Originally published in the Captive Review guide 'How to start a captive – Europe'
If you are thinking of setting up a captive vehicle there are compelling reasons why you should consider domiciling it in Guernsey.
During the past decade the Island's international insurance industry has seen sustained growth and this has continued during 2007 and into 2008 despite our maturity, increased competition and difficult market conditions.
Figures from the Guernsey Financial Services Commission (GFSC) show the number of international insurance entities now stands at more than 700, with 368 international insurers and 345 insurance cells. As part of this growth Guernsey has become home to Gold Coast City Council Insurance Company Limited – the world's first local authority captive.
Guernsey has retained its place as the number one captive insurance domicile in Europe and is fourth in the world in terms of premium written. This continues to rise year on year and is now US$7bn, which is double what it stood at 10 years ago.
We have breadth and depth in our range of providers who continue to see increasing diversity both in terms of the risks being covered and the geographical origin of business. For example, whilst 40% of the entities licensed in Guernsey during 2007 were established by UK parent companies, 30% of new business last year was from the rest of Europe and 13% from the USA. This is in addition to existing business that is spread across the globe.
In 1997 Guernsey pioneered the Protected Cell Company (PCC), which has also become known as the segregated cell company. The Island has since also introduced the innovative Incorporated Cell Company (ICC). There are now more than 70 PCCs established in the Island and last year saw the jurisdiction's first insurance-writing incorporated cells come on-stream.
The Island continues to highlight the potential benefits of cell company vehicles and particularly how the structure enhances the viability of self-insurance for small to medium sized enterprises (SMEs).
Guernsey has also begun to market its captive heritage as a key attraction for European reinsurance operations to establish in the Island. This has coincided with Barbican Reinsurance Company Limited becoming the first major commercial reinsurer in the domicile.
In addition, as part of our promotion of financial products and services in emerging markets, we have been working with Chinese regulators to educate them on the captive concept and showcase Guernsey's industry and regulatory expertise.
Mature yet modern
This year Guernsey has completed a thorough review and made several changes to maintain our tradition of having mature yet modern insurance legislation. Part of the changes regard solvency requirements and effectively codify what is already best practice among Guernsey's insurance managers – the minimum solvency required continues to be set out in the law but the board is required to make its own assessment and submit it to the regulator.
As Guernsey is not part the EU it will not be subject to Solvency II but its licensed insurers and reinsurers will be impacted via inwards and outwards insurance activities. EU based fronting insurers and reinsurers and their regulators should recognise the sound regulatory framework in place in Guernsey, particularly as the changes to the insurance law build on the risk-based approach that has been one of the Island's hallmarks.
Europe's No. 1
Hopefully I have shown that if you're looking to establish a captive then Guernsey has a lot to offer and would be an excellent choice of domicile.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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.