CAPTIVE INSURANCE COMPANIES AN UPDATE

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
Principal Captive Centres
As at 31 December 2002

• Bermuda
• Cayman Islands
• Vermont
• Guernsey
• Luxembourg
• Source A.M. Best

• Number
• 1313
• 600
• 438
• 382
• 268

4
Guernsey 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 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/Lloyds/London
• market working agreement?
• Corporate membership vehicle?