Isle of Man Insurance:

Insurance business carried on in and from the Isle of Man is controlled by the Insurance Act 1986, updated through the Insurance Amendment Act 2004. Domestic insurance business is largely carried on by 'permit-holders', being foreign companies, mostly UK insurers.

'Captive' insurance companies are normally incorporated in the Isle of Man and are authorised and supervised by the Insurance Supervisor. Additional legislation is contained in the Insurance (Amendment) Act 1995 (Redomiciliation of Captives). There are quite comprehensive annual reporting requirements. Effective 1st April 2006, all IOM captives became liable for tax; however the tax rate is zero per cent.

Insurance companies are required to satisfy the Supervisor that the company will be properly managed in the Island and will have adequate financial resources and reinsurance support for the business to be undertaken. The application costs GBP1,000 and an additional GBP500 is payable annually for renewal of the authorisation.

The captive insurance sector has been quite successful in the Isle of Man, if not quite matching Guernsey. In mid-2005 there were over 170 captives and 19 long-term (life) companies on the island with assets exceeding GBP23 bn and annual premium income of about GBP4.5bn.

Rent-a-captives are permitted; and in 2001 the findings of a detailed review of developments in Protected Cell legislation conducted by the Insurance and Pensions Authority (IPA) prompted the Isle of Man Treasury to extend proposed Protected Cell Companies legislation to companies in general. PCC legislation is particularly relevant to captive insurance business, but the IPA review has led the Treasury to believe that there may be opportunities for it to be used by other types of companies.

PCC legislation was included in the Companies (Amendment) Bill 2002, and in 2004 the FSC promoted regulations which to allow the use of PCC structures for international collective investment schemes.

The regulations provide for funds constituted as International Schemes including Experienced Investor Funds and Professional Investment Funds (but excluding Exempt International Schemes) in the Isle of Man to incorporate as, or convert into, protected cell companies.

It is expected that the PCC concept, which provides statutory segregation through partitions (cells) within a company into which separate assets may be placed, will be of particular value for schemes which have a series of sub-funds, the FSC stated.

The liabilities of each cell are legally ring-fenced under Isle of Man law and cross contamination of cells is prevented, giving protection from risk arising from gearing, or otherwise, in other cells.

The Protected Cell Companies (Prescribed Class of Business) (Collective Investment Schemes) Regulations 2004 came into effect on 1st August 2004. In August, 2004, the Isle of Man Insurance and Pensions Authority (IPA) introduced new regulations which allow bodies other than limited companies to carry on insurance business in or from the Island.

The Insurance (Limited Partnerships) Regulations amend the Insurance Act 1986, and the Insurance Regulations 1986, to allow limited partnerships to carry on insurance business.

The new regulations attempt to introduce a regulatory framework for limited partnerships that mirrors that already established for limited companies. The new regulations became effective from the beginning of August.

Version date: 07.05.06