Guernsey introduces pre-authorisation scheme for insurance cells

The Guernsey Financial Services Commission (GFSC) has introduced a pilot scheme for pre-authorisation for insurance cells.

Artex in Guernsey was the first to use the scheme, having implemented a captive cell within 48 hours.

Developed in partnership with the Guernsey International Insurance Association, the scheme permits just-in-time creation of new captive cells in existing protected cell companies. It applies to insurance-licensed PCCs owned by an insurance manager, and is available for captive cells writing a single line of general insurance business to meet an urgent business need. It must meet the standard formula minimum capital requirement and prescribed capital requirement, with no regulatory adjustments available.

The pilot is expected to run until the end of 2021.

GFSC said: “We are happy to work with industry on this type of initiative in instances where it can be done without endangering policyholder protections.”

GIIA chairman Mike Johns said the pilot would give managers a route to act quickly and avoid missed opportunities to assist clients with urgent issues.

“This flexible approach to regulation enables brokers and their clients to react to adverse market developments right up until the renewal date,” said Johns. “This will be an invaluable tool to enable buyers to increase their control over difficult renewals during the current hard market cycle. Guernsey’s proactive approach to cell formation works.”

Kate Storey, partner at law firm Walkers in Guernsey, who was involved, as part of GIIA, in the initiative, said: “We proposed this new, swift-authorisation regime in response to the huge increase in demand for captive insurance vehicles, particularly over the last 12 months, due to commercial insurers raising their rates and restricting available cover in the so called ‘hard market’.”