Guernsey Finance
New Guernsey Finance chief Dominic Wheatley reveals what the jurisdiction is aiming to do next with captives, and paints a positive picture for ILS
Since taking the chief executive position at Guernsey Finance, what plans have you put in place for captive insurance in 2015?
I am inheriting an existing plan, to some extent, but there have been a few developments. We have an insurance-linked securities (ILS) event running in London in March and we will be attending other events in the ILS space in New York and elsewhere throughout the year.
We are also looking at promoting captives, specifically, and alongside other products as well, in some new markets that we will visit in the Americas and Asia.
We will also be attending the usual plethora of third party events such as the Federation of European Risk Management Associations and the Association of Insurance and Risk Managers in Industry and Commerce conferences. In the second half of the year, we’ll be starting work on developing a Guernsey insurance forum along the same lines as the existing Guernsey Funds Forum.
Has your opinion of the domicile changed since taking the position?
My knowledge has changed. I come to this position from a role within the Guernsey financial industry, specifically from the insurance side.
I had a pretty clear idea, after 19 years practicing here, of what Guernsey’s strengths were, but certainly my understanding and knowledge of the other sectors has improved in the few weeks since I started.
There is still a lot to learn and I think the one thing that changed is that I have come to a realisation that the level of diversity across the financial sectors in Guernsey is even greater than I previously thought. If anything, it has given me an appreciation of the complexity of other sectors.
Is Guernsey looking to pursue more of tax agreements like those signed in recent years?
While it is not up to Guernsey Finance to pursue them, we do have a role in that process, which is to highlight to the tax authority in Guernsey the jurisdictions that we feel are most important, from a tax point of view. We are constantly looking at prospective markets and looking for countries where tax agreements would enhance the ability of Guernsey to trade with, and gain business from, those countries.
There is a prioritised list of countries and we are one of the contributors to that list, which is also an ongoing process.
The circumstances are always different and it is quite a lot of work to get in a double tax treaty, so we have to be selective.
The ratings agencies, most recently S&P, seem to look favourably on Guernsey as a domicile. What do you think are the main reasons for this?
There are three things that I think they are looking at. Guernsey has a sound economy and that economy has sustained better than some of the others through the global slowdown since 2008. There are also very sound public finances, with limited public borrowing and no significant current account deficit in government spending.
Finally, the overall level of public debt in Guernsey is, by the standards of most jurisdictions, extremely low. Those three factors mean that we are, from a financial and credit rating point of view, a very good risk.
Is Guernsey continuing its commitment to ILS? What are the plans to sustain the rate of growth?
We are very committed. We are still an emerging jurisdiction in the ILS market, a market that has traditionally been dominated by Bermuda, and we are looking to innovate the ILS products that we are offering.
There are other areas we, and the ILS market generally, need to look at, such as the secondary market and the liquidity of ILS products. This is an obvious area to focus on.
The ILS concept can be applied to a much broader range of risk than has necessarily been the case to date. The overwhelming majority of ILS deals are to do with US natural catastrophe risk, and these are a very natural fit for the product. But it is not difficult to think of other risks with a similar risk profile and clearly these would potentially respond to the same treatment.
I don’t see any reason why the underlying demand for the cover that drives the market is going to subside. The world is an increasingly ‘risky’ place.
Certain types of weather-related risks are, if anything, becoming more prevalent rather than less. I don’t see any signs that sources of capital will dry up, either. ILS is just a way of bringing the demand for capital to the supply. If both of those are to sustain, I can only see the ILS market growing in the future.
Despite Solvency II not being applicable, are there any other looming regulatory concerns for the island of Guernsey?
Certainly nothing “looming”. Clearly, Guernsey is very much committed to the core principles of the International Association of Insurance Supervisors (IAIS).
That commitment was cemented further recently with William Mason, the director general of the Guernsey Financial Services Commission (GFSC), joining the board of the IAIS, and that is exactly where we want to be.
As a committed member of the IAIS, and as a regulatory environment, it is important that we apply those principles properly and in line with good practice.
That is exactly what the GFSC is currently doing—working with the industry to make sure that the new regime is going to be pragmatic and effective. That work will come to fruition in 2015.
