19 May 2017Analysis

Guernsey sees significant take-up in captive interest from Asia

The chief executive of Guernsey Finance, Dominic Wheatley, says that Guernsey is seeing in both China and Hong Kong a growing awareness of what captives can achieve for corporations in terms of both the financing and the governance of retained risks.

Guernsey is looking to improve its business relationship with Asian corporations as a whole, and is currently processing five captive applications in various stages, along with the establishment of Memorandum of Understandings (MoUs) with Asian regulatory authorities.

Against a backdrop of the commercialisation of the Chinese economy and the pressure through the internationalisation of Chinese corporations, there is increased pressure to look at risk financing and insurance in a more structured way, Wheatley said.

“Typically, if you go back, the government owned the company, and the government basically took the risk,” Wheatley said. “Insurance is very fast-growing in China, but it was not historically part of the Chinese corporate scene, because it was not seen as necessary in an environment where the government owned all the assets.”

Since mid-2016, Guernsey has set up four MoUs with the Chinese authorities, the most recent between the Guernsey regulator and the China Insurance Regulatory Commission (CIRC), along with Guernsey Finance and the Beijing Airport Economic Core Zone (BAECZ).

According to Wheatley, what Guernsey is trying to achieve is trying to make sure Chinese captives can do business in Guernsey with the confidence of knowing their regulator is endorsing that as a strategy.

“It's about providing Chinese companies with a quality check from their own regulator on what they will find when they come to Guernsey in terms of the quality of the regulatory environment here,” Wheatley explains.

“What we're trying to do is to make sure Chinese captives can do business in Guernsey with the confidence of knowing their regulator is endorsing that as a strategy.”

Among the five applications for captives which are currently being submitted to the Guernsey commission, there are a number of companies looking to set up protected cell companies and incorporated captives on the island.

“All of the usual captive structures are being investigated actively by companies and their representatives from China and Hong Kong and South East Asia generally,” said Wheatley.

Further to these five current applications being processed by Guernsey, Wheatley said he is aware of a whole host of other conversations that are going on in recent months, with representatives speaking to businesses in Malaysia and Singapore, for example.

Wheatley continued: “What we're seeing from a Guernsey point of view, our interest is not so much the Chinese domestic risk, but we've been focussed on partnerships with China, where we can provide a lot of expertise through our considerable experience of global international programmes, and particularly working with the London insurance market.

“We are the nearest captive domicile to London, so have very strong links and a lot of expertise and experience to provide to Chinese clients. And that is why we are finding a lot of interest from China in Guernsey captives, and we’ve looked at how we can align the international business that we can do for them here with their domestic risk financing using a domestic captive in China.”