Guernsey Seminar on Solvency II Assesses Rejection of ‘Equivalence’

Insurance professionals from the UK and Guernsey were told of the benefits that could result from the Island’s stance on Solvency II. Nearly 100 risk managers, brokers, lawyers, representatives from ratings agencies and insurance trade media journalists attended the Guernsey Solvency II seminar at the London Stock Exchange Tuesday, June 14.

Essentially Guernsey has rejected applying to the European Union for ‘equivalency’ under the new Solvency II insurance regulations that are scheduled to go into force at the beginning of 2013.

The island’s captive insurance industry is the largest “insurance domicile in Europe and the fourth largest in the world, with 677 international insurance entities, comprising 345 international insurers – made up of traditional captives, Protected Cell Companies (PCCs), Incorporated Cell Companies (ICCs) and ICC cells – and 332 PCC cells,” said the bulletin.

Peter Niven, Chief Executive of Guernsey Finance – the promotional agency for the Island’s finance industry internationally – chaired the event. He commented: “The event was very successful. We had a strong panel of experts from both the UK and Guernsey and a very good turnout of nearly 100 quality insurance professionals. One of the most striking things was that there was very good interaction between the panel and the audience who asked some very pertinent questions.

“Overall, it was a great way for us to reiterate that Guernsey is not currently seeking equivalence under Solvency II because we are not prepared to take steps which aren’t in the interest of clients and therefore damage our competitive position.”

Although Guernsey is aligned with the UK, it is not part of the European Union, and the Island’s authorities issued a statement confirming that the “Island has no plans currently to seek equivalence under Solvency II. However, the Island will continue to follow the standards of the International Association of Insurance Supervisors (IAIS) and also monitor global developments surrounding the issues.”

The bulletin notes that this position has been backed by Jonathan Groves, Head of the Continental European Risk Management Group at Chartis. He told delegates: “Guernsey has decided on the business it wants now and therefore it makes sense for it to say now what its position is on Solvency II. There’s enough uncertainty about equivalence that it’s made the right decision now.”

Martin Le Pelley, Chairman of the Guernsey International Insurance Association (GIIA), moderated the panel discussion between Groves, Salil Bhalla, Vice-President and Portfolio Manager at Chartis, Paul Sykes, Managing Director of Aon in Guernsey and Ian Morris, Partner and Head of Insurance at BWCI in Guernsey.

Le Pelley noted: “There were lots of good questions. The whole point was to try to get audience participation and that certainly happened. The panel were very on the ball and gave succinct and effective answers. We were able to reassure people who did have concerns about what the impact of ‘fronting’ could be or the ramifications of non-equivalence.”

UK-based risk manager Graeme Lee, a delegate at the event, added: “I think that the discussions around proportionality and ‘back to basics’ were very relevant and it’s interesting to note that maybe Solvency II is driving us away from some fundamentals and I admire Guernsey in saying that it’s not going to follow that route without considerable thought.”

Source: Guernsey Finance

IJ Ed. Note: There is an ongoing debate over whether captive insurers in the EU should be treated differently from the rest of the industry. Those domiciles, like Guernsey, which are home to many captives, have lobbied for “proportionalty,’ i.e. that the special nature of captives should be taken into account in assessing capital and reporting requirements under Solvency II.

In Guernsey’s case the full application of Solvency II, as it’s currently constituted, would be especially severe, as many of the Island’s captives and cell companies are quite small, and would be hard pressed to bear the added costs the regulations would require. This could lead to them seeking domiciles elsewhere.

Topics Europe