Focus on Guernsey Insurance Sector

Guernsey offshore insurance sector has been one of the most innovative business fields in the offshore world, mainly due to the island’s creativity and quality as an international market of offshore entities. And thanks to a wealthy pool of financial, legal and regulatory specialists, an outstanding high level of progress in both onshore and offshore insurance business was attained.

As with many offshore regimes that emerged around the world, in Guernsey, there was always reason to demand change in the status-quo due to dissatisfaction in certain aspects of the insurance sector. Guernsey’s onshore and offshore insurance has a history of nearly 200 years, has contributed to new classes of insurance and methods that spurred diversification throughout onshore and offshore insurance sectors, promoted focus on positive risk control through captive reinsurance for example, increased discrimination in rating in order that bad risks could be penalized whereas good risks would be given favorable rates, and encouraged advancement in risk management especially with regard to captive insurers.

Onshore and offshore insurance in Guernsey generates many benefits for the UK economy, one of which is the fortification of the sterling due to the fact that Guernsey’s offshore insurance operations, including trade and investment are done in the pound sterling. Guernsey offshore captive with UK parentage help strengthen the financial standing of the UK parent, whilst the increased sophistication of the offshore insurance services in Guernsey highlighted the need for and stimulated the creation of more advanced and rigorous risk management practices within the offshore insurance sector.

In Europe, Guernsey is the number one domicile of offshore captives, not only as a result of the vastness of Guernsey offshore insurance industry, but because of the large number of quality professionals and experts found in the various areas of offshore insurance and related fields in Guernsey. As such, one would find a significant number of UK FTSE 100 companies with offshore captives established in Guernsey, including US, Australian, Caribbean and South African companies.

Initially, the purpose of the Guernsey captive was to insure some or all of the parent company’s risks, however, as time went by, different types of Guernsey captives, such as the pure, association, group and broad captives, emerged, as investor and insurance demands became more advanced and Guernsey insurance services became tailored to meet these needs.

The concept of the Protected Cell Company first emerged in Guernsey. With this new entity, companies were able to use the cell facility to separate their assets and in so doing protect these assets and better manage risks and investment activity, with the use of a company and without having to necessarily setup a Guernsey captive in order to do so. The act introducing PCC’s was passed in 1997, and with its success established the foundation the rent-a-captive, which provides a wide degree of flexibility in terms of separating the life funds of policyholders into specific classes and cells within the framework of a protected cell company. PCC’s have further evolved, making it possible to use the entity to securitize future streams of income by translating capital market transactions into channels for transferring risks and insurance transactions.

All of these advantages of Guernsey insurance and captive business are no longer only accessible solely by international firms and offshore customers. Instead, small to medium sized business (SME) can now take advantage of captive facilities, particularly as made available with the PCC framework in which core and individual cells legally isolate and segregate assets and liabilities, making it impossible to lay claims against a particular set of assets and liabilities in order to cover risks and liabilities with the assets of another cell. Further protection was provided to assets through the introduction of the Incorporated Cell Company or ICC, which has the very same features of the PCC but in which cells are independent/distinct legal persons and are incorporated separately. As an offshore entity, the ICC is available to the international market as well, making Guernsey a leading jurisdiction when it comes to international offshore insurance.

In addition to the protectionist benefits that the PCC, ICC and Captive offer, these offshore insurance facilities are much quicker and more affordable to create and dissolve, demand less time for management, reduce operating costs because of lower or eliminated premium expenses, reduces the tax burden since Controlled Foreign Company laws can be legally avoided as provided for under the act, and have lower minimum capital requirements.

Get to top