Guernsey captives “thriving”, report finds

Guernsey’s government has published a strategic review of the island’s insurance sector commissioned by the Committee for Economic Development from Cutts-Watson Consulting.

The document, which updates a previous review in 2016 by PwC, finds that insurance generated nearly 15% of the finance sector’s gross value added in 2019, GVA. “The sector is thriving,” the report states, with captives playing a key role.

The review notes Captive International reports of record launches in the first six months of 2020 and AM Best finding that the hard market is driving captive growth.

“These are times when Guernsey, as an agile and nimble jurisdiction, can (i) deliver real value with innovative offerings, (ii) provide a secure and predictable place to do business and (iii) further provide cost-effective management and packaging of insurable risk,” the report authors write.

They are also a key area of growth for the island, the review suggests. The sector should work to exploit the hard market, promote the role of captives for wealth structures such as family offices, and look to fill gaps in coverage arising from Covid-19 exposures. It also recommends promoting the hybrid protected cell company (PCC) model.

“Based on effort vs reward, captives offer the best new business growth opportunity,” it states. Captives and PCC cells are “rising stars” among the opportunities for the insurance sector in Guernsey.

“As European market leader, there is a highly efficient captive ecosystem functioning on the island, able to upscale and absorb a surge in new business. The prospect pipeline is full and immediate focus should be on converting this into formations; whilst at the same time replenishing the pipeline,” the authors write.

“Increased investment in educational, promotional, marketing and sales activities by all enablers will deliver dividends through new incorporations and increased risk retention in existing captives, both of which will generate sustainable and resilient value to the Island.”

It adds: “2020 was, and 2021 (and probably 2022) will be, years demonstrating material growth in respect of new captive and cell incorporations and reinvigoration of existing captive structures.”

As well as boosting the promotion of captives through additional roadshows and virtual events, the authors also propose the reintroduction of the Guernsey Insurance Forum.

Deputy and Committee for Economic Development member Nick Moakes welcomed the report.

“Guernsey’s insurance sector has proven itself to be innovative and successful, despite difficult market conditions and the impact of COVID. It demonstrates a significant success story and a sector which is a world leader in providing new solutions to meet clients’ needs. The implementation of the review’s recommendations, by all stakeholders, will benefit the economy and the profitability of this sector. It could also facilitate growth in employee numbers and the number of licensed entities on the island.”

“This review comes at an opportune time with global insurance markets under severe strain as a result of tough market conditions and the impact of the pandemic,” added CWC chairman Malcolm Cutts-Watson.

“A range of opportunities have been identified to further strengthen Guernsey’s insurance proposition by enhancing the client experience, expanding the range of products and services offered and opening up new markets. The recommendations contained within the review provide a blueprint for immediate and longer-term growth.”