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 2018

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
Related Topics
Related Articles
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions