The Commerce and Employment Department of the States of Guernsey (the Guernsey Government) and the financial regulator, the Guernsey Financial Services Commission (GFSC) have released a joint statement, which affirms that “there are no plans for the Island to seek equivalence under Solvency II.”
The statement made the following points:
1. The authorities in Guernsey have no plans to seek equivalence under Solvency II.
2. Guernsey remains committed to meeting internationally accepted regulatory standards as set by the IAIS and endorsed by the G20. In 2011 the IAIS standards will be changing to take account of latest developments on risk based solvency.
3. The States of Guernsey and the GFSC will be focused on amending Guernsey’s regulatory regime to take account of these international developments. Obviously any changes to that regime will need to take account of the nature of, and be appropriate to, Guernsey’s insurance industry.
4. Work on implementing those emerging global standards in Guernsey’s regulatory regime will continue in 2011 and will involve full consultation with Guernsey’s insurance industry.
5. Parallel to this work the Commerce and Employment Department and the GFSC will continue to monitor developments on Solvency II with a view to determining whether or not full or partial equivalence may be beneficial to Guernsey.
6. Before any decision is made as to whether Guernsey should seek equivalence in the future the Department and the GFSC will consult with Guernsey’s insurance industry to ensure that the implications of seeking equivalence are fully understood.
Peter Niven, Chief Executive of Guernsey Finance – the promotional agency for the Island’s finance industry – pointed out that Guernsey is the “largest captive insurance domicile in the European region, but of course we lie outside the EU and as such, we cannot adopt its Directives but can seek equivalence.
“We have carried out a thorough evaluation of Solvency II and believe that, as things stand at the moment, seeking equivalence would not be right for our insurance market which is a world leader in captive insurance.
“Indeed, the treatment of captives under Solvency II remains uncertain and so we will be keeping a close eye on this and Solvency II as a whole to assess progress and how it might impact our market in the future. Guernsey remains committed to meeting internationally accepted regulatory standards as set by the IAIS and endorsed by the G20, including the latest developments on risk based solvency.”
Dominic Wheatley, Managing Director of Willis Management in Guernsey and Chairman of the Guernsey International Insurance Association (GIIA), added: “The Guernsey International Insurance Association is very happy that Guernsey’s position on Solvency II equivalence has been clarified. This puts an end to speculation on the subject and gives certainty to those involved in or looking to be involved in the Guernsey international insurance industry.
“We believe that the position the Island has adopted will enhance Guernsey’s attractiveness as a domicile to captive owners and other niche insurers looking for a regulatory environment that responds to the smaller scales of business and simpler business models typical of their businesses. Guernsey combines good international practice, as witnessed by the recent IMF report, with responsive, pragmatic regulation. We believe that the Island’s future success lies in continuing this tradition as a high-quality alternative to the EU and other mainstream business environments.”
Source: Government of Guernsey
IJ Ed note: Guernsey’s position isn’t surprising, considering the number of captive insurers domiciled there. One of the main unresolved issues in the proposed Solvency II regulations is the treatment of captives; i.e. should they be required to adhere to the same regulations as “normal” insurance companies? The principal bone of contention is whether or not captives that assume liability for third party claims should be required to hold reserves and file regulatory information in the same manner as other insurers.
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