Australian City Council Establishes Guernsey Captive

by Jason Gorringe, Tax-News.com, London

07 September 2007

The Gold Coast City Council – Australia’s second largest local government – has established its own captive insurance company in Guernsey.

Gold Coast City Council Insurance Company Limited commenced trading on 1st July 2007.

Peter Niven, Chief Executive of GuernseyFinance – the promotional agency for the Island’s finance industry, observed on Tuesday that: “The fact that this Australian city council has established its own captive insurance company in Guernsey is a major endorsement of captive insurance as a risk management solution and, more particularly, captive insurance in Guernsey where our high quality offering includes a highly skilled, professional and experienced industry and a first class regulatory environment.”

Following a feasibility study conducted by its insurance advisers, Miller & Associates Insurance Broking Pty Ltd, the Council decided to establish its own wholly owned insurance company, and through this to access the reinsurance market (the wholesale insurance market) in London.

The majority of captive insurers are established in ‘offshore’ jurisdictions because of the ease of set up, low cost bases, expertise in managing captives and legislation/regulation tailored to captives’ needs. The Council considered several jurisdictions including Bermuda and Singapore, but selected Guernsey as the most suitable domicile. This conclusion was reached based on the quality and professionalism of the services and infrastructure in the Island, its close proximity to the London insurance market, the high quality of regulation in the Island, specifically the corporate governance controls enshrined in the insurance law, and the Island’s overall reputation as a first class international finance centre, GuernseyFinance explained.

Dale Dickson, Chief Executive of the Council, stated that: “Council is always looking for ways to improve its services and to reduce the cost of providing them to more than 500,000 residents and the captive gives us an opportunity to reduce our insurance costs."

He continued: “Gold Coast City Council is the first Australian Council to form its own insurance company but there has already been a lot of interest expressed by other Councils and it is likely that others will follow our lead."

“As a public body we have to comply with the Council’s corporate governance controls and we chose Guernsey as the captive domicile that is best able to meet our needs."

“It is a bonus that Steve Butterworth has agreed to become the Chairman of the company. Before his retirement, he spent 20 years as the Director of Insurance at the Guernsey Financial Services Commission, the financial services regulatory body in Guernsey.”

Charles Allen, Managing Director of Heritage Insurance Management Limited, the company’s managers in Guernsey, announced that: “We are delighted to have been chosen by the Council to manage their captive insurance company which will be our second major Australian client.”

He added: “The selection process was one of the most rigorous we have experienced but we are looking forward to working with them to make this a successful and effective venture”.

There are more captives (304 as of end of July 2007) domiciled in Guernsey than any other jurisdiction in Europe, and it is ranked number four in the world in terms of premiums written (GBP3.2bn in 2005). Approximately 40% of FTSE 100 companies have captives in Guernsey, and a March 2007 report from Marsh UK revealed that half of the captives established by UK companies are based in Guernsey. Ten years ago the Island pioneered the protected cell company (PCC) concept, and as of the end of July this year there were 70 PCCs domiciled in Guernsey, as well as its first incorporated cell company (ICC). Including cells, the Island now plays host to 638 captive entities.

The Gold Coast City Council is situated in South East Queensland Australia and has been in existence since 1959. With some 3,000 staff, it is responsible for an area of 1,402 square kilometres (approx 541 square miles). Gold Coast City has 70 km of coastline, is the sixth largest city in Australia and is also one of the fastest growing, with its population of 500,000 expected to increase by 75% by 2021.

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