Best ebook Guide to Captives and Alternative Risk Financing (Commercial Lines) Any Format
The following is a highlight of some of the financial requirements which are aggregated at the core LLC level :. We are very excited to see the captive market pushing down from the Fortune to the middle market. The Delaware series LLC captive is uniquely positioned to allow small and mid-size groups the opportunity to come together in one captive in order to enhance alternative risk financing mechanisms, while at the same time protecting their assets from the debts and obligations of others. If you would like to learn how Lexology can drive your content marketing strategy forward, please email enquiries lexology.
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Watch now. One of the biggest benefits offered by cell companies is that they lower barriers to entry. It also reflects the sophistication of the captive managers who are able to service different types of clients and types of risk. Much of the recent innovation in cell companies and ILS structures has been necessary, explains Wheatley. The competition does inspire people to go out and look for business. There is a real competitive element to the industry here that is very positive. The technical development and innovation around cell structures has always been very strong here.
Captive insurance: Avoiding the risks
It all helps Guernsey plc to grow and attract business. The dramatic growth of the ILS market has provided plenty of opportunities for captive managers. Guernsey has been quick to develop a reputation for its special-purpose insurers, cat bonds and transformer structures.
Indeed, Guernsey has more entities listed on the London markets than any other non-UK jurisdiction. The capital markets — increasingly pension funds and institutional investors — are showing increasing comfort in investing in insurance products such as industry loss warranties, catastrophe bonds and collateralised reinsurance entities.
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The yield on offer in the low interest rate environment has captured their interest and the fact that insurance risk is largely uncorrelated to other markets is also attractive. Another factor that has boosted business is the decision not to seek equivalence with Solvency II. Not because Solvency II is fundamentally unreasonable in the context of mainstream insurance, but because in the context of the relatively small niche of insurance structures we specialise in in Guernsey, Solvency II would be an inappropriate regime and one that would be difficult to sustain on an economic basis.
The biggest concern for European captive owners is the capital requirements under Solvency II. Those that fall within the scope of the regulation and do not qualify for proportional treatment eight out of 10, according to ECIROA will be subject to significantly higher solvency requirements than now.
Monoline captives are particularly likely to see their capital burden increase substantially. This means the solvency requirements will be comparatively lower than would be the case in Europe and captive owners will continue to take advantage of an appropriate capitalisation of their captive. A fundamental shift is taking place in the insurance market with the emergence of ILS. Guernsey has positioned itself as an alternative to Bermuda.
It has political and economic stability, no government borrowing and a regulatory regime that is at the forefront of international best practice — the implementation process of the IAIS Insurance Core Principles is reaching an advanced stage. The groundwork for ILS was laid in Guernsey from and the number of transactions built year on year. The surge in deal flow in came about as convergence gathered momentum — the knowledge base already existed between the insurance managers, legal firms and the regulator, the Guernsey Financial Services Commission GFSC.
The Guernsey International Insurance Association established a Market Development Committee and an ILS sub-committee in to continue to develop Guernsey as an attractive environment for establishing international insurance entities.
Of particular importance is our regulatory regime, which continues to respond to innovative proposals. Aon was delighted to team with Bedell Cristin to deliver the sharia-compliant ILS structure, which was judged as the top innovative deal in Europe and one of the Islamic Finance Deals of the Year in We now have the opportunity to position Guernsey as a partner for more sharia-compliant structures.
Further evidence of strategic thinking bearing fruit is the decision taken in January not to seek equivalence with Solvency II. We have seen a number of Bermuda relocations already and Guernsey stands well positioned to provide the natural alternative jurisdiction for EU-based captives looking to escape the punitive effects of Solvency II.
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