Guidance in respect of requesting disclosure derogation under FRS 103

Summary

This guidance explains how insurance licensees under the Insurance Business (Bailiwick of Guernsey) Law can apply to the Commission for a derogation from the extra disclosure requirements introduced by FRS 103. It sets out who qualifies, the process for requesting the derogation, and the consequential steps needed under the Companies (Guernsey) Law, 2008.

• Who can apply: Only Category 5 Captive (Re)Insurers, as defined in the attached flowchart, may request derogation from the FRS 103 disclosures in paragraphs 4.4 to 4.9.
• PCCs included: Protected Cell Companies are also permitted to apply for the derogation even though they are not separately listed in the categorisation flowchart.
• Effect of derogation: Financial statements move from a true and fair basis to a properly prepared basis, though the information given to the Commission and shareholders does not otherwise change.
• Audit exemption route: After receiving a derogation, the licensee must pass a waiver resolution under section 256 of the Companies Law to be exempt from audit under that Law, while remaining subject to audit under the Insurance Law.
• Licence condition: Licensees electing audit exemption must agree to a new condition on their insurance licence reinstating directors' reporting responsibilities under section 249 of the Companies Law.
• New applicants: Entities applying for a new insurance licence who want the derogation must state this in their application and confirm the licence condition after in principle approval.

The guidance also flags an unresolved interpretive issue about a director signing financial statements on a properly prepared rather than true and fair basis, with a further update promised, and stresses that the Board must notify the Commission before making any business plan changes that would affect the validity of an existing derogation.

Key obligations

• A captive (re)insurer seeking derogation must submit a formal request to the Commission under section 35(6) of the Insurance Law, including a request to prepare financial statements on a properly prepared rather than true and fair basis.
• The licensee's Board must notify the Commission before implementing any change to the business plan that would affect the continued validity of the derogation.
• On receipt of a derogation, the licensee must pass a waiver resolution under section 256 of the Companies (Guernsey) Law, 2008 exempting it from audit under that Law, and file this with the Registrar prior to the end of the company's previous financial year end.
• The licensee must advise its auditors of the derogation and audit exemption election.
• The licensee must confirm agreement to a condition being imposed on its insurance licence requiring directors' report information as if the company were not exempt from audit under the Companies Law.
• New applicants wishing to obtain derogation must note this in their licence application and, following in principle approval, submit a formal derogation request with Board confirmation of the licence condition.

Applies to

captive (re)insurers, insurance licensees, protected cell companies (PCCs)

Deadlines

• prior to 31 December 2014: Example deadline for companies with a 31 December year end to make and file the audit exemption election (waiver resolution) with the Registrar, prior to the end of the previous financial year end.
• prior to the end of Q2 2015: Commission to provide an update on the directors' responsibilities interpretive issue under section 243 of the Companies Law.