captive insurance companies – an update thursday 6 november 2003 peter neville director general of...
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CAPTIVE INSURANCE CAPTIVE INSURANCE COMPANIES – AN UPDATECOMPANIES – AN UPDATE
Thursday 6 November 2003
Peter Neville
Director General
of
Guernsey Financial Services Commission
Captives – The HistoryCaptives – 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
Principal Captive CentresPrincipal Captive Centres
BermudaCayman IslandsVermontGuernseyLuxembourg
[Source: A.M. Best]
Number
1313
600
438
382
268
As at 31 December 2002
Guernsey Finance IndustryGuernsey Finance Industry
Banks
Funds
Fiduciaries
Insurers
66 banks/£71.6 bn deposits
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 cells30 Captive managers26 Life55 Intermediaries31 Domestic£12.7 billion gross assets£2.89 billion gross premiums
Guernsey CaptivesGuernsey Captives
• Increased interest
• Covering risks previously self-insured
• Covering more sophisticated risks
• Over 40% of FTSE 100
Reasons for use of CaptiveReasons 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
Reasons for using GuernseyReasons for using Guernsey
• Lower costs
• Increased flexibility
• Less bureaucracy
• Tailored capital
• Professional and innovative managers
• Good transport and support services
Cell
Cell
Cell
CellCell
Core
A Single Legal EntityA Single Legal Entity
1
32
CoreCapital
Cell Capital
Cell Capital
Guernsey Insurance (PCC) Guernsey Insurance (PCC) LtdLtd
Protected Cell CompaniesProtected Cell Companies
Caveat
• Cell assets held in another jurisdiction
• Attitude of overseas courts
Reputation – The IMF ReportReputation – The IMF Report
• Comprehensive regulatory framework
• GFSC: - well established and well respected
- experienced staff
• GFSC commended for continuous proactive attitude to enhance the regime
The FutureThe Future
• Guernsey/Lloyd’s/London
market working agreement?
• Corporate membership vehicle?