The Insurance and Pensions Authority (IPA) is charged with the
regulation of the insurance sector. The IPA is led by chief executive officer David Vick and supported by Francesca Signorio and Alan Rowe, heads of supervision for life and non-life insurance, respectively. The IPA prides itself on being a highly experienced supervisor that is approachable and responds swiftly to requests, enabling a swift turnaround on applications, for both new business and changes to existing arrangements.
Companies carrying out insurance business in or from the Isle of
Man are required to be authorised under the Insurance Act 2008. The Act seeks to ensure that senior management and controlling parties of insurance businesses are fit and proper, and that the companies are financially sound. The Island’s effective regulatory regime makes it attractive to high quality business, and this has helped the Isle of Man to develop into one of the world’s leading centres for offshore life assurance and a major offshore captive centre. Despite soft market conditions and financial market volatility, the Island has continued to be successful at attracting new business, with total assets of £55.21 billion and annual premiums of £10.11 billion as at the end of 2010, representing year-on- year growth of 17 percent and 36 percent, respectively.
The IPA is committed to the continued development of an appropriate and
up-to-date regulatory framework, and the Isle of Man was one of the first domiciles to introduce legislation allowing captive insurance companies from other territories to re-domicile to the Island without being liquidated in the original territory. This has led to considerable savings for those companies, in both time and cost. The IPA also introduced legislation to allow the formation of protected cell companies (PCCs) and incorporated cell companies (ICCs).
As the Isle of Man is outside the EU, it is not required to comply
with the regulation proposed under Solvency II. Unlike other leading captive jurisdictions, the Isle of Man has consistently stated that it is not seeking to change its regulatory system in order to qualify as a Solvency II ‘equivalent’ jurisdiction.
Regulatory development in the Isle of Man is closely aligned with
the guidance provided by the International Association of Insurance Supervisors (IAIS) and its core principles—a gold standard for insurance supervision. The IPA has created a regulatory framework for captive insurance which is robust and tailored to the size and complexity of insurance operations, while maintaining sufficient supervision to protect policyholder interests and the reputation of the Island.
The act, accompanying insurance regulations and guidance notes
provide key principles (explained further below) which are the foundations of the regulatory framework rather than prescriptive rules. This allows the Isle of Man and its regulatory environment to remain nimble in the face of the changing needs of captive owners and able to address any new risk management techniques and products as they develop.
Regulatory framework Under the regulations, a number of classes of licence are available:
• Classes 1 and 2: direct long-term insurance; • Classes 3 to 9: direct general insurance; • Class 10: long-term reinsurance; • Class 11: general business reinsurance; • Class 12: related party business.
Typically, captives fall into Classes 11 and 12. The guidance notes expand on the criteria required for a licence to be issued, such as incorporation of the company, the financial soundness of the entity and the fit and proper declarations of those associated with the application. All relevant documentation and information has to be provided in the IPA licence application, supported by a business plan.
The IPA clearly defines the extent that ‘mind and management’ and
key functions of the insurance business must be based on the Island. These include:
• New business processing and the determination of terms; • The acceptance and maintenance of all insurance contracts; • The processing of claims and redemptions; • Statutory reporting, financial and actuarial;
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