Isle of Man: Insurance and Pensions

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In this section:

- Isle of Man Offshore Business Sectors
- Isle of Man Commercial Trading Companies
- Isle of Man Investment and Fund Management
- Isle of Man Banking
- Isle of Man Trust Management
- Isle of Man Ship Management and Maritime Operations

Isle of Man Insurance and Pensions

See Offshore Business Review – Insurance for a more general treatment of captive insurance companies.

Companies carrying out insurance business in or from the Isle of Man are required to be authorised under the Insurance Act 2008. Regulations made under this Act provide for detailed supervisory reporting requirements. This Act consolidates most of the existing primary legislation in relation to insurance regulation, including the Insurance Act 1986, the Insurance Amendment Act 2004 and the Insurance Intermediaries (General Business) Act 1996. However, Part 2 of the Insurance Amendment Act 2004 will remain in place and this Act will be renamed the Life Assurance (Insurable Interest) 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 and Pensions Authority (IPA). 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 captive insurance sector has been quite successful in the Isle of Man, if not quite matching Guernsey. At end-March 2011 there were 140 captives and 16 long-term (life) companies on the island. According to the Insurance and Pension Authority's annual report for 2010/11, non-life sector funds under management for the year ended 31st December 2010 fell, finishing at GBP5.4 billion, 8% lower than the prior year figure of GBP5.8 billion. For the most part, entities within the Isle of Man’s non-life sector, predominantly captive insurers, tend to maintain a conservative asset mix that is high in cash and cash equivalents.

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 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 provided 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 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 August 1, 2004.

In August, 2004, the Isle of Man Insurance and Pensions Authority (IPA) introduced new regulations which allowed bodies other than limited companies to carry on insurance business in or from the Island.

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

The new regulations attempted to introduce a regulatory framework for limited partnerships that mirrored that already established for limited companies.

In late 2007, the Isle of Man confirmed that it was set to enhance its challenge for the world's captive industry business, and announced the end of the first stage of the strategic review of the Island's captive insurance industry.

The Incorporated Cell Companies Act was signed and announced by Tynwald on December 14, 2010.

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The Bennet Report

The Bennet Report, a review of the Isle of Man's insurance and captive sector, prepared by ex-AIRMIC Chairman, Norman Bennet, has been completed and presented to industry and government representatives on the Island. It identified the requirements to re-position the Isle of Man as the jurisdiction of choice over competitor domiciles.

Derek Patience, chairman of the Manx Insurance Managers Association (MIMA) on the Isle of Man, commented on the Report: "We are delighted with the on-Island support we have received so far on the Bennet Report. The Report highlights the strengths of our already well-established insurance and captives industry, but emphasises that in order for us to move ahead of our competitors, we need to renew our focus and raise our profile."

John Spellman, head of Isle of Man Finance, added: "We are already a dominant player in insurance for the life sector and it is now time to up the ante in the captive insurance sector too. The offering of modern regulation, sophisticated infrastructure and a zero percent tax regime will prove more than a formidable challenge to other more crowded locations."

The Report was received with interest by the Isle of Man Finance Strategic Group, which had detailed implementation plans drafted to meet legislative and fiscal plans for 2008.

The recently introduced Insurance Act 2008 consolidated most of the existing primary legislation in relation to insurance regulation. The Act seeks to ensure that senior management and controlling parties of insurance businesses are fit and proper, and that the companies are financially sound. The legislation is clear and comprehensive and the reporting requirements it contains satisfy the IPA's strict supervisory needs. Insurance business is principally governed by the 2008 Act and the Insurance Regulations 1986.

Having received Royal Assent, the Insurance Act 2008 came into operation on December 1, 2008 with the exception of a few minor aspects.

The Insurance (Valuation of Long Term Liabilities) Regulations 2007, have effect for periods ending on or after March 31, 2008. The Regulations set out valuation and disclosure requirements for long term insurance liabilities for regulatory reporting purposes. These Regulations, which were made under now-repealed legislative provisions, continued to have effect following the implementation of the new Act. According to the IPA, a further exercise to consolidate these regulations will be carried out in due course.

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Isle of Man International Pensions Legislation

First, Tynwald established the Isle of Man Insurance and Pensions Authority, and in October 2000 the Island passed the Retirement Benefits Schemes Act 2000 (RBSA 2000), a core piece of Legislation which established a broad pensions framework for all schemes operating in or from the Isle of Man. As a further evolution, and in consideration of the fact that domestic and international markets are entirely different from both a regulatory and a marketing perspective, the Insurance and Pensions Authority decided to develop market-specific legislation subordinate to RBSA 2000 by creating separate "international" and "domestic" regulations under the main Act. This "umbrella" approach (ie. the ability to address home and overseas markets within one overriding Act) is entirely consistent with the new "level playing field" approach to regulation that is being adopted within the Island.

Late in 2001 the Authority put in place a framework to enable the creation of authorised international retirement benefits schemes in the Isle of Man. The Retirement Benefits Schemes (International Schemes) Regulations enable the Isle of Man to strategically enter the global pensions market, a market of increasing importance within the international financial services industry. The International Regulations are now embodied within the Retirement Benefits Schemes (International Schemes) Regulations 2001, and took effect from January 2002.

The Authority sees the introduction of the international regulations as an opportunity for Manx Companies to capitalise extensively on pensions trustee, and pensions investment and administration business - particularly as the Island is home to highly skilled legal, trust, insurance, corporate and fund administration industries.

The International Regulations prescribe that all schemes established on the Isle of Man in respect of non Island based employees are operated by appropriately approved and registered trustees and administrators, and specify the information that must be provided to members of such schemes. Additionally, they set out rules regarding the management and reporting requirements associated with international retirement benefits schemes.

The overall objective is to provide suitable protection for members and beneficiaries, which the Insurance and Pensions Authority sees as its primary regulatory responsibility. However, having achieved this objective, the Authority has avoided being too prescriptive regarding the way in which schemes are constructed, or the precise format or dates at which benefits can be taken by members. This enables scheme rules to be adapted to take into account bespoke jurisdictional or corporate requirements, which should assist scheme construction for certain global markets.

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New Pension Arrangements

In 2010, the Isle of Man’s parliament approved an order creating a new type of pension arrangement that adds to the Island’s existing local and international pension legislation, reinforcing the Isle of Man’s reputation at the forefront of international pension provision.

Following a six-month review by HMRC, the new pension arrangement under section 50C of the Isle of Man Income Tax Act was accepted into the UK’s Qualifying Recognized Overseas Pension Schemes (QROPS).

According to the Manx government's Department of Economic Development, the new pension scheme can only be provided by registered Isle of Man resident pension providers who are regulated by the Isle of Man’s Insurance and Pensions Authority. As such, investors in these schemes can be assured that they are operating in a well-regulated jurisdiction.

In addition to providing a new retirement savings option for Island-based members, the possibility of QROPS status for pensions approved under this new arrangement gives the Isle of Man’s pension sector increased opportunities to market these schemes to British expatriates who have retired outside the UK.

As well as having the ability to utilize pension drawdown applicable to Isle of Man personal pension schemes, a lump sum of up to 30% of the fund is available. Any payment made from the new scheme to a non-Isle of Man resident will be paid gross and will not be subject to Isle of Man income tax.

Minister for Economic Development, Allan Bell commented: “This new pensions regime shows that the Isle of Man continues to be the leading jurisdiction for professional, innovative, well-regulated pensions. I am sure this will be welcomed by the Isle of Man pensions industry and will enable them to increase the amount of business placed in the Isle of Man."

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