Guernsey: Special Investment Business Update – Winter 1999

Last Updated: 26 January 2000
Article by David Archer

The South African Reserve Bank locates its captive in Guernsey

'In setting up its captive insurance company in (Guernsey, the South African Reserve Bank has provided a further prestigious endorsement for the island as a leading international insurance centre,' says Mr Steve Butterworth, the Commission's Director of insurance.

Founded in 1921, it was the fourth Central Bank to be established outside Europe. Its main current function is to protect the value of the rand by keeping inflation as low as possible. Other functions include formulating and implementing Monetary policy, operating capital markets and exchange controls, issuing notes and coins, being custodian of the country's gold and foreign reserves, being `lender of last resrort' and banker to the South African Government.

The Bank's shares are listed on the Johannesburg Stock Exchange and it has at least 700 shareholders Its head office is in Pretoria and it has some 1,900 staff.

Mr Callum Beaton, Managing Director of SINSEII (Guernsey) Limited, which set up and managers the Banks local captive, says: 'The Bank had been traditional in meeting its insurance needs but decided that the self-insurance route through a captive offered a better range of risk financing alternatives. Guernsey was one of two possible locations short-listed from an initial list of four. The captive manages the full range of banking institution risks and provider access to international reinsurance markets.'

Majority favour regulation of fiduciaries legislation

The great majority of respondents to a Commission consultation paper on the subject are in favour of the proposed regulation of fiduciaries and administration businesses legislation that is expected to be introduced next year.

The proposals were published in May and comments were invited by 14 July. 'There was a good response with no less than 89 written submissions. Whilst some representations were made as to certain aspects of the proposals, the overwhelming majority were very much in favour of the proposed legislation,’ says Mr Talmai Morgan, the Commission's Director of Fiduciary Services and Enforcement.

He adds that the responses are being considered by the Commission and the Fiduciary Services Committee with a view to a policy letter being presented to the States of Guernsey, the States of Alderney and Chief Pleas in Sark.

The proposals are bared on the normal methods of prudential supervision adopted by the Commission over the past 11 years allied to the Commission's pragmatic approach to regulation which is 'firm but flexible'. Mr Morgan says: 'Therefore, there will be a conventional licensing system analogous to that already applied to all other sectors of the finance business in the Bailiwick. The core feature is that all applicants for licences will have to demonstrate to the Commission that they are 'fit and proper' persons -a concept that requires integrity, competence and solvency.

Commenting on the considerable progress to date, Mr Morgan says: 'We are trying to strike a balance between ensuring that the Commission has the necessary powers to regulate properly without falling into the trap of over-regulation. I have no doubt whatsoever that we shall achieve tile right balance and come up with a law that is sensible, proportionate and workable.'

Total of insurance PCCs continues to climb

Seventeen protected cell companies (PCCs) have to date been formed for insurance purposes and, between them, they have a total of 83 cells.

Mr Steve Butterworth, Director of Insurance, said: 'lt is interesting that the PCC concept which we have pioneered is being emulated by the National Association of Insurance Commissioners in the USA and is expected to be introduced in other offshore

He adds: 'The insurance Division was particularly pleased when United Insurance, a long established Cayman Island based insurer, selected Guernsey as the location for its planned expansion into European business through a PCC and local managers, the International Risk Management Group.

Among the main shareholders of United insurance are Aluminium Company of America, Archer Daniels Midland Company, Brunswick Corporation, ICI Insurance, Solvay S.A., Rohr, Inc. and Weyerhaeuser Company.

Commission's new offices

The Commission's prestigious new offices are situated in the heart of the financial services area of St Peter Port but also within strolling distance of many shops, hotels and restaurants. La Plaiderie Chambers accommodates the 50 staff involved with financial services supervision and regulation while the Training

Agency continues to occupy its Nelson Place premises.

Mr Peter Crook, Director General, says: 'Regulating finance business has developed significantly since the Commission was first established in February 1988 when we replaced a small department of the States of Guernsey.’

Financial Stability Forum presentations

An address on offshore finance centres to the G7 Financial Stability Forum meeting in July at Basle by Mr Steve Butterworth, Director of Insurance at the Commission and Chairman of the Offshore Group of Insurance Supervisors, has been followed by a second address at the organisation's November meeting in Singapore. The Director of Insurance was one of a large number of individuals and international bodies assisting the Forum with its preliminary work.

The Financial Stability Forum was established because of perceived threats to global financial stability and is divided into three groups which concentrate on international offshore finance centres; derivatives, hedge funds and highly leveraged institutions; and capital flows. Part of the Forum's activities includes analysis of existing regulatory standards.

The Forum has recently also issued questionnaires to a wide range of onshore and offshore financial centres (including Guernsey) on issues relating to the regulation of financial activities. The Commission will continue to provide all possible assistance to the Financial Stability Forum in what is certain to be an extensive programme.

Two new Commissioners appointed

Following the retirement of Mr John Parkinson and Mr Harry Taylor, two new Commissioners were appointed earlier this year to join Conseiller Laurie Morgan, Chairman. MrJohn Hallam; and Advocate Nigel Carey

The new Commissioners are Mr Leslie Priestley, TD, FCIB, FCIM, C1Mgt, FKSA and Mr Mel Carvill, FCA.ACII.

Mr Priestley has more than 40 years' experience of banking, having held senior appointments in both Barclays and TSB - finally as Chief Executive, TSB England and Wales pie and a director of the TSB Group. He has also been Secretary General of the Committee of London Clearing Bankers, a member of the Monopolies and Mergers Commission, a director of the Civil Aviation Authority and London Electricity pie. Mr Priestley has also been an adviser to Touche Ross & Co. and a Visiting Fellow at Bangor University. He is currently Chairman of the CAA Pension Scheme and his directorships include those of Prudential Banking pie and Pinnacle Insurance pie.

Mr Carvill, Chief Executive of the Generali Group in Guernsey, is a past President of the Guernsey Society of Chartered and Certified Accountants and the Insurance Institute of Guernsey. He is also past President of the Guernsey Association of Pension Funds. Mr Carrill has served on the working group reporting on pension provision for the self-employed and proprietary directors, the insurance Law Review Committee, the Pensions Steering Group and the Insurance Sector Policy Advisory Group. A Chartered Accountant and Chartered Insurer, he is a director of financial services companies incorporated in Belgium, Guernsey, the UK, the USA and the Middle East.

Innovative bond

Two Divisions of the Commission Insurance and Investment Business were involved with an innovative US$500 million to US$1 billion convertible bond issue made earlier this year by Princess Private Equity Holding of Guernsey.

The issuer is 80.1% owned by Farmers Group, a Swiss investment group and 19.90/0 by Swiss lie New Markets, which specialists in new ways of managing risk. The Swiss Re group is one of the world's largest reinsurance companies.

The conversion rights of the AAA rated zero coupon bonds are carried into shares in a joint venture company which will invest in several hundred underlying private equity partnerships which, in turn, will invest in several thousand private equity and venture capital projects.

Legal awareness session well attended

In excess of 200 finance professionals attended a major new Legal Awareness Programme organised by the Training Agency in conjunction with Collas Day, Advocates. The programme covered technical issues, including trust litigation, company law, the Island's new employment legislation and aspects of pensions.

The sessions were led by a panel of seven lawyers and the programme was accredited for Continuing Professional Development by the Society of Trust and Estate Practitioners and the Law Society.

Next year, a further conference is to be held on securitisations.

Edwards Report a year on

A year after the publication of the review of financial regulation in the Crown Dependencies by Andrew Edwards, the Advisory & finance Committee has released a progress report on the suggestions, comments and observations in the report is they relate to Guernsey.

Conseiller Laurie Morgan, president of the Advisory & Finance Committee, said: 'Guernsey already has an excellent reputation for its high standard of regulation but we continue to investigate ways of further enhancing the island's position as a reputable, co-operative international finance centre. It is important that the island plays its full part in the fight against crime of all types, including tax evasion. Further to the publication of the Edwards Report, and in light of international regulatory and law enforcement developments, the following conclusions regarding Guernsey's financial regulation and measures to combat financial crime have been reached:

  • the Criminal Justice Law 1999, commonly referred to as 'All Crimes' legislation which had been proposed prior to the Edwards Report, will come into effect on 1st January 2000;
  • the Police and Criminal Evidence Law, which will give the authorities additional powers to obtain information for investigations, should come into force during 2000;
  • the Fiduciary and Administration Businesses Law will be considered by the Stares of Guernsey during 2000. This innovative legislation will for the first time regulate trust companies and company formation and administration services;
  • the recruitment of extra police officers has been approved and additional staff have been recruited by the Commission; it is proposed that the law constituting the Commission will be amended to no longer require the board of the Commission to include a politician;
  • it is not accepted that all limited companies should prepare and file audited accounts as this would be contrary to common practice in the UK, the USA and elsewhere;
  • consideration is being given to the means by which information about foreign incorporated companies with a business presence in Guernsey could be made available to those with a legitimate interest; a review of insolvency and bankruptcy procedures is bring undertaken,
  • independent, expert advice on proposed changes to trust legislation is now being considered. Recommendations will be included in the ongoing programme of regulatory reform;
  • the creation of a depositor protection scheme will be proposed to the States during 2000;
  • proposals to create an ombudsman scheme, which were in development prior to Mr. Edwards' Review, will soon be released; a consultation paper on changes to insurance regulation will be issued in 2000; and
  • changes to investment regulation will be proposed to the States in 2000.

A full copy of the report issued by the Advisory & Finance Committee is available on the States of Guernsey Internet site at

New opportunities for closed-ended funds

Of the island's 201 open-ended collective investment funds, 20, or some 10% of the total, are constituted as PCCs.

A further measure to enhance the attraction of Guernsey as a fund centre took place in October 1999 when the Commission made regulations under the Protected Cell Companies Ordinance, 1997 to permit a closed-ended collective investment fund to be incorporated as, or to be converted into, a protected cell company. Previously, PCC status had been restricted to open-ended funds and insurers.

Sponsors of closed-ended funds will now have the choice of constituting their products as PCCs, ordinary companies, unit trusts or limited partnerships. The availability of the PCC is, in particular, expected to increase further the already substantial venture capital fund business based in Guernsey.

Mr Nigel Taylor, Director of Investment Business, commented. 'This exciting initiative should boost an already buoyant closed-ended fund sector which, at nearly £7 bn, already accounts for over 36% of the assets under management in Guernsey collective investment funds.'

New Chairman of AGB

'Our objective is for Guernsey's finance industry to remain in the premier division,' rays Mr Stephen Jones the new Chairman of the Association of Guernsey Banks (AGB)

The AGB was formed in 1988 to represent banks in Guernsey and to enable them to speak with one voice. Its objects are to provide a forum for the discussion of matters and to act as a focal point between the banking industry, the States of Guernsey and the Commission.

Currently the AGB is working on a new code of conduct for members it also plays an active part in welcoming visiting financial journalists and meeting external regulators. It is working closely with the Jersey Bankers' Association on issues of mutual interest.

Mr Jones appreciates that his term of office coincides with a period when the finance sector of the Guernsey economy is subject to both direct and indirect challenges. For this reason, he welcomes the consultation process the AGB enjoys with the Commission, particularly in connection with the drafting of the revised Guidance Notes on the Prevention of Money Laundering.

Mr Jones is Managing Director of Woolwich Guernsey Limited

Banking name changes

A feature of the banking world in recent quarters has been the loss of some well-known banking names. Several long-established merchant banking names have disappeared from the scene. The former Morgan Grenfell business is now part of Deutsche Bank International Limited. Guinness Mahon Guernsey is now lnvestec (Channel islands) Limited, reflecting its South African ownership. Hambros in now SG; Hambros under its French owners. The Rea Brothers name will soon be transformed into Close Bank Guernsey following the Clone Brothers acquisition

The passing of one household name from the UK retail banking market rook place in September as the Midland Bank name was replaced by that of its global parent, HSBC.

European developments have seen the consortium bank Italian International's business continuing under the Banca Monte dei Paschi banner and Spanish amalgamation brings a longer name onto the Commission's list- Banco Santander Central Hispano. Converting from its mutual status, the Irish First National Building Society became First Active Bank. Private Bank and Tust now trades as EFG. Private Bank to signal its European outlook.

With merger and global consolidation continuing unabated the Commission is likely to report more name changes in the future.

E-commerce regulatory review

The Advisory & Finance Committee is progressing the provision of a specific legislative framework for e-commerce·and it is expected that detailed drafting of the law will commence early in 2000.

In addition, with financial services organisations increasingly using the Internet for their activities, the Commission is reviewing the regulatory framework for financial services business on the Internet. A cross-Divisional working group has been established to consider all implications of e-finance on regulation by the Commission.

Key issues being considered are the effect and speed of development of cross-border financial activity, and how to regulate local business undertaking such activity and external entities offering financial services and products to people in the Bailiwick. In addition, all regulatory laws, rules and policy have been reviewed in order to determine the parameters governing the manner in which supervised institutions maintain their records and provide information to the Commission.

Peter Crook, Director General, comments: 'The Commission supports financial services business conducted over the Internet so long as it abides by the standards required by the Commission and preserves the Bailiwick's good reputation

Money laundering courses

Further Training Agency courser for finance professionals on the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999, and the revised Guidance Notes on the Prevention of Money Laundering are to be run during 2000. This follows the over subscription of recent workshop sessions for senior managers and money laundering reporting officers organised by the Training Agency.

Presentations were made by Mr Michael Hyland and Ms Sue Thornhill of MHA Consulting, together with barrister, Mr Stephen Platt.

Rainbow Book II

A new version of the Guidance Notes on the Prevention of Money Laundering has been issued to all financial services businesses in the Bailiwick of Guernsey. The Guidance Notes have been issued by the Commission and reflect changes in international standards since the original 'Rainbow Book' was issued in March 1997.

One major change is that the new Guidance Notes apply to the laundering of the proceeds of all crimes whereas the previous Notes applied only to the proceeds of terrorism and drugs related offences. 'Rainbow Book II’ is available in ring binder and CD-Rom format.

Risk 2000 conference

Guernsey is playing host to a prestigious international conference and exhibition next autumn. Risk 2000 brings risk managers, finance directors, company secretaries, brokers and insurance buyers from across the globe to Europe’s premier captive insurance domicile

In addition to the three keynote plenary sessions, fifteen different workshops will each tackle a subject of interest to the industry. Risk 2000 introduces a novel 'three track' approach offering risk management sessions an technology, European issues and practice.

The two day event will be based on participation and interaction rather than the 'talk and listen' format used in most other conferences.

For more information e-mail or access the event's website·

The conference is being held in Guernsey at Beau Sejour Centre on September 28th and 29th.

New GIBA Chairman

Mr Keith Corbin is the new chairman of the Guernsey International Business Association (GIBA) which represents every facet of the financial services sector in Guernsey

Guernsey-born and educated, he is a founder director of Larem Trustees Limited. He has had an almost unbroken career in trust and corporate administration over the last 26 years.

Of GIBA, formed in 1982, he says: 'Its objective is to provide the finance sector with a collective voice to bring cohesion and focus to dealings with government and regulators.' He maintains this relationship was a key factor in the consultation process surrounding the Edwards Report.

He adds: 'ln the past two years our politicians and regulators have been involved in extensive discussions with their UK counterparts and bodies such as the OECD and the Financial Action Task Force on Money Laundering. GIBA's role is now more important than at any other stage in its history.

Mr Corbin is also Chairman of the Training Agency, a member of tile Society of Trust and Estate Practitioners and a member of the Fiduciary Services Committee.

Year 2000 readiness

The Commission continued to monitor the state of preparation for the year 2000 by licensed banks, insurance companies and investment businesses. In this regard, status reports have been collected from regulated financial institutions over the last year.

The initial focus was on internal testing of business critical systems (computer operating systems). Earlier this year, the Commission began a, monitor the testing of links with external providers of critical services, especially the SWIFT payments mechanism, bur also proprietory information suppliers, dealing systems and valuation feeds (for example, Reuters and Bloomberg). The Commission believes all internal systems are year 2000 compliant and that external testing has been completed

Financial Statistics

The figures shown below give a brief statistical overview of the current status of the principal activities within Guernsey's financial services sector.

78 Licensed banks

Deposits £52.9bn

191 Open-ended investment schemes

Managed £10.5bn

202 Closed-ended investment schemes

Managed £5.2bn

349 Captive insurance companies plus

30 PCC cells

Total assets £5.2bn*

13 Offshore life companies

Total assets £2.2bn*

*1998 figures

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