Types of Insurers

Types of Insurers

Insurers in Guernsey can be licensed to write either general business (i.e. non-life) or long term business (i.e. life).  New composite insurers are no longer allowed except where the life/non-life insurance business is incidental in terms of premium income to the principal non-life/life insurance business being written by the licensed insurer, or where the licensed insurer is a protected cell or incorporated cell company (see below).

Insurers writing long term business are required to put in place a policyholder protection regime that includes the appointment of an independent, Guernsey-based trustee with a duty to report directly to the Commission.  The trustee must hold at least 90% of the insurer’s assets representing policyholder liabilities.  This requirement is imposed via a standard condition on the insurer’s licence.

An Actuary is also appointed by an insurer writing long-term business. As part of their role, they are required to sign and submit an Actuary's Declaration prior to the launch of new products or funds, as well as an annual declaration regarding the products being sold and policyholders' expectations. 

Insurers licensed in Guernsey can be international insurers, which underwrite non-local insurance risks, or domestic insurers, which underwrite wholly, or primarily, Bailiwick of Guernsey insurance risks.

International insurers

International insurers can be classified into two types as follows:
  • Pure captive insurer - an insurer established for the sole purpose of insuring some or all of the risks of its parent
  • Commercial insurer - an insurer established for the primary purpose of participating in the traditional insurance or reinsurance market
The majority of the international insurers licensed in Guernsey are administered by licensed insurance managers who act as general representative to, and manage the day-to-day operations of, these licensed insurers.

Domestic insurers

Domestic insurers can be classified into two types as follows: 
  • Locally incorporated - domestic insurers incorporated in the Bailiwick of Guernsey
  • Non-locally incorporated - domestic insurers incorporated overseas with a branch office in the Bailiwick of Guernsey
Locally incorporated domestic insurers must comply with all relevant local insurance laws, regulations, rules and codes.  Non-locally incorporated domestic insurers meeting the criteria specified in Section 38 of The Insurance Business (Bailiwick of Guernsey) Law, 2002, as amended have limited compliance requirements as the Commission relies on the prudential supervision afforded by the home supervisor.
It should be noted that any overseas insurers advertising, advising or arranging contracts of insurance in the Bailiwick of Guernsey or for Bailiwick of Guernsey residents directly (i.e. where solicitation for business occurs) are required to hold a valid domestic insurance business licence.  This applies to insurers acting directly or through their own agents.

Insurance Company Structures

In addition to the traditional insurance company structure, Guernsey offers two other insurance company structures which provide flexibility when writing an extensive range of different types of business or when dealing with a variety of different customers.   

Protected cell companies (PCCs)

Guernsey developed the concept of PCCs in 1997 in response to the demand from companies who wished to take advantage of the captive approach to risk management but did not wish to establish a captive of their own. Like a traditional insurance company, a PCC is one legal entity.  However, unlike a traditional insurance company, a PCC is subdivided into the core, which contains the capital of the company as a whole, and individual cells, which can either be capitalised separately or rely on the core for support. The key benefit of a PCC is that the assets of each cell are segregated to ensure that no claim against one cell will be covered by the funds furnished by another cell.  Insurance PCCs established in Guernsey are regulated at a cellular level.
The introduction of PCC legislation has proved of particular interest to the promoters of association captives, international group companies with numerous autonomous subsidiaries and insurers writing long term business who wish to separate the life funds relating to different policyholders into separate cells within a PCC. In addition, the PCC structure enables general and long term insurance business to be written in different cells of the same PCC provided these cells are not both reliant upon the core assets for solvency purposes.  A more recent development has been the use of PCCs as Special Purpose Vehicles (SPVs) to facilitate either the translation of capital market transactions into insurance transactions or risk transfer conduits to enable securitisation of future income streams.
A number of insurance managers have established and administer their own PCCs in Guernsey. These allow low cost access to captive-type facilities for companies who do not wish to establish their own captive.

Incorporated cell companies (ICCs)

Guernsey adopted the innovative ICC structure in 2006 and by the end of that year, the first insurance ICC had been formed.  Like a PCC, an ICC has individual cells, but unlike a PCC, each cell is separately incorporated making them distinct legal entities.  This provides an extra layer of protection for investors who may be concerned about the legal standing regarding the ring fencing of liabilities within PCCs, particularly in foreign courts where the concept does not exist.  In addition, unlike a PCC, the legal structure of an ICC enables contracts, such as reinsurance, to be arranged between different cells within the same ICC.

Non-Regulated Structures

The Commission has, from time to time, received enquiries, including potential complaints, regarding membership schemes and service contracts which may be sold to consumers at the point of sale of goods such as mobile phones or laptops.  Consumers should note that such schemes are not insurance products and are not subject to regulation by the Commission.   

These schemes typically charge a monthly membership fee for a range of discretionary benefits such as replacement of lost or stolen items or repair of damaged items.  Consumers may believe that they are purchasing an insurance policy and are therefore advised to check the terms and conditions of any such contracts carefully at the time of purchase. 

Any contract which refers to membership of a scheme, discretionary benefits or service contract is not an insurance policy and may not be subject to regulation (depending upon the jurisdiction of the contract provider) and the Commission cannot deal with complaints regarding such schemes.  Should you have a complaint regarding an insurance policy please refer to the Complaints page of this website.