The Guernsey Financial Services Commission has launched a pilot scheme that fast-tracks pre-authorization for insurance cells. The scheme was developed in consultation with the Guernsey insurance industry and its representative body, the Guernsey International Insurance Association.

The pre-authorization scheme permits just-in-time creation of new captive cells in existing protected cell companies. The scheme applies to insurance-licensed PCCs owned by an insurance manager, and is available for captive cells writing a single line of general insurance business to meet an urgent business need. It must meet the standard formula minimum capital requirement and prescribed capital requirement, with no regulatory adjustments available, according to Guernsey Finance.

The GFSC said, “We are happy to work with industry on this type of initiative in instances where it can be done without endangering policyholder protections.”

GIIA Chairman Mike Johns said the pilot would give managers a route to act quickly and avoid missed opportunities to assist clients with urgent issues. “This flexible approach to regulation enables brokers and their clients to react to adverse market developments right up until the renewal date. This will be an invaluable tool to enable buyers to increase their control over difficult renewals during the current hard market cycle. Guernsey’s proactive approach to cell formation works,” he said.

The pilot scheme for pre-authorization for insurance cells is expected to run until the end of 2021. Guernsey Finance confirmed that it has already been used for the first time: Artex in Guernsey has already implemented a captive cell solution within 48 hours.

Kate Storey, partner at law firm Walkers in Guernsey, who was involved, as part of GIIA, in the initiative, said, “We proposed this new, swift-authorization regime in response to the huge increase in demand for captive insurance vehicles, particularly over the last 12 months, due to commercial insurers raising their rates and restricting available cover in the so-called hard market. Using a captive vehicle, a business can self-insure in a way tailor-made to its business, and more cost-effectively than through commercial insurers.”

She added: “Guernsey is already a global leader in the captives market and now offers the ability to set up and start writing insurance in as little as 48 hours on a pre-authorized basis, provided the documentation complying with the regime is provided to the Guernsey regulator within 14 days of commencement of business.”

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