Guernsey: A Diverse Business: Guernsey’s Insurance Sector

Guernsey's position as Europe's leading captive insurance domicile has made the jurisdiction renowned for captive insurance activity - a large proportion of which provides general insurance cover to UK parents, many of them listed companies. Indeed, approximately 40% of the leading companies on the London Stock Exchange and 95 of the global 500 companies have captives in Guernsey. However, it is also home to a number of insurers and reinsurers underwriting third party risks including life insurance/assurance as well as more exotic risks such as kidnap and ransom and "after the event" insurance.

Guernsey's long-established protected cell companies ("PCC") (as well as its younger offspring, the incorporated cell company ("ICC")) are frequently used as incubators for small captive businesses and as special purpose vehicles for insurance linked securities and transformer structures which convert financial risk into insurance risk and vice versa. (More information on insurance linked securities can be found in a separate note.)

Clients come to Carey Olsen because of our extensive experience, industry know-how and proven track record in advising the insurance industry. We advise on general insurance and reinsurance in an offshore context. With years of experience in advising on protected and incorporated cell companies we're also the legal adviser of choice on complex risk transfer structures including transformer vehicles.

A number of our lawyers previously worked in the insurance and reinsurance departments of other international law firms and sit on the boards of locally-licensed insurance companies. This brings a practical, commercial dimension to the team's experience and advice. Our clients include insurers, reinsurers, intermediaries, brokers and other financial services companies.

This article summarises the legal framework underpinning Guernsey's successful and diverse insurance sector.


Insurers and reinsurers in Guernsey are governed by the Insurance Business (Bailiwick of Guernsey) Law, 2002 (the "Law"). The definition of insurance in the Law includes reinsurance and accordingly all references in this article to insurance or to insurers apply equally to reinsurance and to reinsurers. Under the Law, a person must not carry on or hold themselves out as carrying on insurance business in or from within the Bailiwick of Guernsey ("Guernsey") unless licensed to do so.

The Law distinguishes general insurance and long-term (life) insurance business. Other than in the case of a cell company (i.e. a PCC or ICC), a single company cannot be licensed to conduct both longterm and general insurance business. In addition, a distinction is drawn between domestic insurers who insure persons or property in Guernsey and international insurers who write business outside the islands.

A person wishing to establish a licensed insurer in Guernsey must satisfy the Guernsey regulator, the Guernsey Financial Services Commission (the "Commission"), that it meets the licensing criteria set out in Schedule 7 to the Law and that any person who is to be a director, partner, manager, controller or general representative of the insurer will also meet those criteria. Schedule 7 requires that the insurance business will be carried on with prudence, integrity, professional skill and in a manner which will not tend to bring Guernsey into disrepute as an international finance centre. In addition, each of the persons listed above must be fit and proper having regard to their probity, competence, experience, judgement, qualifications, knowledge and understanding of the legal and professional obligations to be assumed and policies, procedures and controls to be implemented.

The business of every licensed insurer must be directed by two individuals of appropriate standing and experience who are independent of each other. In addition, every licensed insurer must appoint at least one entirely independent non-executive director (i.e. not connected to the insurer's shareholders or the appointed manager (if any)) as well as a general representative who is authorised to accept service of official notices in Guernsey.

To ensure that the mind, management and control of the insurer remains in Guernsey, locally licensed insurers usually appoint a majority of Guernsey residents to the board and board meetings are usually held in the island. Most Guernsey licensed insurers have no employees but appoint an entirely nonexecutive board of directors supported by a local licensed insurance manager. Corporate directors may not be appointed to a Guernsey licensed insurer.

Financial Resources

Minimum Capital

As one would expect, Guernsey licensed insurers are subject to statutory capital and solvency requirements. The minimum paid up capital for a licensed general insurer is £100,000 and £250,000 for a licensed long-term insurer.

It is worth noting that a general insurance company structured as a PCC would commonly issue £100,000 in core shares in order to meet this minimum capital requirement. Although each cell of a PCC must meet the minimum margin of solvency (described below), because a PCC is a single legal entity each cell is not required to be separately capitalised. However, because each incorporated cell of an ICC is a separate legal entity, each incorporated cell must be separately capitalised to meet the minimum capital requirement. Like cells of a PCC, incorporated cells must meet the minimum solvency requirement.


General insurers must also maintain a minimum margin of solvency (i.e. an amount by which its assets exceed its liabilities) of the higher of:

  • 18% of net premium income up to £5,000,000; and
  • 16% of net premium income thereafter; or
  • 5% of loss reserves.

Where the calculation is based on net premium income it must be calculated on both a retrospective and a prospective (i.e. budgeted) basis. If the prospective calculation is at least 10% higher than the retrospective calculation, the prospective calculation must be used for the purposes of calculating solvency.

For long-term (life) insurers, the minimum margin of solvency is the greater of:

  • £250,000; or
  • 2.5% of the value of the statutory fund maintained by that insurer.

The statutory fund is an account which every Guernsey licensed long-term insurer is required to maintain in respect of receipts from long-term business conducted by it. 

The Commission also has the power to vary the minimum capital and margin of solvency requirements generally and frequently does so in the case of companies which are fully funded in respect of the risks they underwrite including, for example, special purpose vehicles.

In addition, every insurer must maintain shareholders' funds (i.e. assets in excess of liabilities) of at least 75% of the minimum capital requirement.

Since 2008, all Guernsey licensed insurers have been required to calculate an own solvency capital assessment ("OSCA") considering the particular risks written by that insurer. That assessment involves the board of directors (or their equivalent) conducting a subjective analysis of the business written by the insurer and determining the appropriate level of capital that should be maintained. The OSCA may be and often is higher than the minimum solvency requirement described above. The OSCA calculation must be lodged with the Commission annually.

The Commission is currently consulting with industry on proposed changes to Guernsey's solvency framework and amendments to the existing regime are anticipated towards the end of 2014 or beginning of 2015.

Other Requirements

In addition to the OSCA calculation, every Guernsey licensed insurer must lodge an annual return with the Commission together with its audited accounts. The annual return must include an up to date business plan including financial projections, a statutory solvency calculation, a copy of the auditors' management letter, a summary of the extent of adherence to the corporate governance principles applicable to licensed insurers and a note on how insurance reserves are calculated. Consistent with Guernsey Companies law, every licensed insurer which is a company must be audited annually.

Every licensed insurer which carries on long-term business must appoint an actuary who must prepare an annual report including a valuation of the liabilities of the insurer and an assessment of the surplus or deficit (as appropriate) on the statutory fund.

Long-term insurers must also appoint a Guernsey based trustee to hold in trust assets representing at least 90% of policyholder liabilities. The Commission has a discretion to waive this requirement and will generally do so in respect of life reinsurers.

Change in Control

Strict controls are imposed on the shareholders and key officers of Guernsey licensed insurers. A person acquiring an interest in excess of 5% of the equity share capital (directly or indirectly) of a licensed insurer must notify the Commission. A person proposing to obtain an equity interest of 15% or more or an interest of 50% or more in a cell of a PCC must obtain the consent of the Commission before doing so. In addition, the Commission must approve any proposed change in the directors or officers of a licensed insurer which is a company.

Please note that this briefing is only intended to provide a very general overview of the matters to which it relates. It is not intended as legal advice and should not be relied on as such.

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.