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CAPTIVE INSURANCE COMPANIES – AN UPDATE

CAPTIVE INSURANCE COMPANIES – AN UPDATE. Thursday 6 November 2003 Peter Neville Director General of Guernsey Financial Services Commission. Captives – The History. First appeared over 200 years ago Purpose: to provide cover too expensive or unavailable in conventional market

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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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