GUERNSEY 2014 From the publishers of GROWTH The captive space continues to demonstrate significant growth on the island STRUCTURE Why insurance-linked securities and PCCs are proving to be popular captive structures LOCATION How Guernsey offers an alternative location to other European domiciles 001_CRGuernsey2014_Cover.indd 1 07/02/2014 16:48 High-flying CORPORATE & COMMERCIAL / TRUST & FIDUCIARY / FUNDS INSURANCE / PROPERTY / DISPUTE RESOLUTION / INSOLVENCY Advocates PO Box 69, La Vieille Cour, La Plaiderie St Peter Port, Guernsey GY1 4BL Tel +44 (0)1481 713371 www.babbelegal.com Untitled-30616BAB_Ad_CaptiveReview_GR_200114_Fnl.indd 1 1 05/02/201420/01/2014 17:3216:10 FOREWORD Strategic thinking puts Guernsey in first position he Guernsey Financial Services Commis- Of particular importance is our regulatory sion (GFSC) licensed 89 new interna- regime which continues to respond to innova- REPORT EDITOR T tional insurers during 2013. This means tive proposals and this was reinforced by the Karolina Kaminska there were 758 international insurers licensed GFSC’s decision to form an Innovation Unit +44 (0)20 7832 6654 in the island at the end of December 2013. within the regulator. [email protected] A signifi cant proportion of the licences is- Guernsey also o ers proportionality STAFF WRITER sued were associated with structures related through meeting the insurance core principles Alexis Burris to insurance linked securities (ILS). This in- of the International Association of Insurance +44 (0) 20 7832 6656 cluded a Shariah-compliant ILS structure that Supervisors (IAIS). The decision taken in Janu- [email protected] was judged as the top innovative deal in Eu- ary 2011 not to seek equivalence with Solvency GROUP HEAD OF CONTENT rope and one of the Islamic fi nance Deals of II looks prescient in the light of the recent an- Gwyn Roberts the Year 2013 by Islamic Finance News. nouncement from the European Captive In- HEAD OF PRODUCTION However success on this scale doesn’t surance and Reinsurance Owners’ Association Claudia Honerjager simply happen. The groundwork for ILS was (ECIROA) that as Solvency II stands, “eight out laid in Guernsey from 2005 and the number of 10 European captives will fail to qualify for DESIGNER of transactions steadily built year on year. simplifi ed solvency capital treatment in 2016”. Jack Dougherty The surge in deal fl ow in 2013 derives from a Guernsey stands strategically well positioned SUB-EDITORS fundamental shift in the markets as investors to provide the natural alternative jurisdiction Rachel Kurzfi eld from the capital markets have sort returns for those captives. Eleanor Stanley on capital from the insurance market. Con- Guernsey was named ‘European captive Luke Tuchscherer vergence gathered momentum in 2013 and domicile of the year’ at the UK Captive Ser- PUBLISHING DIRECTOR Guernsey was ready to react. vices Awards 2013 and independent research Nick Morgan The Guernsey International Insurance As- carried out by trade publication Business In- +44 (0)20 7832 6635 sociation (GIIA) established a new Market surance (March 2013) ranked Guernsey as the [email protected] Development Committee and an ILS sub- largest captive insurance domicile in Europe. SENIOR PUBLISHING ACCOUNT MANAGER committee in 2013, with the aim to continue Jo Cole to develop Guernsey as an innovative and at- Paul Sykes +44 (0)20 7832 6636 tractive environment for establishing a wide Chairman of the Guernsey International [email protected] variety of international insurance entities. Insurance Association PUBLISHING ACCOUNT MANAGER Bea Jarrett Paul Sykes leads Aon’s captive, insurance company and cell company management +44 (0)20 7832 6631 operations in Guernsey. He is also a director of the Aon and White Rock protected cell companies in Gibraltar and Malta and jointly leads Aon’s EMEA Captive Practice [email protected] Group. He was chairman of the Gibraltar Insurance Association in 2010 and a former HEAD OF EVENTS president of the Insurance Institute of Guernsey. Beth Hall +44 (0)20 7832 6576 [email protected] Contents CEO Charlie Kerr 04 ILS ADDS TO GUERNSEY’S 16 REASONS TO BE CHEERFUL RANGE OF OPTIONS FOR INSURERS 18 GUERNSEY’S LOVE AFFAIR WITH THE PCC 06 A STANDOUT JURISDICTION 21 IT’S GOOD TO TALK 11 GUERNSEY: THE KEY FACTS 24 SIZE SHOULDN’T MATTER Published by Pageant Media, Thavies Inn House, 3-4 Holborn Circus, London, 12 KNOW YOUR SERVICE EC1N 2HA PROVIDER 26 SERVICE DIRECTORY ISSN: 1757-1251 Printed by The Manson Group © 2014 All rights reserved. No part of this publication 14 CORPORATE GOVERNANCE: may e reproduced or used without prior permission AN AUDITOR’S VIEW from the publisher. 003_CRGuernsey2014_Intro_contents.indd 3 07/02/2014 12:28 GUERNSEY | GUERNSEY FINANCE ILS ADDS TO GUERNSEY’S RANGE OF OPTIONS FOR INSURERS Fiona Le Poidevin of Guernsey Finance talks to Captive Review about the island’s success as a captive domicile he latest fi gures from the Guern- cial services world as an alternative applica- sey Financial Services Commission Written by tion for the structuring of many different types of products. As well as adopting the similarly (GFSC) show that Guernsey contin- Fiona Le Poidevin ues to grow its insurance industry. innovative ICC, the island has, through legis- At the end of December 2013, lative advancements, developed a regulatory Tthere were 758 licensed international insurers Fiona Le Poidevin is chief executive of Guernsey infrastructure that enables them to be widely Finance, the promotional agency for Guernsey’s in Guernsey – a net growth of 21 international fi nance industry. Previously a senior tax manager employed. insurers over the previous 12 months. Much with a large accountancy fi rm, she has over 15 years’ PCC and ICC structures provide a low cost, of this growth relates to the use of protected experience working in fi nancial services in both the low administration vehicle to access returns cell companies (PCCs), incorporated cell UK and Guernsey. from the reinsurance market and some ILS companies (ICCs) and associated cells within funds avail themselves of both within their the increasingly popular concept of insurance it the optimum location for ILS. Remember, growth strategies. linked securities (ILS). Guernsey pioneered the cell company con- The reasons for the attractiveness of ILS as cept back in 1997 with the introduction of the Guernsey pedigree a structure and an alternative asset class for PCC for use in the captive insurance sector. At the time of writing there are in excess of 50 insurers and investors are two-fold: The subsequent success of this innovation protected cells established in Guernsey across 1. ILS permits an insurer to purchase is illustrated by the fact that we’re ranked as four different PCC platforms having written additional protection for low frequency, the number one captive insurance domicile in fully collateralised reinsurance primarily high severity losses, including natural Europe and the fourth largest globally, while covering property catastrophe risks, marine, and non-natural perils, operating in the the cell company is now used across the fi nan- crop and other classes such as premium rein- traditional insurance market, typically in the form of catastrophe ‘cat’ bonds or collateralised reinsurance. 2. Investors like ILS because returns are “Guernsey’s great strength is that it has a long and non-correlated with the general fi nan- strong heritage in both the investment funds and cial markets. insurance sectors, making it the optimum location Guernsey’s great strength is that it has a for ILS” long and strong heritage in both the invest- ment funds and insurance sectors, making 4 CAPTIVE GUERNSEY REPORT 2014 004-005_CRGuernsey2014_GuernseyFinance.indd 4 20/01/2014 16:48 GUERNSEY FINANCE | GUERNSEY statement or prize indemnity. Protected cells Heritage Insurance Management, Alternative was not designed for captives as they have par- in Guernsey are also being used to conclude Risk Management (ARM) and Kane. The sector ent companies as their policyholders. International Swaps and Derivatives Associa- is also complemented by banking, investment The European Captive Insurance and Rein- tion (ISDA) arrangements as an alternative to and fiduciary sectors and supported by a net- surance Owners’ Association (ECIROA) has a reinsurance contract. work of professional services, including legal, similarly found issues with the way Solvency In 2012, the Channel Islands Securities tax, accounting and actuarial advisers. II has been drawn up. The Directive may have Exchange (CISE), formerly known as the The pre-eminence of Guernsey as a captive had its implementation date pushed back to Channel Islands Stock Exchange (CISX), insurance domicile is underlined by the fact 2016, but as it currently stands eight out of became home to the first private catastrophe that approximately 40% of the leading 100 10 European captives would fail to qualify bond listed on any exchange worldwide when companies on the London Stock Exchange for solvency capital treatment because they Aon Insurance Managers in Guernsey – which with captives have them domiciled in the carry liabilities underwritten for disposed has been involved with more than 80 ILS island. Indeed, a significant majority of the entities, according to ECIROA. If the rules transactions since 2006 – worked with Swiss international insurers licensed in Guernsey go unchanged then ECIROA believes many ILS manager Solidum Partners AG to establish have their parent company located