Guernsey: Evolution Of An International Insurance Centre

Last Updated: 24 November 2009
Article by Peter Niven

Most Read Contributor in Guernsey, September 2018

Originally published in Captive Review, Guernsey Report, 2009-10, October 2009

Guernsey is a leading financial jurisdiction well prepared for the future, says Peter Niven of Guernsey Finance.

Guernsey's development in captive insurance has been steady, long lasting, of benefit to all stakeholders and it has been at the forefront of the island's finance industry in excess of 30 years. Not so well known is the island's development as an insurance and reinsurance centre. This article considers why Guernsey is so suited to this wider role.

Current driving forces

At a time when certain insurers and reinsurers, including Lloyd's agencies, are on record as saying that Britain presents excessive costs and taxes, Guernsey provides an established, well-regulated, attractive and cost-effective solution to those issues. Guernsey, with its professional approach to business and track history of unrivalled innovation, offers all the attributes required for effective regulation, establishment, management and administration. Add to this that continuous change, following deliberation and consultation, has allowed the island to stay ahead of vulnerabilities introduced by recession, added regulatory burdens, consumer confidence and increased corporate governance pressures.

Guernsey has a long-term track record of insurance and financial services innovation and, with its political stability, is ideally positioned as an international insurance centre.

Captive insurance, in which the island has developed its insurance reputation over 30 years, presents relatively modest demands of management companies yet is a significant facilitator for other financial services activities. It is the breadth and depth of expertise gained through long-term development of the captive and cell captive sector that provides the island with an unique advantage. It is this development that has already attracted a number of well-recognised insurers and reinsurers to the island.

Guernsey as an insurance centre

Guernsey was the first European offshore centre to introduce insurance legislation, it was the first to redefine that legislation in the wake of changing international circumstances, it was the first to introduce codes of corporate governance in relation to the direction and management of insurers in the island and is pro-active in developing an equivalence status to Solvency II. Its Protected Cell Company legislation provided the global template for a sector that has seen the lion's share of captive-oriented development in the past 12 years and the island continues to support diversification of the insurance sector. Its pedigree, as an innovative financial centre, is without doubt and it is constantly evolving to ensure business interests are fully satisfied.

The G20 had no choice, in the face of top quality infrastructure, to confirm Guernsey's position on the so-called 'white list'. Underpinning this accreditation is the quality of legislation, regulation, transparency, education and management resources present on the island.

Guernsey does not, therefore, simply prepare itself for a visit from the IMF, but it maintains an ever-present commitment to high standards of delivery and innovation.

These high standards have seen the development of the island's captive insurance sector to its leading present day position employing upwards of 300 people. The captive sector is not the only insurance activity as there lies an additional resource. The island's domestic, life and reinsurance sectors all contribute to its insurance industry and, in turn the insurance industry is supported by banks, accountants, actuaries, investment managers and lawyers, providing levels of expertise that reflect best international standards. All of this is provided in a leading jurisdiction less than an hour's flight from London.

Guernsey is well attuned to the needs of the insurance sector with complete understanding of the support services required. As noted, all insurance and reinsurance support functions are already present in the island and its companies and insurance laws are widely recognised as setting premier league standards, yet without some of the more burdensome regulation that can be found elsewhere.

Over many years the Guernsey Financial Services Commission has played an active role in the International Association of Insurance Supervisors seeking to support local and global activity. Guernsey is not a member of the EU so its insurers and reinsurers are not swept into the fold of Solvency II compliance, but the application of Own Capital and Solvency Assessment rules provides a flexible response suited not only to present day requirements of insurers but allowing ongoing refinement as to delivery of shareholder and stakeholder protection in the future.

From a fiscal standpoint Guernsey companies, other than regulated banks which pay 10%, are taxed at 0%. The so-called zero/ten tax regime, complemented by Tax Information Exchange Agreements, further reinforces the island's position in relation to fiscal and financial transparency. There are no employment or sales taxes and personal taxation is at a flat rate of 20% with a variety of personal allowances. Standards of living are good and employees benefit from excellent healthcare, funded by a mix of state and personal contribution, and children's education is to sixth form level on the island with access thereafter to UK universities. The frequent daily flights to the UK mainland, together with daily year-round ferry services, ensure that islanders have no requirement to feel cut off.

A broader insurance future

A number of companies have already made the move to Guernsey – Barbican, Catlin, Hiscox and Canopius all have presence on the island. Others are actively considering the island as a future European base and recognise the benefits available while the relatively recent licensing of Lloyd's Underwriters by the Guernsey Financial Services Commission has opened up further opportunities, some already in use.

It is the diversity afforded in Guernsey, through its multi-faceted finance business, that truly underpins its position as an international centre and not just a captive insurance domicile. Employee expertise, a favourable working environment, plentiful complementary services and zero rate tax all assist directly in supporting the island's position in the insurance field.

Employee resource

Mergers and acquisitions have strengthened the captive management sector while, in parallel, creating a glass ceiling in career development for many. There has never been a better time to hire experienced personnel resident on the island. Training and development is a key focus of attention and the Guernsey Training Agency (now the GTA University Centre accredited to the University of Bournemouth) is a joint initiative between the States of Guernsey and the Guernsey Financial Services Commission committed to the procurement, facilitation and promotion of high quality training to all sectors of the community.

The requirement for insurance training is not only understood, it is pro-actively supported by government, commercial and regulatory stakeholders affording employers a first class pool of talent. Guernsey continues to have a proactive captive management sector and its role should not be missed in assessing the needs and demands of the wider insurance sector. Already, a number of captive managers have seen advantage in promoting their services to reinsurers offering the wherewithal to host start-up facilities to insurers and reinsurers alike. Companies have thus been able to address start-up operations on a highly cost-effective basis permitting business focus to address insurance and reinsurance issues rather than routine business administration that can so easily consume the time and effort of personnel in a new business environment.

The future

Guernsey has, over many years, watched, listened and learned from developments and requirements of financial services businesses in general, and the insurance sector in particular. This is not the tax haven of old, making a pitch for the in and out business that captives presented in their infancy, but an international insurance centre providing a well-supported and highly credible response to changing market conditions. The island is a leading financial jurisdiction and has a clear understanding not only as to its ongoing development and how it is already assisting, but also how it can assist further, in the strategic development of insurance and reinsurance businesses.

Guernsey Finance is grateful for the contribution to this article from Callum Beaton, founder and principal of Callum Beaton (Insurance Consulting).

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.

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