Industry Updates
‘An Invaluable Tool’

• Frank Klimko
• January 2021
• 

The island of Guernsey's financial regulator has rolled out a pilot program to allow the pre-authorization of captive insurance cells for existing protected cell arrangements.

The Guernsey Financial Services Commission pilot is expected to run through the end of this year and give captive managers a streamlined avenue to adjust captive arrangements for clients, Guernsey International Insurance Association Chairman Mike Johns said in a statement. “This flexible approach to regulation enables brokers and their clients to react to adverse market developments right up until the renewal date. This will be an invaluable tool to enable buyers to increase their control over difficult renewals during the current hard market cycle,” Johns said.

The program applies to insurance-licensed protected cell arrangements 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, according to a statement by We Are Guernsey, a government/industry initiative to promote the island.

Applications must meet the standard formula minimum capital requirement and prescribed capital requirement, with no adjustments available, it said.

Demand for captive vehicles has mushroomed as rates have gone up, said attorney Kate Storey, of Walkers in Guernsey, who helped draft the program. “We proposed this new, swift-authorization 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,'” she said in a statement. “Using a captive vehicle, a business can self-insure in a way tailor-made to its business, and more cost-effectively than through commercial insurers.”