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CAPTIVE INSURANCE COMPANIES – AN UPDATE

This informative update, presented by Peter Neville, Director General of the Guernsey Financial Services Commission, offers a thorough overview of captive insurance companies, tracing their history from their inception over 200 years ago to their current significance in the insurance market. Emphasis is placed on Guernsey's role as a leading captive insurance center, showcasing its growth, benefits, and robust regulatory framework. The discussion highlights the future trends and potential collaborations between Guernsey and major markets like Lloyd’s and London, emphasizing the importance of captives in managing sophisticated risks and improving risk management strategies.

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CAPTIVE INSURANCE COMPANIES – AN UPDATE

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  1. CAPTIVE INSURANCE COMPANIES – AN UPDATE Thursday 6 November 2003 Peter Neville Director General of Guernsey Financial Services Commission

  2. Captives – The History • First appeared over 200 years ago • Purpose: to provide cover too expensive or unavailable in conventional market • First Guernsey captive: 1922. • “Captive” to parent and related risks • Other benefits recognised • Insurance industry now accepts the concept

  3. Bermuda Cayman Islands Vermont Guernsey Luxembourg [Source: A.M. Best] Number 1313 600 438 382 268 Principal Captive Centres As at 31 December 2002

  4. Banks Funds Fiduciaries Insurers 66 banks/£71.6 bn deposits Guernsey Finance Industry 507 funds/£40.1 bn assets under management 227 full and personal licensees £77.7 bn liquid assets under management 386 captives of which: 56 are PCCs which contain 192 cells 30 Captive managers 26 Life 55 Intermediaries 31 Domestic £12.7 billion gross assets £2.89 billion gross premiums

  5. Guernsey Captives • Increased interest • Covering risks previously self-insured • Covering more sophisticated risks • Over 40% of FTSE 100

  6. Reasons for use of Captive • Useful in hard and soft markets • Access to reinsurance • Broader coverage • Premiums more stable • Placing of profitable customer related business • Cover for “uninsurable” risks • Improved risk management • Advantageous funding vehicle

  7. Reasons for using Guernsey • Lower costs • Increased flexibility • Less bureaucracy • Tailored capital • Professional and innovative managers • Good transport and support services

  8. A Single Legal Entity Cell Core Cell Cell Cell Cell

  9. Guernsey Insurance (PCC) Ltd 1 Cell Capital 3 Core Capital 2 Cell Capital

  10. Protected Cell Companies Caveat • Cell assets held in another jurisdiction • Attitude of overseas courts

  11. Reputation – The IMF Report • Comprehensive regulatory framework • GFSC: - well established and well respected - experienced staff • GFSC commended for continuous proactive attitude to enhance the regime

  12. The Future • Guernsey/Lloyd’s/London market working agreement? • Corporate membership vehicle?

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