This article was originally written on Wednesday, 28 March 2007.
A new report from insurance broking giant Marsh has revealed that half of the captives established by UK companies are based in Guernsey.
According to the survey, Guernsey accounts for around 50% of the UK captive market, followed by Isle of Man (21%), Bermuda (15%) and Ireland (8%).
"This report illustrates that Guernsey is very much the UK’s captive domicile of choice," said Peter Niven, Chief Executive of GuernseyFinance – the promotional agency for the Island’s finance industry.
"In doing so it provides further evidence that businesses seeking captive insurance solutions highly value Guernsey’s excellent offering, including substantial expertise and ongoing tradition for innovation."
The report shows that when Marsh conducted similar research in 1995, 42% of captives with UK parents were domiciled in Guernsey. At that time the market was dominated by Guernsey, Bermuda and the Isle of Man. In the interim period, while Gibraltar has remained relatively consistent in terms of its market share, Dublin has experienced notable growth and Guernsey has experienced growth of 20%, with its gain in the market share largely at the expense of the Isle of Man. While Bermuda’s attraction has remained for its existing client base, new captive owners have opted not to establish there primarily because the same captive benefits are available much closer to home.
Mr Niven added: "UK companies really appreciate that Guernsey’s convenient location – it is in the same time zone, has regular air links from a number of different cities and is less than an hour away from London by plane, coupled with its broad-based finance industry and sophisticated range of support services all within a close proximity, make it an ideal ‘one stop shop’."
The Marsh report shows that the number of captives forming to serve the UK market have broadly followed the dynamics of the insurance market. At the height of hard market cycles the number of captives formed naturally accelerates, as was previously seen in both 1994 and 2002. Overall growth has remained steady with around 12 to 18 captives formed each year. It shows that the primary reason for captive utilization is to reduce the total cost of risk.
The new Marsh report comes ten years on from when Guernsey introduced the Protected Cell Company (PCC) concept to the world. By the end of 1997 there were six PCCs and 14 cells in Guernsey but by the close of 2006 this had risen to 68 PCCs and 243 cells. During that period the Island also introduced the innovative Incorporated Cell Company (ICC) concept. The captive sector has continued to grow through the decade and at the end of 2006, while the net number of captives domiciled in Guernsey had dropped marginally from 12 months previously, the net number of captive entities (captives, PCCs/ICCs and cells) had risen, once again, to 624 and included the addition of the Island’s first insurance ICC.
More captives are domiciled in Guernsey than any other jurisdiction in Europe and it is the fourth largest in the world in terms of the value of premiums written (£3.2bn).
"Guernsey remains a very buoyant captive insurance domicile ten years on from its introduction of the PCC to the world," said Mr Niven.
2007 not only marks the tenth anniversary of the PCC’s birth but also 21 years since Guernsey introduced its robust and pragmatic regulatory framework for captives.
"Guernsey though is not resting on its laurels," added Mr Niven.
"To ensure that business flows are maximised work is ongoing to enhance the island’s infrastructure, for instance through the development of new types of insurance vehicles like cells and companies and also the promotion of captive insurance in Guernsey to new markets."
‘Captives for today and tomorrow’ is the theme of this year’s Guernsey Insurance Forum, which is being held by GICMA, in conjunction with GuernseyFinance, today at the Queen Elizabeth II Conference Centre in London.
The one-day conference and exhibition includes an exploration of key developments in the sector and the advantages of using Guernsey as a captive insurance domicile. The keynote speaker is the former Business Editor of the BBC and now the Daily Telegraph’s Editor-at-Large, Jeff Randall.
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