Protected cell captives boost registrations for Guernsey.
Guernsey, like Bermuda, continues to attract substantial numbers of new captives while in less well established domiciles, the numbers are standing still. The Tillinghast Towers-Perrin Captive Insurance Company Report, for example, calculates that in 1998, across all European domiciles there were 65 licences issued in European domiciles and 27 removed, for a new gain of 38. Guernsey, by its calculation, issued 27 new licences or over 40% of the total.
One reason for Guernsey's continuing success is its foresight in passing legislation in 1997 to allow the creation of protected cell companies (PCC). There is clearly demand for this type of structure, where a professional manager or third party sponsor sets up a company to handle risks for multiple sponsors. The Guernsey Financial Services Commission (GFSC) says that two new PCC companies were formed during December 1998 alone, bringing the total during the year to 11 with over 30 cells.
Among the companies who incorporated PCCs last year were Guardian Insurance and Benfield and Guernsey's own Polygon as a joint venture. Swiss Re and Winterthur have set up European Credit & Guarantee Insurance PCC to (re)insure credit and surety and related classes. Chubb is to offer Foundation Reinsurance PCC for customers to use as part of an integrated risk management programme.
Other domiciles also see growth in this type of structure. The Cayman Islands offer segregated portfolio companies (SPCs), a type of rent-a-captive. Enabling legislation was passed in mid-1998, and five new SPCs had been licensed by the end of the year. Vermont has just passed legislation permitting sponsored captives, which are similar structures, and the idea is under consideration in Dublin. The Isle of Man and Jersey have, at least for the time being, rejected the idea.Protected cells, segregated portfolios and rent-a-captive companies are all designed to allow a professional manager to set up an umbrella under which subsidiary cells operate. The intention is that the cells or segregated portfolios are operated independently of each other, and their assets are protected from debts incurred by any other cell. The aim is to enable companies that do not want the expense and administration of their own captive - or to write particular types of business in their captive - to participate in their insurance programmes.
Figures given by the GFSC as to the overall number of captives in Guernsey vary from those listed by the authoritative Tillinghast-Towers Perrin Captive Insurance Company Directory and Insurance Company Reports. The GFSC says there are 349 captive insurance companies plus 30 PCC cells. Tillinghast-Towers Perrin lists 360 captives at the end of 1998 with 27 of those protected cell companies. The issue is certainly one of definition. By any measure Guernsey is the largest European domicile and ranks number three or four worldwide. At the end of 1997, Guernsey's captives had total assets of £5.2 billion.Guernsey continues to attract UK sponsor captives, and it has an increasing number with continental European parents, such as Contrex Insurance, set up by the Dutch business conference organiser, HR Group. Among UK sponsors are the Lloyd's agency Hiscox and two major holiday companies. From further afield, Abgroup, a quoted Australian construction company, has established Abgroup Risk Management Services.
Financial regulation in Guernsey, as in Jersey and the Isle of Man, came under review in 1998 as part of a UK government investigation led by Andrew Edwards into offshore domiciles that are Crown dependencies. Guernsey was generally pleased with the comments in his report which was published in November. Peter Crook, director general of the GFSC states: “The tone and conclusions of the report are positive.”
Suggestions made by Mr Edwards for changes to Guernsey's regulatory and legislative framework are being studied by special working groups set up by the various divisions of the GFSC, including insurance. Mr Crook says that during the next three years there will be several alterations to the island's regulatory structure, including the introduction of significant new company and trust legislation. He adds that some of Mr Edwards' suggestions were already in hand before the review was announced, such as up-dating of insolvency legislation, the regulation of fiduciary services and the widening of money laundering legislation.Guernsey is also caught up in discussions about tax taking place within the European Union and Organisation of Economic Development and Co-operation (OECD), and it has presented a submission to the OECD secretariat arguing the island is not a tax haven and that its tax structure is beneficial rather than detrimental to international trade.