Tokio Marine - Major Japanese Insurance Group establish Reinsurer on the Isle of Man

The first Japanese owned life reinsurance company to set up business in the Isle of Man received its licence to operate from the Insurance and Pensions Authority (“IPA”) in April 2007 and since then has transacted significant business. This substantial operation was initially capitalised at Yen 10 billion, £40 million.

Tokio Marine Bluebell re Limited (TMBRL) is fully licensed as a life reinsurer and, to date, has been transacting business with companies within the Millea Holdings, Inc. Group. Its sophisticated reinsurance products provide capital protection as well as life cover for products sold in the Japanese domestic life insurance market, a significant and developing sector. Its majority shareholder is Millea Holdings, Inc., the giant Japanese insurer, whose stable of companies includes Tokio Marine & Nichido Fire Insurance, with significant interests in both life and non-life insurance. The other partner in this joint venture is an affiliate of a leading U.S. bank, JPMorgan Chase & Co. LCL Services (IOM) Limited (“LCLS”) was selected as the insurance manager. LCLS has managed the establishment and authorisation process and has now seen the company successfully through its first year end.

Isle of Man - Professional and Pragmatic Regulation

The Isle of Man won the Japanese business against considerable international competition. Millea Holdings considered several other international jurisdictions before choosing the Isle of Man. Key to the decision of the shareholders to establish their reinsurance venture on the Isle of Man was the professionalism and pragmatism of the IPA the Island’s insurance regulator. Throughout the establishment process and since, the IPA has worked closely with all parties to consider swiftly and carefully the many innovative features that TMBRL brought with it, culminating in speedy approval of the life reinsurance license for TMBRL and the transaction of its first reinsurance business within a few days of being authorised. LCLS was appointed at the beginning of February 2007 with authorisation being obtained by April 2007.

Stuart Fairclough, Chairman of LCLS, commented following the establishment: “In view of the complexity of the business, I believe the rapidity of establishment and authorisation of TMBRL could not have been matched elsewhere. Being able to achieve this was a major factor in the Japanese opting for the Isle of Man – and is again a reflection of LCL’s expertise and the responsiveness of the IPA and their actuarial advisers. “The Isle of Man remains the biggest player in the international life market and consequently has the greatest skills base of almost anywhere else in the world. It is also an experienced centre for captive insurance and therefore already has the regulatory framework in place to handle this type of complex reinsurance business offering the company a secure working environment.

“The Isle of Man also has fair value accounting rules which suit Japanese companies operating in this specialised area of the market allowing them to reflect fair value for the assets they are holding in their business. And crucially, we also have the necessary actuarial and financial expertise available on the Island to handle this calibre of reinsurance work.” The active and ongoing support of the IPA has been welcomed by Millea, both in the early days and as TMBRL plans to grow its business further in future.

Isle of Man - Significant Insurance Expertise

Recently established, TMBRL is a significant, substantial and well capitalised Isle of Man-based life reinsurer and although presently operating on a captive basis, its license is not restricted to captive business. In the establishment of TMBRL and its swift entry to the market, it was necessary to bring together not only the insurance and investment expertise of Millea and JPMorgan and the active support of the IPA but also the life insurance and captive management skills of the parties who have provided services to TMBRL and who have assist in running its business and who help provide both the capability and capacity to develop its business in the future to meet the needs of this sophisticated reinsurance market.

LCL’s background is running its own life insurance business as well as a third party administration service for other life insurance companies. Its background and skill base provides the actuarial, accounting, administrative and governance capability necessary for a large and significantly capitalised insurer such as TMBRL. This expertise based in the Isle of Man, augmented by LCL Group’s London-based capabilities in providing professional services to captive and non-life insurers, was a key component in the selection of the Isle of Man as the jurisdiction of choice, opting for LCLS as Insurance Managers and the speedy and successful establishment of TMBRL. LCLS forms part of the LCL Group’s life insurance division and is a specialist division of Charles Taylor Consulting plc.

Keller - UK FTSE 250 company wooed by Island's flexible regulatory environment

Keller Group plc (“Keller”) formed an Isle of Man captive, Capital Insurance Limited (“Capital”) recently to replace its existing captive based in Dublin. Keller’s former captive was established in 2001 to act as reinsurer of Zurich & ACE for Keller’s public and products liability risks.

The captive played a key role in Keller's risk management programme, but Dublin's restrictive and ever-increasing insurance regulation resulted in Keller seeking new opportunities in a jurisdiction which was more aligned with the company's needs. They appointed Marsh's Captive Advisory unit in London to assess Keller's captive needs, including a domicile comparison review.

The Isle of Man wins out

Marsh concluded that Keller should continue to use a captive but that it locate this within the Isle of Man as this would better suit Keller's needs. The Isle of Man outscored all competing domiciles in a wide range of factors individually weighted to the precise needs of Keller.

Key factors for Keller included:

Competitive capital and solvency requirements
Pragmatic regulatory approach
Financial sector reputation
Strong, efficient infrastructure
Ability to maximise loans back to group
Ease of incorporation and licensing

A warm welcome

James Hind, Keller's Finance Director, and Jackie Holman, Keller's Company Secretary, travelled to the Isle of Man to hold a series of meetings with David Vick, the Chief Executive of the Isle of Man Insurance and Pensions Authority ("IPA"), and with prospective captive managers, auditors and non-executive Directors.

They were extremely impressed with the warm welcome they received on the Isle of Man and the ease of access from the City. "We were able to fly in from London, conduct a series of meetings and fly back all on the same day which meant that our time was used effectively. Also, the fact that we were able to meet David Vick, at relatively short notice, to outline our plans was an added bonus" said Holman.

From incorporation to insurance licence

Keller appointed Marsh Management Services Isle of Man Limited ("Marsh") as the captive manager of Capital and Marsh immediately started work on Capital's business plan, financial projections and licence application. The majority of the existing and future liabilities were to be transferred via a loss portfolio transfer from Keller's Dublin captive to Capital, and this was included within the business plan.

The financial projections were reviewed by KPMG, Capital's auditors, before the licence application was submitted to the Regulator. The IPA approved the licence application on 21 November 2007, only 10 working days after the initial submission. Holman was delighted with the speed and efficiency of the Regulator and commented that "We were extremely impressed with the IPA's efficient review and processing of the insurance licence request".

Flexible regulatory approach

The critical factor in Keller's decision to establish a captive in the Isle of Man was the recent change in Isle of Man insurance legislation regarding inter-company loans. This change provides the IPA with the flexibility, if certain criteria are met, to accept 100% of the value of an inter-company loan as an admitted asset for the purposes of calculating an insurer's solvency margin.

Derek Patience, Chairman of the Manx Insurance Managers Association ("MIMA") and Head of Office at Marsh said that "the Isle of Man's success in attracting Keller to the Island is a fine example of the co-operation that exists between the industry and the regulator. Last year, MIMA lobbied the IPA to review the existing regulations to allow the IPA increased flexibility regarding the approval of inter-company loans as an admitted asset. The IPA carefully considered this request and concluded that a change in the regulations would indeed be an enhancement to existing policy and took the appropriate steps to amend the regulations".

John Spellman, Director of Isle of Man Finance, which is a Division of the Isle of Man Government Treasury responsible for developing the Islands Financial Services, said "We are delighted that Keller has decided to form an Isle of Man captive to replace their Dublin captive. The Island has developed an excellent platform for Captive insurance and it is wonderful for the Isle of Man to reap such a quick reward of the recent regulation change concerning inter-company loans.

The Isle of Man holds many attractions for businesses seeking to realign their business activities and is an excellent choice for Keller."