UK FTSE 250 company wooed by Island’s flexible regulatory environment
Keller Group plc (“Keller”) formed an Isle of Man captive, Capital Insurance Limited (“Capital”) recently to replace its existing captive based in Dublin. Keller’s former captive was established in 2001 to act as reinsurer of Zurich & ACE for Keller’s public and products liability risks.
The captive played a key role in Keller’s risk management programme, but Dublin’s restrictive and ever-increasing insurance regulation resulted in Keller seeking new opportunities in a jurisdiction which was more aligned with the company’s needs. They appointed Marsh’s Captive Advisory unit in London to assess Keller’s captive needs, including a domicile comparison review.
The Isle of Man wins out
Marsh concluded that Keller should continue to use a captive but that it locate this within the Isle of Man as this would better suit Keller’s needs. The Isle of Man outscored all competing domiciles in a wide range of factors individually weighted to the precise needs of Keller.
Key factors for Keller included:
A warm welcome
James Hind, Keller’s Finance Director, and Jackie Holman, Keller’s Company Secretary, travelled to the Isle of Man to hold a series of meetings with David Vick, the Chief Executive of the Isle of Man Insurance and Pensions Authority (“IPA”), and with prospective captive managers, auditors and non-executive Directors.
They were extremely impressed with the warm welcome they received on the Isle of Man and the ease of access from the City.
“We were able to fly in from London, conduct a series of meetings and fly back all on the same day which meant that our time was used effectively. Also, the fact that we were able to meet David Vick, at relatively short notice, to outline our plans was an added bonus” said Ms Holman.
From incorporation to insurance licence
Keller appointed Marsh Management Services Isle of Man Limited (“Marsh”) as the captive manager of Capital and Marsh immediately started work on Capital’s business plan, financial projections and licence application. The majority of the existing and future liabilities were to be transferred via a loss portfolio transfer from Keller’s Dublin captive to Capital, and this was included within the business plan.
The financial projections were reviewed by KPMG, Capital’s auditors, before the licence application was submitted to the Regulator. The IPA approved the licence application on 21 November 2007, only 10 working days after the initial submission. Ms Holman was delighted with the speed and efficiency of the Regulator and commented that
“We were extremely impressed with the IPA’s efficient review and processing of the insurance licence request”.
Flexible regulatory approach
The critical factor in Keller’s decision to establish a captive in the Isle of Man was the recent change in Isle of Man insurance legislation regarding inter-company loans. This change provides the IPA with the flexibility, if certain criteria are met, to accept 100% of the value of an inter-company loan as an admitted asset for the purposes of calculating an insurer’s solvency margin.
Derek Patience, Chairman of the Manx Insurance Managers Association (“MIMA”) and Head of Office at Marsh said that
“the Isle of Man’s success in attracting Keller to the Island is a fine example of the co-operation that exists between the industry and the regulator. Last year, MIMA lobbied the IPA to review the existing regulations to allow the IPA increased flexibility regarding the approval of inter-company loans as an admitted asset. The IPA carefully considered this request and concluded that a change in the regulations would indeed be an enhancement to existing policy and took the appropriate steps to amend the regulations”.
John Spellman, Director of Isle of Man Finance, which is a Division of the Isle of Man Government Treasury responsible for developing the Islands Financial Services, said
“We are delighted that Keller has decided to form an Isle of Man captive to replace their Dublin captive. The Island has developed an excellent platform for Captive insurance and it is wonderful for the Isle of Man to reap such a quick reward of the recent regulation change concerning inter-company loans.
The Isle of Man holds many attractions for businesses seeking to realign their business activities and is an excellent choice for Keller.”
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