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Captive Insurance Times Guernsey Insight 3 Guernsey by Numbers Guernsey’S Latest Insurance Sector Statistics, As of 31 December 2016

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Captive Insurance Times Guernsey Insight 3 Guernsey by Numbers Guernsey’S Latest Insurance Sector Statistics, As of 31 December 2016 Artex Ensuring Greater Understanding Artex provides a full range of alternative risk management solutions, customized for our clients’ individual challenges and opportunities. Powered by independent thought and an innovative approach, we empower our clients and partners to make educated risk management decisions with conidence. Captive Insurance Management Commercial Insurers & Reinsurers Underwriting Participation Structures Pension Longevity Transformers Insurance-Linked Securities & Structured Transaction Administration EU Licensed Intermediary & MGAs Operating in over 30 domiciles and in more than 15 o ices internationally, we have the proven capacity to supply any alternative risk need. For more information, please visit our new website at: artexrisk.com 32024A ® Editor’s Note Good things in small packages Group Editor: Mark Dugdale The traditional captive insurance market has [email protected] peaked with large corporations already owning +44 (0)203 750 6017 one or more of their own insurers, however, small- and medium-sized entities are enjoying Deputy Editor: Stephanie Palmer something of a boom. [email protected] +44 (0)203 750 6019 This is true in Guernsey, where six new captives were created last year, of which four were Supplement Editor: Becky Butcher protected cell companies, while 76 new cells [email protected] were created. In total, Guernsey is now home to +44 (0)203 750 6018 837 captive insurance entities. Contributors: Barney Dixon, Drew Nicol and Theo Andrew Dominic Wheatley, CEO of Guernsey Finance, maintains that captives are still the bedrock of Associate Publisher and Designer: John Savage the insurance industry on the island. [email protected] +44 (0)203 750 6021 Wheatley explains: “I don’t subscribe to the theory that captives require a hard market in Publisher: Justin Lawson which to flourish because surely constructing a [email protected] business plan on a set of market circumstances +44 (0)203 750 6028 over which you have no control is not an optimal approach.” Marketing Director: Steve Lafferty [email protected] “So, even if a captive is established in a hard market cycle, it is unlikely to be abandoned when Office Manager: Chelsea Bowles the market softens, because the real benefits of [email protected] the structure lie in its governance, management, control and proper pricing of retained risk.” Sales Support Executive: Paige Tapson [email protected] Where there is significant potential for growth in Guernsey is in reinsurance, with insurance- linked securities and pension longevity swaps proving particularly popular. Published by Black Knight Media Ltd In this Guernsey-focused issue from Captive Insurance Times, you will find detailed insight into the island’s insurance industry, providing an update on topics such as BEPS, Brexit, Solvency II, ILS, pension longevity, cell Black Knight Media Ltd structures, Guernsey’s agreement with China, Provident House and investment opportunities for captives. 6-20 Burrell Row Beckenham Becky Butcher BR3 1AT, UK Company reg: 0719464 Supplement Editor Captive Insurance Times Guernsey Insight 3 Guernsey by numbers Guernsey’s latest insurance sector statistics, as of 31 December 2016. For more information, visit: www.gfsc.gg Last 12 months Type 31 Dec 2015 Additions Surrenders Net Change 31 Dec 2016 Companies 242 6 6 0 242 PCCs 64 4 3 1 65 PCC Cells 444 79 53 26 470 ICCs 13 1 0 1 14 ICC Cells 41 4 1 3 44 Totals 804 94 63 31 835 Authorised managers 31 Dec 2015 Additions Surrenders Net Change 31 Dec 2016 Total 19 0 0 0 19 International insurers gross assets, net worth and premiums written Gross Assets (£bn) Net Worth (£bn) Premiums (£bn) Date Nominal Inflation Nominal Inflation Original Inflation Adjusted Adjusted Adjusted 2015 23.86 23.86 11.48 11.48 5.54 5.54 2014 23.66 23.66 11.57 11.57 4.94 4.94 2013 22.87 23.43 10.14 10.39 4.83 4.95 2012 22.35 23.60 9.32 9.84 4.63 4.89 2011 21.76 23.71 8.97 9.77 4.62 5.03 2010 21.40 24.55 8.46 9.71 4.05 4.65 Guernsey Update P6 Experts convene to talk to Becky Butcher about the stability that Guernsey represents in a challenging financial and political environment Captive Banking P12 With the insurance market opening up in Guernsey, Nigel Winkett and Dave Bartram of Barclays expect the demand for bank accounts to continue to P12 increase over the coming months ILS Insight P16 Guernsey’s ILS numbers reveal a booming market made better by regulatory innovation. Becky Butcher reports Pension Longevity p20 Guernsey has seen significant growth in the use of incorporated cells for pension longevity, as Christopher Anderson of Carey Olsen explains Cell Structures p22 P16 Protected cells continue to be the vehicle of choice for securitisations. Stewart McLaughlin of Aon reveals how flexibility has been a key factor in their success China Deal p24 Guernsey’s hard work is paying off as China looks to stretch the boundaries of its captive strategies. Becky Butcher reports P24 Captive Insurance Times Guernsey Insight 5 Guernsey Update Only St Peter Port in a storm Experts convene to talk to Becky Butcher about the stability that Guernsey represents in a challenging financial and political environment 6 Captive Insurance Times Guernsey Insight www.captiveinsurancetimes.com Guernsey Update Persistent soft market conditions and frequent the captive industry is faring “reasonably well”. catastrophic events should spell uncertainty for He revealed that year-end premium in 2015 stood captive insurers, but they are proving far more at £5.46 billion, compared to £4.94 billion in 2014, resilient than many expected. while licence numbers were in the 830s in 2016 compared to the early 800s in 2015. It’s widely held that the traditional captive insurance market has peaked, with most Fortune 500 Quick comments: “The global economy is back on companies already owning one or more of their track and Guernsey, as an international finance own insurers. Yet small and medium-sized entities centre, should benefit from that in the long term.” are enjoying something of a boom. This is true in Guernsey, where six new captives were created last The GFSC has noticed an uptick in activity in a year, of which four were protected cell companies, number of sectors. Insurance-linked securities while 76 new cells were created. In total, Guernsey (ILS) and pension longevity swaps have been two is now home to 837 captive insurance entities. of the biggest. Quick suggests that the pension longevity swaps sector will continue to grow, given Even though captive growth as a whole has become the challenges that pension funds face with life “static” in Guernsey, Dominic Wheatley, CEO of expectancy increasing. Guernsey Finance, maintains that captives are still the bedrock of the insurance industry on the island. Although the reinsurance industry has seen a surge in figures, Guernsey remains a big captive domicile, Wheatley explains: “I don’t subscribe to the theory which is an area that is stable in net terms. that captives require a hard market in which to flourish because surely constructing a business Quick reveals that Guernsey has seen companies plan on a set of market circumstances over which both leave the island due to mergers and you have no control is not an optimal approach.” acquisitions and enter the market anew, suggesting there is still a commercial appeal to the captive, “So, even if a captive is established in a hard despite strains on traditional business such as low market cycle, it is unlikely to be abandoned when insurance rates, increasing insurance premium tax the market softens, because the real benefits of the in the UK and the crackdown on base erosion and structure lie in its governance, management, control profit shifting (BEPS). and proper pricing of retained risk.” Peter Miller, executive director at EY, also “Therefore, when there has been a sustained suggests that the captive industry remains softness in the conventional markets you can only “relatively safe” because insurance is always assume that people have captives for permanent or needed. Miller adds: “The only risk in Guernsey is long-term strategic reasons, not short-term tactical that it becomes futile to have a captive because reasons,” Wheatley adds. you can get it cheaper elsewhere.” Richard Searle, partner at BDO, suggests that there Although as a whole Guernsey’s captive figures is confidence in Guernsey, alongside a healthy are somewhat static, the same does not apply amount of caution. for Artex, which has seen success in bringing on new business, according to Peter Child, managing Amid unquantifiable variables such as Brexit, Searle director for Artex’s Guernsey office. points out that Guernsey has traditionally been good at is managing its own destiny. He says: “As Child explains that currently in Guernsey there is long as we don’t just sit back and leave our destiny more of a focus on reinsurance and if Guernsey in the hands of others, but take control of it and wants to grow as a whole then it has to focus in manage it, I think we will be okay.” that area. According to Jeremy Quick, director of the banking He comments: “For Artex as a business, this year and insurance supervision and policy division at the there is still a lot of strength out there and you Guernsey Financial Services Commission (GFSC), never know when the market changes, it might not www.captiveinsurancetimes.com Captive Insurance Times Guernsey Insight 7 Guernsey Update be as dramatic as the way it has changed in the past, but there will be change and there will always be little areas where there will be a disconnect Brexit between what underwriters are willing to write risks at and what the insureds think their risks are worth, With 70 percent of Guernsey’s financial services and when that happens we can provide some kind business coming from or via London, Wheatley says of value.” Brexit will affect the island “profoundly”.
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