Isle of Man: Offshore Business Sectors
Insurance and Pensions
This page was last updated on 24 January 2020.
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, Insurance Amendment Act 2004 and 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.
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. In 2018 there were 106 captives on the island. 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.
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.
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 1 August 2004.
Also in August, 2004, the 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 Insurance Regulations 1986 to allow limited partnerships to carry on insurance business. The 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 resulting Incorporated Cell Companies Act came into force in 2011.
The Bennet Report
The Bennet Report, a review of the Isle of Man's insurance and captive sector, prepared by ex-Association of Insurance and Risk Managers in Industry and Commerce (AIRMIC) chairman, Norman Bennet, was issued in 2008. It identified the requirements to reposition the Isle of Man as the jurisdiction of choice over competitor domiciles.
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 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 Insurance and Pensions Authority (IPA). Insurance business is principally governed by the 2008 Act and the Insurance Regulations 1986.
The Insurance (Valuation of Long Term Liabilities) Regulations 2007, went into effect on after 31 March 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.
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 IPA. 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 Isle of Man-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.