Guidance Note for International Life and Pensions Insurers (November 2021)

Summary

This guidance note from the Guernsey Financial Services Commission sets out the ongoing regulatory expectations for insurers carrying out, or proposing to carry out, international life and pensions business from Guernsey. It supplements the Insurance Business (Bailiwick of Guernsey) Law, 2002 and the Insurance Business Rules, 2021, covering business planning, reporting, actuarial requirements, auditor duties, agent conduct, policyholder protection and public disclosure.

• Business plan: Registered life companies must submit an annual business plan covering the previous year and at least the next 3 years, including products and markets, forecast volumes, retention levels, reinsurer details, unaudited financial projections and policyholder protection arrangements; the Commission must be told before any material deviation.
• Annual insurance return: Due within four months of the insurer's financial year end; more frequent returns (e.g. management accounts) may be requested in certain circumstances.
• Actuarial valuation: An actuarial valuation prepared by the company's actuary must be submitted with the annual return; more frequent valuations may be requested.
• Actuarial declarations: An annual actuary-signed declaration on products and policyholder expectations must accompany the annual return, plus an additional declaration before launching any new product.
• Auditor duties: External auditors must report on internal controls covering asset/liability mismatching, expense monitoring, policy reserves and trustee asset transfers, and unit pricing methodology; the auditors' management letter must accompany the annual return.
• Agents: Companies must monitor literature issued by agents (tied or independent) to ensure no unreasonable investment claims are made, and ensure agents are aware of this requirement.
• Policyholder protection: Guernsey-registered international life and pensions insurers must appoint a Guernsey-based trustee (who appoints a custodian) and hold assets representing at least 90% of policyholder liabilities in trust, per the section 12 standard licence condition.
• Public disclosure: Licensed insurance companies are subject to public disclosure requirements under the Rules; applicants should agree disclosure details with the Commission.

The note also flags that different requirements may apply to branches of UK companies and to companies writing non-retail business such as reassurers, and directs readers to related Commission publications (the Actuarial Valuation Guidance Notes, standard licence conditions, and declaration forms) for further detail.

Key obligations

• Registered life companies must submit an annual business plan covering the previous year and at least the next 3 years, including specified content on products, markets, forecasts, retention, reinsurance, financial projections and policyholder protection arrangements.
• Insurers must inform the Commission prior to any material deviation from their business plan.
• Insurers must submit the Annual Insurance Return within four months of their financial year end.
• Insurers must submit more frequent returns (e.g. management accounts) if requested by the Commission.
• An actuarial valuation prepared by the company's actuary must be submitted with the annual return.
• An annual actuarial declaration regarding products and policyholder expectations must be submitted with the annual return.
• An additional actuarial declaration must be supplied in advance of launching any new product.
• Companies should submit details of any unusual proposed investment linkages before entering into them.
• The external auditors' management letter, including details of any weaknesses, must accompany the annual return.
• Companies must monitor literature issued by agents and ensure agents are aware of the requirement not to make unreasonable investment claims.
• Guernsey-registered international life and pensions insurers must appoint a Guernsey-based trustee who appoints a custodian to hold company assets.
• Assets representing at least 90% of policyholder liabilities must be held in trust.
• Insurance companies must comply with public disclosure requirements and agree required disclosure details with the Commission.

Applies to

international life and pensions insurers, registered life companies, insurance companies licensed in Guernsey, branches of UK companies (potentially different requirements), non-retail insurers such as reassurers (potentially different requirements)

Deadlines

• annually: Business plan covering the previous year and at least the next 3 years must be submitted annually.
• within four months of the financial year end: Annual Insurance Return is due.
• in advance of the launch of any new product: Additional actuarial declaration must be supplied before launching a new product.