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New rule changes may be to benefit of non-E.U.domiciles


There could be an upside for some non-E.U. domiciles from new capital adequacy rules. Regulators in places such as Guernsey and the Isle of Man, which are not part of the European Union, speculate as to whether they may gain competitive advantages without the restrictions imposed by Solvency II.

Domiciles outside the E.U. see a potential benefit from Solvency II. They hope the regulatory demands in the E.U. will give them a competitive advantage.

In Guernsey, "what we might see is increased growth if there is redomiciliation because of the impact of Solvency II," said Diane Colton, director of insurance at Guernsey Financial Services Commission. "So from Guernsey's point of view, it's an upside."

"We see indications that some of those requirements on some of the Dublin, Gibraltar and Malta captives may mean that they make the decision to come offshore as a solution to the more stringent solvency requirements," said Aidan Kelly, a director at Willis Management (Isle of Man) Ltd. in Douglas, Isle of Man.

Large captives are not expected to make such a move, said Mr. Kelly, but smaller ones may look for less stringent capital requirements. "That's where we're hoping to see some spillover from Dublin."

Victor Rod, president of the management board of the insurance commission of Luxembourg, acknowledged that "some European captive owners have a choice to stick to the new regulations, close down the captive or move to a domicile outside the E.U." A problem may arise, though, for captives that move. Regulators may be able to bar captives from operating in their domiciles if they do not meet Solvency II standards, he explained.

Such a scenario leaves two possibilities, Mr. Rod said: The captive either forgets about operating in the jurisdiction or fulfills the requirements of Solvency II.