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Captives: Why the Isle of Man?
The captive industry on the Isle of Man, a UK crown dependency in the British Isles, has come a long way since issuing its first captive licence in 1981. Over the years, the island has matured into a highly respected and well-established captive domicile, with 152 captives and general insurers currently domiciled on the island, nearly 50 of which are owned by companies in the G500, FTSE 100 or FTSE 250 listings. In 2007, these captives wrote annual premiums in excess of £1.4bn and had assets under management of more than £5.2bn. One of the key reasons for the Isle of Man’s success as a quality domicile for captive and general insurance business is its long track record of having a strong regulatory environment, where it continues to adopt a pragmatic, business-friendly approach to regulation. The Island was endorsed with a ‘AAA’ rating from Standard & Poor’s and Moody’s for the seventh year running in 2008, and it continues to meet the high standards set out by international bodies including the OECD and the FATF. The Isle of Man also provides the most stable of environments for captive managers from around the world, with 2008 marking its 25th year of unbroken economic growth and GDP averaging 7.7% over the last ten years. The Island’s captive sector is well-supported by a variety of experienced service providers, including financial institutions, international banks, major audit companies and leading legal firms. The strength of the Isle of Man’s corporate service provision provides comfort to businesses from establishment through to successful management on the Island. Nearly all of the captive managers are members of MIMA, so although there is a great deal of competition, there is also a considerable amount of cooperation between the managers, which benefits the Isle of Man as a whole. Last year, a total of 19 firms connected to the captive sector joined MIMA as associate members. The Isle of Man’s Insurance & Pensions Authority (IPA) frequently meets with captive owners and there is daily liaison between the commercial sector and the IPA. The IPA also attends MIMA meetings and both parties participate fully in regular reviews of legislation in order to maintain its effectiveness. This spirit of cooperation within the Isle of Man’s captive industry and strong relationship with the regulator is complemented by a close collaboration between private sector and public sector that exists throughout financial services on the Island. Nowhere is this more evident than in the insurance sector, where MIMA, the IPA and Isle of Man Finance are in ongoing consultation on the issues affecting the captive insurance industry and how to maintain a competitive edge. This represents an enviable asset that is crucial to innovation and quality in the provision of services, and which sets the Isle of Man apart from other jurisdictions. Isle of Man legislation offers its captive owners a wide range of captive structures, including single-parent captives, association captives, rent-a-captives, Protected Cell Company (PCC) captives, limited liability partnership captives and captives writing third party business under limited third party authorisation. Incorporated Cell Company (ICC) legislation, which will broaden the options, is expected to be introduced in the near future. In addition, since the Isle of Man is not part of the EU, captives domiciled on the island are not encumbered by the stringent EU insurance legislation, thus providing much needed flexibility. Historically, growth in the captive sector has come from UK-parented business. However, while the UK remains very important to the Isle of Man, business today is generated from all over the world. Unlike many of its competitor jurisdictions, the Isle of Man also boasts the capacity for further growth both physically and in terms of the world-leading telecommunications infrastructure that supports that Island’s businesses. A further advantage offered by the Isle of Man is the relatively straightforward incorporation and licensing process. This was highlighted when Vaultex UK Limited required the development and implementation of a captive at extremely short notice, prior to the deadline for the transfer of assets to Vaultex UK Limited. Isle of Man based Marsh worked closely with Vaultex, Marsh UK’s Financial Products practice, Deloitte and the captive’s non-executive directors to prepare the business plan and complete the licence application. As a result the IPA was able to review this extremely efficiently and successfully met the deadline. Accessibility is yet another reason why global captive managers have such a strong presence on the Isle of Man. The Island is located in the heart of the British Isles with extensive air links and only an hour’s flight time to London. English language and a European time-zone are also key attractions. Another factor in the rapid development of the Isle of Man as a leading centre for captive insurance is the Island’s favourable fiscal environment. In April 2006, the Isle of Man Treasury introduced a zero rate of corporate tax for businesses including insurance companies. This measure, the first of its kind among UK jurisdictions, boosted performance in all sectors of the financial services industry on the Island and has resulted in a highly cost-effective proposition for captive insurers. The Isle of Man Captive Conference 2008 will discuss in greater detail the Isle of Man proposition, highlighting why many of the world’s most internationally recognisable companies have chosen the Island as their preferred captive domicile, and further providing a forum for discussion of where the industry is headed in today’s turbulent market. See sidebar for more information. Editor's Links for more information: |
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