01/01/18
FROM Features
As Featured in the Guernsey 2018 Supplement
Guernsey’s reputation as a leading specialist financial centre has been firmly established over the last decade and more. Its top-quality financial services sector has grown and Guernsey has been recognised as a lead player on the global stage. Alongside its established and successful investment solutions, such as the Protected Cell Company, which has been in use in Guernsey for 20 years, Guernsey is also ensuring it is leading the way with its innovation and regulation of new products and services, for example, in the field of fintech and with the advent of blockchain technology.
This forward-thinking approach to business, coupled with the ability to evolve and respond to global financial change is what makes the Guernsey business model so successful.
In this special supplement, we showcase Guernsey’s specialist skillset and its ability to prosper within the current cliate by ensuring its compliance with global standards while maintaining its competitive edge. We hear from the pillars of the Guernsey financial sector – the Guernsey Financial Services Commission, Guernsey Finance and the Guernsey Government who take us through the building blocks that have given the Island its confidence to think outside the box when developing its progressive services and product range.
Alongside these public bodies, we include comment and case studies from private practitioners, on areas such as; investment funds, incorporated cell companies and The International Stock Exchange.
The IFC Guernsey supplement provides a succinct summary of the success story that is the Guernsey Financial Centre.
– Ciara Fitzpatrick, Editor
Guernsey 2018
Guernsey: Stability, Quality and Competitiveness
During a meeting with the Ambassador from one of the world’s major economies, the Ambassador told me that Guernsey’s strategic position was almost too good to be true: part of the British Isles and part of the sterling zone but not a part of the United Kingdom; a strong cultural, geographic and business relationship with Europe but not part of the European Union; and with deep historic and trading links across the world. Aside from the happy accident of geography, it has taken determination, vision and investment to develop that strong strategic position. Guernsey’s government is absolutely committed to maintaining that strong strategic position, and that clear and compelling offer of stability, quality and competitiveness. Guernsey’s stability comes from its historic ties with the British Isles, London and the City. As a Crown Dependency, we exercise a large degree of autonomy. That includes our own legal, fiscal and judicial systems. We receive no funds from the UK or the EU and have the responsibility for funding all our own public services by raising our own taxes. We are able to maintain low taxes alongside high quality public services by keeping government lean. The financial watchword of our government is ‘prudence,’
A Destination of Choice for Non-UK Companies
According to figures published by Guernsey Finance, at the end of 2016 there were 124 Guernsey-incorporated entities on the LSE, with around three quarters of those listed on the Main Market. By comparison, Jersey, which is the second most popular overseas jurisdiction for LSE listings, was at that time home to 82 London-listed entities, followed by Ireland with 51, the Isle of Man with 44, and the British Virgin Islands with 39. Guernsey is now recognised as the leading offshore jurisdiction for investment funds listing on the London markets and choosing not to incorporate in the UK, and London boasts one of the largest and most actively traded closed-end funds markets in the world. Guernsey entities that listed in 2016 included Hadrian’s Wall Secured Investments, the first investment company to list on the LSE’s Main Market in 2016; and VinaCapital Vietnam Opportunity Fund, which last year moved from the Cayman Islands to Guernsey and from AIM to the premium segment of the Main Market. Overall, Guernsey is home to 91 non-UK companies listed on the Main Market of the LSE, and to 33 entities listed on AIM. It is also the market leader for non-UK investment funds listed on the
The Guernsey ICC and Longevity Risk Transfer
In the summer of 2017, MMC UK Pension Fund Trustee Limited, the pension fund of Marsh & McLennan Companies, completed the longevity hedge of £3.4 billion in liabilities – covering around 7,500 pension fund members – using the Guernsey-domiciled ICC, Mercer ICC Limited. Also, British Airways’ Airways Pension Scheme (APS) is reportedly using its Guernsey captive structure, APS Insurance ICC Limited, to hedge £1.6 billion of liabilities. In my experience it is the Guernsey ICC structure itself that is attracting the business to Guernsey, combined with the fact that Guernsey is the number one captive domicile in Europe. The Longevity Problem The growing level of longevity risk faced by defined benefit pension schemes has been well documented and has led to pension schemes seeking solutions to manage this risk. Such solutions have included pension buy-outs (for example, the General Motors pension buy-out arrangement with Prudential Financial Inc. in 2012), but in the last several years the trend has been towards longevity swap arrangements. Typically, in a longevity swap transaction the employer sponsor and/or the trustee of the pension scheme will agree to pay fixed monthly amounts to a financial institution or commercial insurer that in return makes variable monthly payments
Guernsey 2018
A Modern Finance Environment for a Complex World
Recent events in the Caribbean have reminded us of the destructive power of Mother Nature. Global warming is changing traditional weather patterns, increasing the incidence of tropical storms and increasing their ferocity. This is placing substantial burdens on the wholesale reinsurance markets to meet the aggregate claims that arise out of such events. Insurance linked securities (ILS) are a means by which investors can provide additional capital into the market against this risk, providing investors with enhanced returns in today’s low interest environment. ILS also has a risk profile that is non-coterminous with that of conventional financial assets, facilitating improvements in the overall risk profile of investors’ portfolios. Guernsey’s combination of both fund and insurance expertise within industry and at regulatory level has positioned the island at the heart of this fast-developing market. Fund managers and promoters with capital to deploy are brought together with transformation managers who understand insurance risk. At the Guernsey Insurance Forum in London in October the audience of nearly 200 heard about the use of reinsurance technology to help meet the humanitarian outcomes of natural disasters. These have already been used to enable nation states in Africa respond to famine relief in a timelier manner
The Beneficial Ownership of Legal Persons in Guernsey
What is a Legal Person? The Guernsey Register of Beneficial Ownership (the Register) is intended to include information in respect of all legal persons incorporated or created in Guernsey and includes: • companies registered in Guernsey; • foundations registered under Guernsey law; and • limited liability partnerships registered under Guernsey law. (In this article we refer to each of the above as a ‘Guernsey Entity’.) As of 15 August 2017, the incorporation or creation of any Guernsey Entity now requires submission of details of its beneficial owner to the Guernsey Registrar of Beneficial Ownership of Legal Persons (the Registrar). Existing Guernsey Entities will need to do the same by 30 November 2017 with the exception of companies which will have until 28 February 2018 (to coincide with the requirement for annual validations). The Beneficial Ownership (definition) Regulations, 2017 (the Regulations), made on 25 July 2017, define the persons or classes of persons (whether legal or natural) who will be a registrable person in respect of a Guernsey Entity. What does ‘Ownership’ Mean? Companies Owners are all persons that hold, directly or indirectly: • more than 25 per cent of the company’s shares; • more than 25 per cent of the
An Expanding Capital Market
Guernsey is a facilitator of global capital flows, with a report from KPMG demonstrating that the island acts as a conduit for more than £100 billion of investment into Europe, with a large majority from international investors. Ultimately the island acts as a hub for investment both inward to and outbound from the UK and wider Europe. The International Stock Exchange (TISE), which is headquartered in Guernsey and also has offices in Jersey and the Isle of Man, plays a significant and growing role in facilitating these and other flows of capital globally. During the first three quarters of 2017, there have been 454 new listed securities on TISE, which is a 44 per cent rise year on year so that by the end of September there were 2,418 listed securities with a total value of around £400 billion. Global Business The Exchange business was established in the Channel Islands in 1998. It was rebranded from the Channel Islands Securities Exchange (CISE) to The International Stock Exchange (TISE) in the first half of 2017. This was predominantly to reflect the fact that much of our existing business is global in nature. Indeed, we have seen increased geographical diversification in recent
Guernsey Fiduciary Overview
There is a wide range of fiduciary and corporate service providers in Guernsey, from subsidiaries of major European, North American and South African financial institutions to owner-managed independent trust companies. In total, there are more than 150 licensed fiduciaries in Guernsey. In addition, there are many licensed individuals who can act as trustees or directors. Regulated fiduciary activities may only be carried on by way of business in or from Guernsey or by a company incorporated in Guernsey, under a licence granted by the GFSC. There are two categories of fiduciary licence: • A full fiduciary licence can only be granted to a company or a partnership, and authorises all regulated fiduciary activities.• A personal fiduciary licence can only be granted to an individual and authorises the holder to carry out a restricted range of fiduciary activities. Those include acting as a company director, as trustee (but not as a sole trustee), and as executor of a will or administrator of an estate and as a foundation official for foundations. Licences are granted to entities and individuals who meet the minimum criteria for licensing set out in Schedule 1 of the Law. Licensees are required to meet the criteria on
Guernsey 2018
Q&A with William Mason, Director General of the Guernsey Financial Services Commission
IFC: How important is Guernsey’s regulatory regime to the success of its financial services sector? William Mason: Guernsey’s proportionate, risk-based approach to regulation is an integral component of the financial services sector. It contributes to the island’s success as an international financial services centre, enhancing its excellent reputation as a good place to do business. Financial services firms and their clients are increasingly looking to place their business in reputable jurisdictions which have a demonstrable track record in providing good regulation to international standards. IFC: How would you describe the relationship between the Guernsey regulator and the private practitioners on the island? WM: The Commission has a constructive working relationship with the main industry bodies, with all parties respecting where the boundaries are drawn. The Commission hr regular dialogue with those bodies so that issues and areas of mutual interest can be explored at the earliest opportunity. The Commission also promotes an open communications policy to ensure firms and individuals are aware of its requirements and expectations so as to avoid any ‘surprises.’ IFC: How important is it for the GFSC to be innovative in its approach to regulation of the industry or is it more important to be seen
