The Isle of Man is certainly enjoying a purple patch in terms of new business activity and an increase in captive formations has been followed by a greater amount of new enquiries.
The Isle of Man is certainly enjoying a purple patch in terms of new business activity and an increase in captive formations has been followed by a greater amount of new enquiries.
The island’s legislation currently caters for pure captives, protected cell companies (PCCs) and incorporated cell companies (ICCs), as well as accommodating general insurers that write third party business. There are 225 licensed insurance entities on the island, covering a range of insurance structures, which are all regulated by the Isle of Man Insurance and Pensions Authority (IPA).
On 8 May, the Isle of Man released a public consultation document, pulled together in partnership between the insurance sector and government, to begin the process of legislating for insurance-linked securities (ILS). Following this consultation, which closes on 19 June, KPMG’s Simon Nicholas has predicated that live regulations could be in place as early as the end of that same month.
Nicholas comments: “A number of key advisors in our industry have worked in other offshore jurisdictions, such as Bermuda, and have experience of ILS and cat bonds already. The demand on the Isle of Man is coming from past, present and future clients, especially some of the larger life and reinsurance companies, that will now be able to do establish ILS entities using a regulatory framework which is appropriate for the nature of the risk.”
The island’s ILS regulations will be consistent with other leading ILS-regulated markets, while the laws themselves have already been market tested. Managing director for Aon Insurance Managers on the island, Gaynor Brough, says: “The exciting thing for us is that we have already have couple of enquiries in the pipeline and we hope to convert those into registration as soon as possible.”
The Isle of Man even claims to have gone a step further than other jurisdictions by embedding the application turnaround times into the regulations themselves. On the assumption that all of the necessary paperwork is completed properly, the proposed regulations state that a normal licence application will be turned around within five working days.
Nicholas states: “That is quite a bold statement but, due to the way in which the framework and application process has been designed, it is very achievable. The IPA intends to grow its staff levels generally and will have sufficient resources to cope with the anticipated demand.”
“A couple of other jurisdictions have not delivered on those kinds of promises so it was key for us make sure we do. That is why the five-day promise is incorporated into the regulations.
The island has been transacting insurance since 1980, leading the sector to become one of the major contributors to the island’s economy and amounting to around 15 percent of its GDP. Captive insurance is a significant part of the market, with its own dedicated resources within the department of economic development.
Although other nearby domiciles already have ILS markets in place, none have reached the same scale as some of their rivals on the opposite side of the Atlantic. With ILS growing as a global trend, the island’s captive managers feel that opportunities are more abundant than ever.
Aon, Marsh and Willis are all represented on the island in terms of captive management and have been for a number of years. Some of the big law firms, such as Appleby, now also have offices in the Isle of Man to accompany their ILS endeavours in Bermuda and the Cayman Islands.
Despite other domiciles getting a head start on the Isle of Man, those on the island feel that the nuances of the proposed regulations could give them an edge over the competition.
Nicholas says: “The jurisdictions that already conduct ILS business are largely offshore and have a zero corporate tax rate, so we are not the only domicile to have that advantage.
“The feedback we got from the market was positive regarding the consistency in the way we apply regulation and the speed to market we have available.”
“The regulator is commercially minded and is working closely with industry to bring the new regulations in to force. The Isle of Man government has supported the initiative, with the regulator, from day one.”
“The whole project has very much been a team approach and I feel that this typifies the way in which the Isle of Man operates.”
