Guernsey claims more than half of new captive growth in Europe

21 August 2018

Guernsey captives made up more than half of the European market last year, according to figures compiled by the industry magazine Captive Review.

The research, conducted in partnership with Wilmington Trust, showed that of 17 new structures licensed in Europe in 2017, nine were domiciled in Guernsey. There are more than 800 captives in Europe of nearly 6,500 worldwide, Captive Review said, with Guernsey’s market share of the European business at 38%.

During the year, 31 captive licences were surrendered across Europe, 15 of them in Guernsey, but the net decrease for the region over the year was two-thirds of the decline in the market for 2016. 

Industry experts told Captive Review, a media partner for the event, that many of the closures were due to merger and acquisition activity in the market, or old schemes coming to the end of their natural life cycle. Captives were still valued, they said, and there were hopes for growth among ‘mid-market’ companies.

Chair of the Guernsey International Insurance Association’s Marketing Development Committee and Managing Director of Artex Risk Solutions, Peter Child, said it was no surprise that Guernsey continued to outperform the world-wide trend. 

“It is generally recognised that the current environment is challenging for captive growth per se,” Mr Child said. “Being able to evidence that the substance of insurance decision-making and corporate control is genuinely undertaken in the captive's home jurisdiction is becoming increasingly important due to BEPS-related initiatives. Guernsey's history of robust corporate governance and wealth of qualified and experienced insurance expertise ensures that it can provide captive clients with genuine on-island substance simply by continuing business as usual.”

The number of active captives declined by 2% globally during 2017 to 6,482, attributed to several trends across the regions. Europe had particularly experienced consolidation of large group captives, while Caribbean jurisdictions were under pressure from onshore competition in the US. Surrenders during the year were up from 409 to 562.

The statistics were published this summer, ahead of the third annual Guernsey Insurance Forum, which takes place in London on Thursday 11 October. Captive structures play a part in the theme of ‘Creative Disruption’ – Guernsey’s insurance industry’s first foray into serving non-domestic clients started with captive structures.

"Guernsey's history of robust corporate governance and wealth of qualified and experienced insurance expertise ensures that it can provide captive clients with genuine on-island substance simply by continuing business as usual."
GIIA Chair and Artex Risk Solutions Managing Director Peter Child

Credited to economist Joseph Schumpeter in the 1940s, the phrase ‘creative destruction’ describes the processes by which the old is replaced by the new – relevant now with events such as international tax reform and Brexit threatening to disrupt the status quo.

The influence of Brexit will be discussed at the Guernsey Finance-hosted event by keynote speaker Karl Hennessy, Aon CEO of Carrier Solutions.

“London sits at the heart of the global insurance and reinsurance market,” Mr Hennessy said. “The complexity of its engagement with customers and markets throughout Europe across multiple lines of insurance is well matured in terms of market infrastructure, custom and technology. That is all about to change. Even without clarity of the ultimate implications, Brexit is having a profound influence on how business is transacted in London as brokers and carriers plan to stay ahead of the uncertainty."

For more information about the Guernsey Insurance Forum, and to register, visit the event website. The event is sponsored by Bedell Cristin, Marsh (both gold), Appleby, Ogier, Royal London, SunTrust, Walkers (all silver), Willis Towers Watson (coffee) and Artex (drinks). Media partners are Captive Review, Captive Insurance Times and Captive International.

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