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Jersey Captive Insurance

The Bailiwick of Jersey is a British Crown dependency off the coast of Normandy.

Captives are a proven vehicle for controlling cost of risk and helping companies use risk transfer to help achieve strategic objectives. Pooling programs, protective cell companies and rent-a-captives represent further opportunities for organizations seeking new and creative ways to manage risk. Going the captive or pooling route requires planning, strategy and in-depth actuarial services.

It has been possible to form captive insurance companies in Jersey since 1983. Whilst there are many advantages of using Jersey as a captive insurance base other offshore jurisdictions such as Bermuda and Guernsey have, in the past, established themselves as market leaders. Voisin & Co. together with its associated trust company, Volaw Trust Company, incorporated Jersey’s first pure captive insurance company, on behalf of an Australian multinational corporation. The client chose Jersey because of cost savings and the more flexible regulatory framework adopted by Jersey’s Financial Services Commission (FSC). The FSC’s attitude to pure captive insurance business compares favourably with other offshore jurisdictions. The FSC recognises that only the parent company would suffer loss, and not third parties, if a pure captive were to fail. The FSC is therefore prepared to take a flexible approach to regulations on solvency margins, authorised investment of assets and other issues, when granting permits to pure captives. It is the general policy of the States of Jersey to grant insurance permits only to companies which are subsidiaries of major corporations of good reputation. Permits granted by the FSC allow the holder to engage only in restricted insurance business, being captive insurance and re-insurance and general and long-term re-insurance.

Jersey captives will normally be established as either a tax exempt company or an International Business Company (IBC); an IBC pays Jersey Income Tax on income arising outside Jersey in a sliding scale, reducing from a maximum of 2% to a minimum of 0.5%, whilst income arising in Jersey is taxed at 30%. It is possible, for example, for a captive insurance company established as an IBC to be taxed on its underwriting profits at 30%, on the basis that they are Jersey source income, and to be taxed on its investment income at 2% or less, on the basis that it is international source income. Thus the effective net rate of tax can be anything between 2% and 30%, which may be important in overcoming controlled foreign corporation legislation. It is also understood that the Comptroller of Income Tax in Jersey will treat as tax deductible any provisions for incurred but not reported (IBNR) reserves created in an IBC, provided that they are supported by actuarial calculations. This provides Jersey with a considerable advantage over some other jurisdictions, which do not allow IBNR provisions to be deducted for tax purposes. The deductibility of IBNR provisions is not, of course, a concern for captives which are tax exempt.