Dominic Wheatley, chief executive of Guernsey Finance, remarks on Guernsey’s decades of experience in demonstrating substance in its insurance industry
I moved from London to Guernsey more than 20 years ago when I stepped out of London market underwriting to move into the fast-growing captive industry.
The move was part of a strategy to move captive management business away from an administrative focus to being technically and strategically equipped. It was decided that the operational efficacy of the existing industry had to be matched with real insurance expertise for managers.
It was a model quickly and widely copied because, with Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting (BEPS) Actions not even on the horizon, industry leaders were still forecasting the importance of true expertise to engender substance and technical excellence.
We have been substance-based for a very long time because the UK tax authorities have long demanded that business done in Guernsey was done at arm’s length and that the necessary governance to conduct that business would be done on the island.
Areas of concern in the industry today—commercial substance, transfer pricing, governance, and financial ratios—are very familiar to Guernsey captive managers and present no significant challenge. The sector has transformed itself from an administration centre into a full value insurance management industry, providing best-practice strategic and technical advice.
Our maturing insurance sector now has an increasing breadth of experience not only in captives but in the offshoot sectors of reinsurance, insurance-linked securities, and other commercial niche products.
The industry has also embraced modern governance standards, including board and director responsibilities, and benchmarking on key financial metrics.
The Guernsey insurance industry has had a stake in the Guernsey government’s response to the ongoing BEPS debate over the past four years. It has publicly supported the BEPS agenda and vowed to demonstrate substance, while indicating that the island’s finance sector model and regulatory framework are not particularly conducive to Guernsey being exploited for BEPS.
Our Guernsey Insurance Forum held in London on 11 October addresses the issues underpinning the substance debate from the captive perspective, including how the industry adequately demonstrates engagement with financial, operational, governance, and regulatory issues day-to-day, and the impact of the increasing use of technology on substance.
Among the questions our insurance sector is currently pondering is will the EU’s substance requirements offer a new lease of life for captives in picking up emerging risks not being adequately served today by the marketplace.
It looks like the sector could develop in interesting ways.
Meanwhile, our expanding insurance community continues to combine professional skills with decades of experience to deliver real substance alongside the industry’s core accounting and administrative expertise.
It services an increasingly demanding clientele with advice on global risk financing strategies and programmes across all major lines of business, in all jurisdictions. From employee benefits to financial classes, property or casualty, and professional indemnity, Guernsey’s captive management industry is among the most professional and experienced in the world.
Whatever is required for the captives of our global clients in response to BEPS, they should be very reassured that Guernsey continues to provide a strong substance-based service to meet them
