Isle of Man: Secure Global Financial Risk Environment

Last Updated: 15 September 2008

The Isle of Man's insurance industry represents one of the 'three legs' of the Island's all-important economic engine-house - along with banking and financial services. As the biggest player in the international life market, the Island's industry can boast the greatest skills base of almost anywhere in the world. And as an experienced and quality centre for captive insurance, it has the regulatory infrastructure in place to handle international insurance work. All of which adds up to a secure working environment for the handling of global financial risk.

The Isle of Man has established its international profile as a blue chip jurisdiction of choice for the international captives industry. It's a status that's been endorsed by a large tranche of the UK's top 100 companies for more than two decades. Recent arrivals have included BAE Systems plc, Keller Group and a joint venture between Barclays and HSBC.

There are currently 160 Isle of Man based captives with £5 billion plus under management and writing gross premiums of more than £1.3 billion. Business is now generated from all over the world and recent legislative changes - designed to broaden the range of investment options open to captive owners - are further helping to increase the volume of business undertaken by this important sector of the Island's innovative and robust insurance industry.

Corporate responsibility

The Isle of Man operates a 'lighttouch' approach to regulation which benefits well run companies. Recent changes enhance solvency requirements allowing intercompany loans from a captive to be fully admissible when calculating the captive's solvency margin, subject to the approval of the Isle of Man insurance supervisor.

The Island's existing legislation already provides for the virtual free movement of captives between qualifying jurisdictions. (Previously companies operating on a permit basis still had to retain incorporation in the original foreign jurisdiction.) There are also provisions for setting up Protected Cell Companies - the most recent established in the past few months, and proposed measures to introduce Incorporated Cell Companies.

With such a large proportion of commercial insurance premiums now flowing through captive insurance companies, the Isle of Man recognises the importance of continuously sharpening the industry's competitive edge. The captives' sector has moved up several gears over the past twelve months with an ambitious new strategy to reaffirm the Island's prime position in this major market.

'Twin seminars'

A large part of the Island's attraction to international business is the successful working partnership between Government and the finance industry in general. Isle of Man Finance is the Treasury team tasked with assisting new businesses to establish on the Island. Included is the showcasing of the Island's superior financial services in the global marketplace. Together with MIMA the Isle of Man is now hosting two annual captive seminars, which are attracting such high profile supporters as Barclays Wealth and London & Capital Asset Management.

Another big 'plus' is that the captives industry is supported by thriving international life and pension sectors, which present opportunities for 'cross-fertilisation' of business within the industry. For instance, the first Japanese owned reinsurer to set up business in the Island received its licence to operate by the IPA last year. Tokio Marine Bluebell Re has been established by Japan's Millea Holdings in association with JP Morgan and is being administered by LCL Group's life division headquartered in the Isle of Man.

The Island's existing regulatory framework and quality business environment were deciding factors in securing the company.

Fast formation

The Island's ability to fast track the company formation process is also a major factor in attracting highpowered global business. In the case of Millea, the new company was set up and licensed by the Isle of Man Insurance and Pensions Authority within three months. This level of service could not have been bettered elsewhere - a view endorsed by both Millea and ICL.

Add the Isle of Man's triple 'A' sovereign credit rating, two decades of continuous economic growth, political stability and unique geographical situation within the British Isles, close to the City of London - and there is all the necessary ammunition with which to compete in this rapidly growing sector of the global market.

The argument for large companies setting up captive subsidiaries has already been proven. One significant advantage is to reduce the overall cost of a company's insurance by retaining a portion of the risk and reinsuring into the commercial market. A number of reasons, such as continued difficulties in obtaining cover for certain types of risk, differences in coverage available across the various parts of the world and insufficient credit for deductibles and loss control efforts, or both, remain key drivers for the continued use of captives.

The Isle of Man has created a 'bespoke' blue chip environment for the discerning owners of captive insurance companies that ranks with the very best in the global business.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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