offshore – in other words, the company was not set up purely to avoid UK tax. I would like to think that the GIIA's response to the consultation did go some way to help the Treasury to reach what appears to be a sensible result for captives. There are still some uncertainties, such as the way in which PCC cells will be treated, however the low-profits exemption will hopefully do more good than harm in encouraging companies to set up Guernsey captives during 2012.

Of course, Solvency II and equivalence remain 'hot topics' for captive insurance domiciles. Guernsey was the first domicile to publically state that it would not be pursuing equivalence with the Solvency II regime for the time being. This decision has been largely welcomed by all parts of our industry, as it bring about certainty and clarity over the way in which insurance will be regulated in Guernsey, and helps to reassure captive owners who have significant concerns about the application of Solvency II to captives.

There is still much uncertainty over the way that Solvency II will be applied to captives, and also to the way in which equivalence will affect captives in domiciles such as Bermuda and Switzerland. However in challenging economic conditions, most companies will not be welcoming of any regulations that require additional capital to be put into their captives unnecessarily, something the Guernsey insurance market and regulator is very aware of.

GIIA's role

During the year, GIIA has remained active within the local community, being an active member of the Guernsey International Business Association (GIBA) and keeping a close eye on developments at the regulator, government and tax office in particular. While the regulations and tax position for captives are very unlikely to change during 2012, there is a local election such that some changes in the government are inevitable.

GIIA has a good relationship with all parts of government and will continue to ensure that any proposed changes to legislation affecting the finance industry, and the insurance industry in particular are properly considered, consulted on and responded to. During the year, the GIIA has responded to a number of consultations on a variety of topics ranging from a financial ombudsman to the make-up of Guernsey's population.

Finally, 2012 has turned out to be a positive year for business growth in Guernsey. At the end of 2011, Guernsey had licensed more insurers than in the previous year, with 72 in total. While there have also been a number of licences surrendered, the overall activity in the market, and the trend for continued growth in both number of entities and transaction volumes (total premiums written are now more than £4bn per annum) is excellent news, and I believe supports the positive contribution the GIIA has made to preserving and enhancing the insurance industry in Guernsey, and maintaining its position as a cost-efficient and attractive domicile.

We are only a few days into 2012, but I am hopeful that this year will also be a positive year for insurance in Guernsey, and that GIIA will continue to represent the industry and remind market participants and new entrants alike why Guernsey is the most popular captive insurance domicile in Europe and one of the largest in the world.

For more information about Guernsey's finance industry please visit

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.