Banking and Insurance
The Island's banking industry is dominated by subsidiaries or branches of the main UK clearing banks, although there are many other UK and foreign banks and also branches and subsidiaries of major UK building societies. Whilst the Island's currency is sterling, deposits are accepted in all major currencies of the world. The banking system is similar to that in the UK. Current accounts, deposit accounts and all other services offered by UK and international banks are also offered from the Isle of Man. Interest rates are comparable to those prevailing in the London Money Market. Competitive returns are available in all currencies
Most banks offer a full range of services, including treasury, investment management and trust administration. The Isle of Man also operates a Deposit Compensation Scheme. The growing reputation and credibility of the Isle of Man as a financial centre has led many individuals, companies and trusts to look to the Island for their investment and other financial needs.
Many wish to conduct their business within a sterling area, but outside the UK itself. Such people are turning more and more to professional advisers to manage their investments and to conserve their assets. Tailor-made portfolios are available for those simply requiring their investment to generate a living income through to those seeking capital appreciation. Non-residents of the UK, as well as many former UK taxpayers, including expatriates working abroad and those who have retired to the Island or elsewhere choose to protect the value of their savings by utilising the wide range of investment opportunities provided by the Isle of Man offices of some of the world's leading investment organisations.
The Island is ideally suited as a location for the establishment of trusts, with discretionary and non-discretionary private trusts being commonly used vehicles for tax planning and asset protection. Manx trust law is set out in a Trustee Act of 1961 and is based very closely on UK trust law. Key features of all trusts are security, confidentiality and continuity. The Island is a most favourable jurisdiction for trust administration, a fact borne out by an increasing volume of business in this area. Recent developments include the Trusts Act 1995 which provides for certainty in trusts formed for forced heirship planning purposes and the Purpose Trusts Act 1996 which introduces Purpose Trusts provisions into Manx law.
The island's insurance sector consists of two main segments, captive insurance and international life assurance. Captive insurance companies, which are usually managed under contract by one of the insurance managers on the island, are set up to underwrite all or part of the insurance risks of a parent company, group or trade association. Under new legislative provisions introduced in 1995, captives may also redomicile in the Isle of Man from other jurisdictions. They represent an area of significant growth for the island. By the creation of its own captive, the principal company/group can achieve substantial savings by accommodating its own risks, eliminating brokerage commission and timing its own cash flows on premium income, reinsurance and claims payment.
Since 2004, the IPA allowed Protected Cell Companies (PCC) to carry on insurance business in or from the Isle of Man. A PCC can provide a means of entry into the captive insurance market where previously such entry may have been uneconomic. In essence, a PCC can be considered a standard limited company separated into legally distinct portions, or cells. The overheads of a PCC captive can be shared between the owners of other cells, thus making the captive cheaper to run.
Since April 2007, insurance companies are now subject to an income tax rate of 0%. The Exempt Insurance Companies Act of 1981 was repealed under the Income Tax (Corporate Taxpayers) Act of 2006.
Availability of cover on some risks not provided by the ordinary insurance market and the provision of effective tax planning initiatives (facilitating the establishment more quickly with reserves against long-term and catastrophe exposures) are other reasons the Manx captive insurance market has grown and prospered. With proven service and resources to welcome many more captives, the future of this sector is bright.
The international life assurance market is world-wide and principally directed at expatriates whose contracts typify high income, low out-goings and end of contract bonuses. Such clients are anxious to find efficient ways of investing their savings. They are being attracted to the Isle of Man by a life sector which continues to expand by offering innovative product solutions and expertise and which is one of the largest of any of the world's offshore centres. Establishing viable distribution channels continues to be the challenge and is one to which local companies are responding vigorously and so enhancing the island's reputation as a major centre for expatriate life assurance. These companies are subject to strict actuarial supervision. In addition, in 1988, the UK awarded the Isle of Man Designated Territory Status. This is a seal of approval to the Island's insurance regulatory system.
The Life Assurance (Compensation of Policyholders) Regulations 1991 ensure that, in the unlikely event of one of the Island's life assurerers being unable to meet its liabilities to its policyholders, up to 90% of the liability to the protected policyholder will be met. Unlike other schemes, the Island's system operates globally, covering policyholders no matter where they reside. The scheme would be funded, if ever activated, by a levy on the funds of other life assurance companies.
The Island is well represented by a number of stockbroking firms. All are Members of the London Stock Exchange and have access to the London Market via the Automated Quotations System, which is open during virtually all possible trading time.