We can still look back at 2021 as a year where Guernsey showed its core strengths of stability, security and substance, which makes the island such an attractive destination for financial services in such uncertain times around the world.
Funds On The Rise
Guernsey demonstrated ‘quality and quantity’ early in 2022 as the Guernsey Financial Services Commission’s (GFSC) fund statistics for Q4 2021 showed that the net asset value (NAV) of Guernsey-domiciled funds had surpassed £300 billion for the first time, with an increase of £58.1 billion (27 per cent) over 12 months, taking the total to £303.6 billion. The NAV has increased every quarter since the end of Q2 2020 and the total number of funds, standing at more than 850, is also at the highest level for nearly 10 years. Assets under management have doubled since 2008.
In October, Guernsey approved its first cryptocurrency fund after the GFSC authorised Jacobi Asset Management to launch the world’s first Tier 1 Bitcoin exchange-traded fund (ETF).
It was designed by Guernsey-based regulatory consultancy Midshore Consulting, led by Managing Director Christopher Jehan, also Head of Fund Architecture at Jacobi and former Chair of the Guernsey Investment & Funds Association.
Midshore has worked with Jacobi since early 2021 to design and develop the fund and its operating model, ensuring that strict Guernsey regulatory requirements have been met. The final product brings together both Guernsey and international service providers, ensuring that local requirements are met whilst allowing the flexibility of working with blue chip global firms experienced in this type of esoteric asset.
This project required early and frequent engagement with the GFSC and development of a key controls framework to ensure that regulatory requirements were considered at an early stage and kept in mind throughout the project.
Towards the end of 2021, it was announced that the world’s first humanitarian catastrophe bond covering pure volcanic eruption had been listed on The International Stock Exchange’s (TISE) – headquartered in Guernsey – Qualified Investor Bond Market (QIBM) and admitted to its sustainable market segment, TISE Sustainable.
Dunant Re IC Limited – an Incorporated Cell of Replexus ICC (Guernsey) Limited – issued the bond, which is settled using Replexus’ unique blockchain-based Guernsey Insurance Linked Securities (ILS) platform, ILSBlox.
An initial US$3 million was raised through private placement with specialist cat bond investors to cover the risk of 10 volcanic eruptions across three continents. In September, Dunant Re IC Limited became the first insurance entity to be accredited and receive a kitemark under the Guernsey International Insurance Association (GIIA) Environmental, Social and Governance (ESG) Framework.
Good Global Citizen
Turning to sustainable finance, Guernsey’s specialist financial services sector is celebrating yet another world first that will fortify its global reputation in this space.
The GFSC has published two consultation papers proposing the introduction of what could be the world’s first Natural Capital Fund regime, accompanied by further guidance to guard against greenwashing. You can learn more about this elsewhere in this report.
WE ARE GUERNSEY, and indeed Guernsey Green Finance, was also a contributor of funding to the fourth annual State of Play Report from the United Nations Financial Centres for Sustainability Network (FC4S): ‘Leading Financial Centres Stepping Up Sustainability Action’ was the result of FC4S’ annual assessment programme.
It has helped us in the development of our 2022 strategy for Guernsey Green Finance, highlighting our strengths and highlighting areas where we can improve. For example, since the survey launched, we have appointed a member of our government to chair our Guernsey Green Finance Strategy Group, Deputy Nick Moakes, who will provide more details on all our activities in sustainable finance elsewhere in this report.
Sustainable finance is just one part of the Environmental, Social & Governance (ESG) spectrum, and we have branched out further in other areas.
On the private wealth side, we have been looking into trends in philanthropy. Giving away sums of wealth to benefit worthy causes is more popular than ever, and specialist financial services centres such as Guernsey are pivotal to facilitating this.
There is a range of versatile and innovative structures available via Guernsey providers for modern day philanthropists, supported by highly knowledgeable service providers on the island.
WE ARE GUERNSEY hosted an event in London to launch our latest report, Effective Philanthropy, which outlines the various philanthropic structures and vehicles available in Guernsey while also analysing key trends in global giving.
It is clear that philanthropy has evolved from the notion of simply giving away wealth. Today’s philanthropists want to be engaged in the causes they align themselves with and are often eager to have a degree of input into how the capital is utilised.
Transparency and good governance are also of paramount importance. This is an area in which Guernsey’s specialist private wealth sector has long excelled and continues to be at the forefront.
You can read the report in full here.
Our research also took us to the Middle East. Charitable giving is deeply rooted in Middle Eastern culture, and Middle Eastern clients are increasingly turning to Guernsey for the wide range of structures available to further philanthropic causes.
The many reasons why clients are attracted to Guernsey for their asset protection and wealth structuring needs make the island equally attractive in the context of philanthropy. Guernsey is a tax neutral jurisdiction which helps minimise tax leakage when collecting and deploying benefits to charities – ensuring the maximum amount of funding goes to charitable purposes across the globe - which appeals to many international clients. In addition, unlike some jurisdictions, Guernsey does not have capital or currency controls that can restrict the ability for some families or institutions to provide funding or benefit outside of their own jurisdiction.
Guernsey has a variety of tried and tested structures that are favoured by international families - from traditional Discretionary Trusts to Private Trust Companies and Guernsey Foundations - that are increasingly popular for asset protection and succession planning.
Looking further into 2022, we as a promotional agency, and the island as a whole, have plenty to look forward to. June marks the 100th anniversary of the first ever captive insurance company in Guernsey. Generally, the accepted narrative is that there has been an established finance industry in Guernsey since the 1960s, so we were delighted to have been able to trace our history back even further and demonstrate that specialist insurance services have been conducted here for 100 years.
Guernsey’s captive industry has historically proven itself robust and capable of providing solutions to new and changing risks; and it is clear that the industry will continue to rise to these challenges.
We have already begun our celebrations for this centenary, including a magazine on the origins and history of insurance services in the island and how one of our key sectors has grown into what it is today. You can read it here. We also plan to host an event celebrating the centenary in London later in the year.
From an agency point of view, we have stepped up our presence in the United States by appointing a Business Development Representative, Jonathan Gamble, to build further connections in the region, predominantly in New York but also with regular engagements in Los Angeles and Miami.
We are also working with the Guernsey International Insurance Association (GIIA) to recruit an insurance-dedicated BD representative, in recognition of the fact that the insurance sector is a highly specialised sector within the Guernsey financial services industry. We are confident that this appointment will help to maintain and enhance the island’s reputation as a world class finance centre for specialist insurance services.
Having hosted a hybrid event in 2021 to build on 2020’s virtual event, we are delighted that the 2022 edition of Guernsey Sustainable Finance Week will be held entirely in-person.
The week will host market leading keynote speakers and informative panel sessions, and an opportunity to network with allocators; managers and providers of capital (both private and institutional); leading international figures in sustainability and private wealth; investment fund owners; and insurance practitioners.
Our three key chosen themes for the event, with a day devoted to each, are biodiversity, energy transition, and carbon markets and pricing. These were chosen as a direct result of Guernsey Green Finance’s Strategy Report, which was released in March this year. Again, this will be detailed elsewhere in this report.
I am delighted to say that Guernsey continues to be robust and resilient, providing high levels of security and substance, and we will continue to innovate throughout our industry sectors to ensure that Guernsey remains a first class global finance centre.
Rupert Pleasant is Chief Executive of Guernsey Finance, the promotional agency for Guernsey’s finance industry. His role includes business development and the promotion of Guernsey’s finance industry in the island’s target markets, including Europe, US, Asia, South Africa, and the Middle East. Brought up in Guernsey, his financial services career has taken him globally, working for blue chip institutions in London, Hong Kong, South Africa, and Switzerland, before returning to Guernsey in 2014. His background is in private banking, trust and corporate services, where he has held a number of senior management roles. Rupert joined Guernsey Finance in May 2020.