Guernsey: New Self Insurance Facility



Commercial Union, J&H Marsh & McLennan and Dresdner Kleinwort Benson have launched a new insurance facility called Portway Insurance PCC Limited. The objective of the facility is to allow corporate insurance buyers to access all of the benefits of a formal self-insurance vehicle at the lowest cost and without the need for them to inject share capital.

Portway Insurance has been incorporated in Guernsey, as an authorised insurer, under the newly enacted Protected Cell Company (PCC) legislation. This legislation provides for the legal segregation and protection of the assets and liabilities of each individual participant.

Effectively, Portway Insurance is a risk-taking rent-a-captive.

Prospective Users

The target market for Portway Insurance is varied; however, within a UK context, the principal target markets are seen as:

  • Small to medium sized companies wishing to finance their risks over time, under a formal structure, but which have insufficient premium volumes to justify the expense of capitalising, establishing and managing their own captive.
  • Homogeneous groups such as Trade Associations wishing to offer a package of insurance products to their members which incorporates elements of self insurance. The PCC legislation will allow competing businesses to enjoy a pooled self insurance arrangement without any risk sharing amongst the group membership.
  • Existing captive owners who may wish to create a secondary self insurance mechanism for non-traditional risk financing, with the benefit of not participating in ownership or control of the insurance company.

Outside the UK, it is believed Portway Insurance will be attractive to:

  • International companies where ownership of a captive is inefficient or where there is an interest in funding / tax planning.

As with the ownership of captives, the benefits of net cost risk financing to an Insured using Portway Insurance, will be achieved over a period of time. Participating Insureds should be committed to the "ownership" of their underwriting experience within their cells and, to this end, will sign a 3 year agreement with Portway Insurance.

Share Capital / Investors

The fundamental difference between Portway Insurance and a traditional rent-a-captive is that Portway Insurance's risk-bearing share capital is available to Insureds to support the underwriting programmes within their cells. The obvious benefits of that are, firstly, Insureds are not required to inject capital and, secondly, tax deductibility of premiums should be achieved in the Insureds' tax computation, which is not often the case with traditional rent-a-captives.

The core capital of Portway Insurance will support the underwriting activities of each cell and provide the cash flow in the event that any cell falls into deficit. In this manner, each Insured can fund for defined risk exposures over a period of time with the knowledge that if claims occur in the funding period, Portway Insurance will continue to support the programme and hence provide net cost risk financing for the duration of the contract.

Two investors, namely Kleinwort Benson Channel Islands Limited, a wholly owned subsidiary of the Dresdner Bank Group, and Commercial Union have equally subscribed to Portway Insurance's initial share capital of £5 million.

Service Providers / Existing Relationships

J&H Marsh & McLennan will manage the facility in Guernsey, Commercial Union will provide any required fronting and claims handling services and Kleinwort Benson in Guernsey will provide banking services, together with the management of a purpose designed investment vehicle.

However, it is important to note that Portway Insurance is accessible by any service provider. Portway Insurance permits the continuation of any good working relationship which an insured may enjoy with any other broker / insurer / reinsurer.

Underwriting Parameters / Pricing

There are no restrictions on the type and location of risk which Portway Insurance is prepared to consider.

Portway Insurance will follow the pricing strategy of the conventional risk transfer market. For instance, let us assume an Insured has placed a risk transfer contract with a conventional insurance company. Although the Insured has a strong risk management programme, they cannot avoid claims completely and, in the first year, they incur an unexpectedly large claim in addition to their normal attritional level of claims. At the renewal of this risk transfer insurance programme, the insurer will increase the base price of the contract because of the unexpected loss. This will return the insurer to an underwriting profit and once this has been achieved, they will gradually decrease the contract price again, assuming market pressures do not cause "abnormal" underwriting behaviour. Portway Insurance will behave in the same manner after the year of unexpected claims. The premiums will increase into Insured's cell in accordance with the "market" rate. However, if the Insured does not incur the unexpected claims in subsequent years, the additional premium surplus remains to the benefit of the Insured and therefore will be returned at the underwriting period closure. Ultimately this achieves net cost risk financing for the layer of risk retained within each cell.

Operational Aspects

Portway Insurance allows its individual Insured's to set up their own cell or cells from which to finance defined layers of risk.

Into each cell will be transferred:

  • Premiums (after any brokerage)
  • Investment Income on cash flow

and out of each cell will be paid:

  • Claims
  • Specific Reinsurance
  • Management Costs

Claims reserved but unpaid at the ultimate closure of the underwriting year will be estimated and commuted back to the Insured. This method will provide a contractual termination of all further liabilities under the year of account. After deducting this commutation amount from the cell, any remaining accumulated surplus will be returned to the Insured by way of a premium rebate. From that surplus will be deducted a profit commission payable to Portway Insurance.

For short-tail business, it is envisaged that each underwriting year will be kept open for a period of 12 months after the end of the underwriting year, to allow claim reserves to be finalised. For long-tail risks, an appropriate period will be selected during which each underwriting year will remain open.

Thus, on closure, the Insured will receive a premium rebate (representing his net underwriting surplus, plus investment income, less management fees and profit commission), together with a commutation payment representing the value of any outstanding claim reserves.

If the cell should show a "cash" surplus but an "accounting" deficit - the difference representing reserves for outstanding claims - then the amount of the claim commutation payment to the Insured will be restricted to the "cash" surplus, so that the cell breaks even.

If the cell should show both a "cash" and an "accounting" deficit, on closure, then such deficit will be carried forward to be offset against surpluses from future underwriting years.

Costs of the Facility

As the target market in the UK is seen to be small to medium sized companies for whom the expenses of ownership of a pure captive might outweigh the benefits derived therefrom, Portway Insurance's total fees will be less than those incurred in running a pure captive.

There is a single charge levied on each Insured, calculated as a percentage of the premium income to be transferred to the cell, which will cover all costs, including :-

  • rent of capital
  • investment management
  • construction of insurance / reinsurance programme
  • claims management
  • accounting and reporting (including Statutory)
  • audit fees.

In addition to the above charge, a profit commission is payable to Portway Insurance on the ultimate closure of any underwriting year.

This information 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