Guernsey reports no let-up in interest in captives throughout lockdown

05-06-2020

Guernsey reports no let-up in interest in captives throughout lockdown

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There was continued interest in captive insurance in Guernsey throughout its period of lockdown, according to speakers at the Guernsey Captive Briefing Webinar on June 3.

In an event that replaced a conference that should have been held in London in March, Mike Johns, chairman of the Guernsey International Insurance Association, said the island had experienced no let-up in interest in captives, despite the COVID-19 crisis and many people being forced to work from home.

The interest came principally from companies concerned about the hardening market and rate increases, Johns said. While there have been increases in most lines of insurance, increases in professional indemnity have been among the most pronounced, he added.

Many captives owners have kept the faith with their captives for years, despite the soft market giving them an excuse to abandon them and procure insurance from the commercial market.

“Now, with the market hardening, those who persevered during the soft market are being paid back for their foresight,” said Ciaran Healy, director of client solutions EMEA at Aon Global Risk Consulting.

James Battersby, chief broking officer Central & Eastern Europe, Middle East & Africa at Willis Towers Watson, agreed companies that had their captive insurance arrangements in place going into the COVID-19 lockdown have benefited from them. But, he suggested, the difficult economic backdrop might make it difficult for some companies to commit to launching new captives programmes.

In 2019 Willis completed work with a Bahrain-based company to launch a captive in Guernsey that had been two years in the making, he said.

“If we were setting that up now and this company was asked to stump up $20 million (to capitalise the captive) it might not have gone ahead with it. But the deal was done before the crisis started and now the company is reaping the benefits,” said Battersby.

However, Johns stressed, Guernsey was seeing no evidence of such reticence.

Healy agreed that interest in captives is increasing in response to the hardening market, which is pushing prices up across most lines and rendering some no longer viable for commercial carriers.

While some sectors such as retail, hospitality and travel are too busy fighting for their own survival to have time to think about launching a captive, there has been a definite uptick in interest from businesses looking at captives, Healy said.

Aon has received interest from prospective owners looking to launch new captives, as well as existing captive owners looking to deepen their retention and write new lines of coverage, he added.

“For most businesses insurance is compulsory or business-critical, so thinking about this is a necessity for many,” said Healy. “Captives are back to doing what is the core reason for their existence, which is helping companies when the insurance climate is difficult.”

The first French onshore captive in years was launched in March,  and corporate tax departments are increasingly interested in setting up captives in the same jurisdictions as their parent organisations, noted Healy. However, he argued, there is little prospect of European captives business flowing away from Guernsey to onshore locations.

“A good captive management infrastructure is still the most important factor. People are looking for experienced service providers to help them navigate the process,” he said. “For me it’s a no-brainer: that means Guernsey.”

Dominic Wheatley, chief executive of Guernsey Finance, added that the thousands of insurance professionals in Guernsey who provide actuarial, accounting and legal services ensure the island’s future as a leading captives domicile.

Guernsey, Mike Johns, Guernsey International Insurance Association, Ciaran Healy, Aon, James Battersby, Willis Towers Watson, Dominic Wheatley

Captive International