Captive insurance in Guernsey is thriving after opting out of Solvency II

Guernsey’s decision not to be a part of EU’s Solvency II has strengthened the country’s captive insurance sector – making it the largest in Europe today. 

In January 2011 the Guernsey government and the GFSC issued a joint statement that they would not be applying for Solvency II equivalency. This provided a new form of clarity regarding the regulation of insurance business in the country and, as a result, 72 new insurance providers entered the industry in 2011, and 97 new overseas insurers licensed in 2012, bringing the number of international insurers to 737 at the end of 2012.

According to a new report from Timetric, Guernsey has the largest captive insurance industry in Europe and the fourth-largest in the world. Overall the Guernsey insurance industry grew in terms of written premium value from US$7.3 billion in 2008 to US7.7 billion in 2012, at a CARG of 5.5%. The industry is projected to grow to value US$9.6 billion in 2017, at a CARG of 4.6%, supported by an increasing number of market participants and improving economic growth.

Favourable regulation drives growth for Guernsey’s insurance industry

The government of Guernsey applies no tax on corporate income, capital gains and payroll for insurers operating in Guernsey. As a consequence the number of overseas insurers entering the industry is increasing. At the end of 2012, Guernsey had over 737 overseas insurance providers, compared to 687 at the end of December 2011. Many of these are captive providers, but also the conventional insurance industry recorded stable growth from 2008 – 2012, generating revenues from motor, property damage, life insurance, business interruption, transport, employers, public liability and material damage insurance.

Guernsey’s insurance industry remains relatively unaffected by global developments

It has been some difficult years for the global insurance industry, due to the global financial crisis, dept crisis in the EU and massive catastrophe losses in 2011. The global insurance industry lost approximately US$350-380 billion in 2011 due to various natural disasters such as earthquakes in New Zealand, the tsunami in Japan, and the eurozone crisis. These events have had little impact on the Guernsey insurance industry, which is dominated by captive insurance and focus more on the UK than the eurozone. However, the Guernsey insurance industry is not free from facing external risk. According to Timetric, the ongoing debt crisis in the EU and struggling economic development in the US might influence the growth of the captive insurance industry to 2017.