Guernsey’s decision not to be a part of EU’s Solvency II has strengthened the country’s captive insurance sector—making it the largest in Europe today, said a report from Timetric.
In January 2011 the Guernsey government and the GFSC issued a joint statement that they would not be applying for Solvency II equivalency. This, said Timetric, provided a new form of clarity regarding the regulation of insurance business.
The country then saw 72 new insurance providers entered the industry in 2011, and 97 new overseas insurers licensed in 2012, bringing the number of international insurers to 737 at the end of 2012.
According to Timetric, Guernsey has the largest captive insurance industry in Europe and the fourth-largest in the world. Overall the Guernsey insurance industry grew in terms of written premium value from $7.3 billion in 2008 to $7.7 billion in 2012, at a CARG of 5.5 percent.
The industry is projected to grow to value $9.6 billion in 2017, at a CARG of 4.6 percent, supported by an increasing number of market participants and improving economic growth.
The government of Guernsey applies no tax on corporate income, capital gains and payroll for insurers operating in Guernsey. “As a consequence, the number of overseas insurers entering the industry is increasing,” said Timetric. At the end of 2012, Guernsey had over 737 overseas insurance providers, compared to 687 at the end of December 2011.
“Many of these are captive providers, but also the conventional insurance industry recorded stable growth from 2008-2012, generating revenues from motor, property damage, life insurance, business interruption, transport, employers, public liability and material damage insurance.”
Various events in 2011 such as natural disasters—the earthquakes in New Zealand and the tsunami in Japan—and the eurozone crisis, caused a $350-380 billion loss for the industry that year alone.
But Timetric argues that these events have had little impact on the Guernsey insurance industry, which is dominated by captive insurance and focus more on the UK than the eurozone.
“However, the Guernsey insurance industry is not free from facing external risk … the ongoing debt crisis in the EU and struggling economic development in the US might influence the growth of the captive insurance industry to 2017.”
