The offshore captive model remains an attractive proposition, according to insurance law expert Richard Spiller.
Speaking at Carey Olsen's most recent client seminar in London, Mr Spiller of Holman Fenwick and Willan, told the audience how the offshore captive model continued to be very attractive, but that managers needed to be careful to ensure business processes were properly documented to minimise the risk of contravening the UK regulatory requirements.
Figures from the Guernsey Financial Services Commission (GFSC) show that there were 749 international insurers licensed in Guernsey at the end of February 2013. This number comprises 240 limited companies, 70 Protected Cell Companies (PCCs), 415 PCC cells, 5 Incorporated Cell Companies (ICCs) and 19 ICC cells. It compares to a total of 695 international insurers being licensed by the GFSC at the end of February 2012, which means there has been net growth of 54 entities during the year.
The Carey Olsen seminar, which was chaired by Peter Child, Director of Heritage Insurance Management, looked at UK regulatory and Guernsey company law issues and included presentations from Mr Spiller and Carey Olsen partner Christopher Anderson.
Advocate Anderson outlined the updates to the Companies (Guernsey) Law, which were approved in principle by Guernsey's parliament, The States of Guernsey, at the end of last year and what they will mean for existing Guernsey insurance companies. The changes updated legislation is now being drafted and is expected to come back before the States of Guernsey for final approval later in 2013.
Advocate Anderson suggested that the amendments in respect of PCCs were probably of most interest to the audience. In particular, cells of PCCs will be able to convert into non-cellular companies which will provide greater options for insurance managers in restructuring insurance portfolios. Guernsey pioneered the cell company concept when in 1997 it introduced the PCC, and the latest figures show that this continues to be the area of greatest growth.
Mr Spiller reviewed UK legislation and examined what constituted 'carrying out' or 'effecting' contracts of insurance under the Financial Services and Markets Act 2000 (FSMA). He warned that Guernsey insurers and managers needed to be aware of the risk of the activities of Guernsey licensed insurers becoming more and more UK focussed over time, which he referred to as 'activity creep' into the UK.
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