Guernsey: Captive Insurance – Know Your Service Provider

Last Updated: 25 March 2014
Article by Gavin Parker

Most Read Contributor in Guernsey, November 2017

The captive industry is seeing a growing trend for captive entities to forge relationships with partners who are already connected to their parent company. Gavin Parker, head of captive insurance at Barclays in Guernsey, argues that this approach has several benefits for all parties and that Guernsey is leading the way in establishing and promoting these multi-faceted relationships.

Guernsey remains a leading international financial centre, with strong expertise in the fiduciary, funds, investment and banking sectors, in addition to being Europe's largest captive insurance centre and the fourth largest globally.

A key part of Guernsey's success has been its proactivity in promoting the capabilities of the island and establishing strong long-term relationships with key business partners and introducers.

This theme of exploring and deepening relationships is no different in the captive sector. Increasingly we are seeing captives being established in the island where the establishing parent is interested in maintaining existing relationships and maximising efficiency in the way its insurance structure will be run.

This can be achieved where the captive is established in the island with partners that are also connected with the parent company, for example the captive might be established with a local bank, like Barclays, that also provides banking services to the captive's parent company. Primarily the benefits centre around a greater familiarity between the parties responsible for establishing the captive which grants flexibility in terms of establishing the structure, choosing investments and speeding up processes including the establishing of basic banking accounts through to the provision of collateral arrangements, whether this is through letters of credit (LoC) or trust arrangements.

For example, an arrangement for a captive entity where the parent is also known to the bank, allows the captive to be established with the balance sheet and investment objectives of the parent company being taken into account. This in turn allows a banking partner, with the enhanced knowledge of the parent company as well as the needs of the captive, to look at a broader range of solutions. The result is that the bank will often be able to increase yield through the captive, while still meeting the parent company's asset diversification programme.

This could be achieved by shifting an asset class from the parent balance sheet, gilts, bonds, equities to the captive balance sheet and not holding it on the balance sheet of the parent. Further, this can have benefits for the financial status of the captive as it makes the captive more cost-efficient in its own right and it ensures that the captive is not just viewed as a cost centre but an income generator for the parent.

Outside of asset use within the captive, these synergies can also lead to the introduction of more economically and operationally efficient structures for captives. As an example, historically, the most common way for a captive to secure its fronting insurance arrangements was by a cash backed LoC. While this may still be a valid option, we are increasingly seeing captive boards using alternative options that are more flexible and cost effective, such as the Security Trust Agreement (STA), and also looking at ways in which the assets of the captive can generate increased yield, within defined risk parameters.

Through seeking to implement new strategies of asset holding into captives, such as the STA, a historical hurdle has been the lack of understanding of these products and their use. With the increasing access to the parent as well as the captive, we have now started to find these ideas are being better received. Principally this is because these products are not far removed from what many larger corporates will use in their day-to-day activities and this knowledge is now being brought closer to the captive structures. The representative(s) from the parent company that sit on the board of the captive can be helpful in shaping discussions and decisions taken, while recognising the separate governance structure around the captive.

As the ties between parent company and a captive are reinforced at respective board levels, this has changed the emphasis for captive service providers who now have to view the process of establishing captives more holistically. Previously, decisions were principally made based on what was best for the captive. We are experiencing an increasing trend in captive managers informing us that they have to bear in mind that what is good for the captive may not be good for the parent. We are also witnessing that the representation on the captive board is increasing in seniority from the parent company e.g. a finance director currently where previously a finance controller would have been present. This is a response to parents wanting the captive to work harder for them as they are no longer guaranteed to be self-sustaining through interest rate return on cash held alone.

This evolution of captive boards has meant that increasingly they are looking at a broader range of potential solutions for the captive that drive efficiency and return. Shared banking providers also means that the representatives of the parent company that sit on the captive board will typically already know the capabilities and individuals within the bank the captive is dealing with, they can therefore be more demanding and insistent on what they expect and wish from their banking partner.

Having closer ties between the two, and indeed between the advisors and relationship managers of each party, means that these decisions can be made more easily and that all parties can be kept informed of why certain actions are being taken. To illustrate the benefit of this approach, one of Guernsey's leading independent captive managers gave us their view: "The client appreciated the 'joined-up' approach used by Barclays in bringing the client's UK relationship manager into the discussions with the captive board in Guernsey.

The parent company and the captive were already both using Barclays' banking services, and the UK relationship manager's knowledge of the potential expansion into the captive's investment management activities enabled her to link in with the parent company's treasury team and ensure that their reporting and other requirements were being met from a group perspective." Guernsey is particularly active in promoting this part of the captive management space because it demonstrates the importance of ongoing management to the successful use of captives. Rather than just a handy jurisdiction for establishing a structure, the island has billed itself as home to professional advisors who can do things differently, building strong relationships and maintaining and evolving those to offer a better service. This sets the island apart and focuses on the value-add, how if captive companies look beyond their partners as service providers and look to create mutually beneficial relationships then success is assured.

Part of any successful relationship includes having an eye to the future. From an insurance perspective, Solvency II has created challenges and opportunities. In this particular case this has provided benefits for Guernsey as it is not part of the European Union. The banking industry also continues to go through change, with Basel III affecting the treatment, and therefore the potential cost, of letters of credit. We continue to see Guernsey captive managers being proactive to change, as they work with their clients not only on their day-to-day requirements of the captive, but planning for the future to make sure captives in Guernsey are equipped to deal with future changes in a positive way.

Above all, working with existing contacts gives great comfort to companies looking to establish a captive. In an era when 'know your customer' is increasingly important it is perhaps not surprising that 'know your service provider' is becoming more critical to business decisions. Using the same banking partners for both corporate and captive structures makes business sense and reflects Guernsey's resolve to provide a more holistic approach in the initial establishment of a captive, while also aligning service providers that will be able to support the captive as its needs change over its lifecycle.

An original version of this article was published in Captive Review's Guernsey Report 2014.

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
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
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 you may opt out by clicking here

    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.

    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.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    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.

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