pci for family offices
TRANSCRIPT
Private Cap+ve Insurance
Private Cap+ve Insurance
(Guernsey) Limited
Private Cap+ve Insurance for Family Offices
▪ Cap+ve insurance is the process by which insured risks can be combined to access the “wholesale” re-‐insurance market, historically only available to companies due to the size of premiums required by re-‐insurance companies.
▪ We have now created an innova+ve and highly cost-‐effec+ve solu+on to provide the same benefits of substan+ally lower premiums and more client-‐based risk management for privately held assets.
▪ We combine each family’s insurable risks to access the re-‐insurance market but rather than the costs of establishing a stand-‐alone cap+ve insurance company, we have developed the use of a Guernsey Protected Cell Company (PCC) to provide the cap+ve insurance. The PCC is licensed by the Guernsey Financial Services Commission (GFSC).
▪ The PCC can create mul+ple cells, each one effec+vely providing a wrapper through which a family’s en+re assets can be insured. By combining all the risks into one policy, there is sufficient premium to obtain insurance cover from a re-‐insurance company. There is a single policy & premium rather than the cumbersome administra+on when assets are insured individually.
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What is cap+ve insurance?
▪ Each cell is legally segregated from the other cells and separately regulated by the GFSC in addi+on to the PCC as a whole. Families therefore have two levels of protec+ve regula+on in addi+on to the corporate governance of the PCC itself.
▪ The insurance risks within a family’s cell can be either par+ally retained (if the client iden+fies a specific level of exclusions which will reduce premiums) or be fully re-‐insured by the cap+ve insurance manager.
▪ If the family opts to retain some risk within the cap+ve insurance company (i.e. not fully re-‐insure the total risk), if there is no loss, a surplus of capital can be built up over +me. This surplus can then be carried forward to cover any future losses and act as an offset against the future amount of re-‐insurance required. This will mean that the premiums payable will fall over +me.
▪ If the family does not want to retain risk (i.e. accepts a level of exclusions), then the total risks can be fully re-‐insured and the cap+ve used for re-‐insurance “arbitrage”, thereby benefiUng from the cheaper premiums available from the wholesale re-‐insurance market.
▪ This innova+ve solu+on provides families with bespoke cap+ve insurance for both personal assets and any companies they own at a frac+on of the cost of establishing a stand-‐alone cap+ve insurance company. Addi+onally, it provides families with the following benefits.
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What is cap+ve insurance?
▪ By combining all the insurable risks within the cell under one policy, there is sufficient premium to access the re-‐insurance market where the cost of cover is substan+ally lower.
▪ Ability to obtain cover for risks tradi+onally difficult or impossible to insure (e.g. Kidnap & Ransom). ▪ As the cap+ve manager places the risks in each cell directly with the re-‐insurance company, there are no “retail” insurance brokers’ commissions (typically 15% – 25% embedded within the premium) or retained earnings by the retail insurance company (only by the re-‐insurance company). Two levels of fees/costs are therefore removed.
▪ Premiums are based not only on the value of each asset but also the claims history. The family office will therefore pay insurance based upon the family’s own risk profile, not on the general insurance market rate, which can lead to substan+al cost savings.
▪ Cap+ve insurance provides flexible risk management as even a modest level of exclusions can result in a large cut in the family’s premium. However, full coverage can be provided, if preferred.
The benefits of PCI’s cap+ve insurance
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▪ As financial solvency to pay claims is cri+cal, PCI is working with insurance specialists and has iden+fied and constructed a panel of the best capitalised re-‐insurance companies globally. Crea+ng a panel also provides the benefit of diversifica+on of counter-‐party risk. However, the family office can select the re-‐insurance company, if preferred.
▪ The PCC and the individual cells are managed by one of the most experienced cap+ve insurance managers globally which currently administers in excess of 350 cells from mul+ple jurisdic+ons.
▪ There is minimal administra+on for the family office as an annual cell owner’s mee+ng typically covers all the relevant issues. Rather than having to complete numerous policies there is just one. Also, any claims are administered by you cap+ve manager which can use its leverage with the re-‐insurers to arrange quick and efficient sedlement.
▪ PCI has created a more cost-‐effec+ve solu+on to insurance management than crea+ng a personal family-‐owned insurance company which requires substan+al capital outlay and is very costly to run.
▪ There are poten+al tax benefits if the family’s assets are held through certain types of offshore trust, especially where there is a non-‐domiciled Sedlor. Tax benefits may also apply to situa+ons where the family owns trading companies.
NB: We are not tax advisors and you should seek specialist tax advice.
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The benefits of PCI’s cap+ve insurance
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High value personal assets
What can be included in your Cap+ve Cell?
MARINE
PROPERTY ART & COLLECTABLES
AVIATION
BLOODSTOCK
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The risks of trading and commercial companies
What Can be Included in Your Cap+ve Cell?
COMMERCIAL PROPERTY
PROPERTY MOTOR
PERSONAL INDEMNITY
KIDNAP & RANSOM
PUBLIC LIABILITY
DirectorsNEDs
PCC CORE
AuditorsRegulated
CELL 1Each cell
owned by a separate client
CELL 2 Cells
individually regulated by The GFSC
CELL 3Cells have the
same governance as the core
CELL 4Each cell
writes a single policy for its owner & re-insures the
risks
CELL 5Cell pays any claims funded
by the re-insurer
Structuring of The Cap+ve
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PCI as your cap+ve insurance partner PCI combines exper+se in insurance, trusts, wealth planning & structuring. Our exper+se includes: • The management of more than 350 cells (by our cap+ve managers). • Having worked with the largest global insurance companies.
• More than 50 years advising trustees and family offices.
• Management of re-‐insurance programs to create op+mal alloca+on across a range of re-‐insurers (by our re-‐insurance management team).
• Leading private wealth and trust legal exper+se on The Board.
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Your team at PCI
Dennis Govan Paul Bailey Russell Bussey
Non-‐Execu+ve Director
Non-‐Execu+ve Director
Consultant
Dennis’s career spans over 35 years in interna+onal financial services as CEO, NED, advisor to the board and consultant across mul+-‐disciplined businesses. Dennis has led investment, corporate and retail businesses in the UK, Europe, USA, Middle East and the Caribbean. Dennis qualified as an Associate of The Ins+tute of Taxa+on, UK (ATII) and Member of The Chartered Insurance Ins+tute, UK (CERT PFS) and in 2008 completed a Bank Leadership Programme “Exec MBA” at Wharton, University of PA, USA.
Paul has 28 years experience working with interna+onal families and trustees, pr imar i ly in the field of wealth management. He started his career working for Schroders in London and aaer 12 years joined GAM, where he was a Client Director both in London and Bermuda. Paul has been a regular speaker at conferences on a broad range of topics related to private wealth and is a Member of the Oversight Committee for the STEP Indices. Paul holds a BSc (Honours) Degree in Banking & Interna+onal Finance from The City University, London.
Russell has over 36 years experience and was a Director of both UBS and Credit Suisse. Russell was responsible for the Society of Trust and Estate Prac++oners (STEP) Managed Poreolio Indices service and was Deputy Chairman of the highly esteemed STEP Awards Programme for 9 years. Russell has worked in Switzerland and the US and has been advising clients in the Channel Islands and IOM for over 30 years. A regular industry commentator, Russell has had ar+cles published in many Private Client Journals and has been quoted in the FT. Russell holds the IMC Cer+ficate.
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Your team at PCI
Gavin Ferguson Director
Gavin is the Managing Partner of the Guernsey office and prac+ses in the Private Client & Trusts Department of Appleby Group. He is qualified to advise on both the laws of the BVI and Guernsey and provides conten+ous and non-‐conten+ous fiduciary services to high net worth individuals, corporate clients and chari+es. He advises on all aspects of trust and founda+on law and also on regulatory majers, general private client majers (including probate) and has an interest in Sharia compliant trust structures. Gavin is a qualified English solicitor (non-‐prac+sing), BVI solicitor and Guernsey Advocate. Gavin is personally licensed by t he Gue rn sey F i nanc i a l S e r v i c e s Commission to provide regulated services including ac+ng as a personal trustee, protector, director and counsel member.
Clive James is Group Chief Opera+ng Officer at Kane Group and is primarily responsible for ini+a+ng and developing structures for clients. Clive brings over 30 years’ insurance management exper+se to the posi+on and has a proven track record in strategic and long-‐term planning with a focus on business development, financial planning and business efficiency. Previously, Clive was group Managing Director at Aon Global Insurance Managers, where he was responsible for managing some 520 staff in 30 domiciles with 1,300 clients. Clive is an Associate of the Chartered Insurance Ins+tute and holds an Honours degree in Business Studies from Plymouth University.
Director Clive James
Mark Rogers is a Senior Account Manager at Kane Guernsey. Mark is responsible for the day to day management of the Guernsey office, and the administra+on of a leading mul+-‐class cell company located in Guernsey. Mark is a qualified and experienced accountant who has been working in the financial industry for over 25 years, including roles in the commercial, trust, fund management and cap+ve insurance sectors. His exper+se includes the selng up of cap+ves for mul+na+onals and global opera+ons and their successful development and profitability. He was also been on the Board of several cap+ves as well as silng on sub commijees rela+ng to both accoun+ng and insurance. Mark is a Fellow of the Associa+on of Chartered Cer+fied Accountants (FCCA).
Director Mark Rogers
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As Guernsey has over 700 cap+ve insurance companies, there is a very well developed professional support infrastructure including the large accountancy firms, interna+onal law firms, actuaries, fiduciaries and banks.
Guernsey is one of the world’s foremost domiciles for cap+ve insurance and the leading jurisdic+on in Europe, with cap+ves for 40% of the top FTSE 100 UK companies. It was the first domicile to introduce Protected Cell legisla+on.
Guernsey -‐ Exper+se in Cap+ve Management
Guernsey is not part of the EU but cap+ve insurance can be provided directly to the UK. Assets located within Europe but owned by offshore trusts can be covered. Cap+ve insurance can be provided to EU countries typically through a local provider that re-‐insures with the cap+ve cell.
Establishing Your Cap+ve
1 You provide details of the insurance you want included within your cell. Typically this includes details of the assets, valua+on, any recent claims, level of cover required and current premiums.
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Informa+on for Feasibility Study
Based upon the informa+on provided, the cap+ve manager calculates the premium. This will depend upon prevailing re-‐insurance rates, type of cover and claims history. This is compared with current premiums to determine if a cap+ve cell is cost-‐effec+ve.
Feasibility Study Completed
3 Once the decision is taken to proceed, the cell is incorporated. No capital is required for incorpora+on and the process is straighmorward.
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Crea+on of Your Cell
The Owner pays the premium. Where risk has been retained, capital is also paid into the cell equivalent to the solvency margin. Payment is not remijed into the UK.
Payment of Premium to Cell (Plus Solvency Capital if Risk is Retained)
5 It is the cell, being a regulated insurance company, that issues the insurance policy from Guernsey.
Cell Issues the Insurance Policy
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All aspects of your cell is managed by Private Cap+ve Insurance PCC Limited. Any retained profits due to no-‐claims are accumulated and can be paid as a dividend or retained un+l the cell is eventually wound-‐up.
7 On-‐going Management of Your Cell
Coinciding with the issue of the policy by the Cell, the agreed level of risk is placed with the re-‐insurer. Reinsurance of Your Cell’s Risk.
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Combines all your insurable risks to access the compe++ve re-‐insurance market, reducing your premiums.
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Summary of the benefits
Premium based on your risks, not the general market level of losses.
Removes broker’s commissions (typically 15 -‐ 25% of the cost of premiums).
Flexible management of the total level of cover and ability to include risks where cover not generally available.
Possible tax benefits for some types of trust and also for on-‐shore trading companies.
Simple to incorporate, as no capital required at cell level ini+ally and then only when any risk is retained by the cell.
Two +ers of regulatory oversight and a highly experienced team.
Ease and minimal cost of winding-‐up your cell should it no longer be required.
Next Steps…
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There can be considerable benefits for Trustees by using a Guernsey PCC to provide cap+ve insurance instead of ‘tradi+onal’ mul+ple policies. We hope that this will be of interest. Please contact us, as detailed on the following slide, to proceed with the Feasibility Study for which there is no cost but all the poten+al future benefits.
Private Cap+ve Insurance PCC Limited has taken every care in the prepara+on of the content of this presenta+on. However, to the extent permided by applicable law, Private Cap+ve Insurance PCC Limited does not represent or warrant the accuracy or reliability of any informa+on or content about any service contained in this presenta+on. To the fullest extent permided by applicable laws, Private Cap+ve Insurance PCC Limited hereby excludes liability for any claims, losses, demands or damages of any kind whatsoever with respect to this presenta+on including, without limita+on, direct, indirect, incidental or consequen+al losses or damages, whether arising from loss of profits, loss of revenue, loss of data, loss of use or otherwise and whether or not the possibility of such loss has been no+fied to Private Cap+ve Insurance PCC Limited. The foregoing will apply whether such claims, loss or damages arise in tort, contract, negligence, under statute or otherwise.These terms shall be governed by and construed in accordance with English law. If any provision of these disclaimers and exclusions shall be unlawful, void or for any reason unenforceable, then that provision shall be deemed severable and shall not affect the validity and enforceability of the remaining provisions. Copyright: Private Cap+ve Insurance PCC Limited. All rights reserved. No part of this presenta+on may be reproduced without the prior wriden consent of Private Cap+ve Insurance PCC Limited. Private Cap+ve Insurance PCC Limited, Noble House, Queens Road, St Peter Port, Guernsey GY1 1PT. Licensed by the Guernsey Financial Services Commission.
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Contact Details
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Paul Bailey -‐ +44 (0)7810 38 39 37 Russell Bussey -‐ +44 (0)7881 62 55 80 Dennis Govan -‐ +44 (0)7767 20 03 33 paulbailey@privatecap+ve.com russellbussey@privatecap+ve.com dennisgovan@privatecap+ve.com
www.privatecap+ve.com