Guidance Note on Producer Owned (Re)Insurance Companies

Summary

This guidance note explains how the Guernsey Financial Services Commission assesses licence applications for Producer Owned Reinsurance Companies (PORCs) and Producer Owned Insurance Companies (POICs) - structures where an insurance producer (such as an intermediary or introducer) beneficially owns the (re)insurer that ultimately carries the risk on business it places. It does not change the Commission's normal licensing criteria but adds specific expectations around identifying and managing the conflicts of interest inherent in these ownership structures.

• Conflicts of interest: Applicants and managers of PORCs/POICs must identify and manage conflicts faced by the producer and other related parties, and the Commission expects evidence this has been done.
• Client fairness: This may involve giving policyholders detailed information about the structure and its financial benefits to producers so they can give fully informed consent, and/or generating additional evidence that clients are treated fairly.
• Underwriting and commission review: The Commission will examine underwriting policies and controls, commission levels paid to the producer relative to potential loss, and whether additional capital is needed, and will consider whether the producer itself is regulated.
• EU producer disclosure (POICs): Where the producer is established in an EU member country, it is required under EU rules to disclose to its clients any interest exceeding 10% in the insurer; the Commission will seek confirmation of compliance via a declaration from the Manager and/or specific due diligence.
• Non EU producers: For producers established outside the EU, the Commission will impose licence conditions requiring the POIC to impose similar disclosure requirements on the producer.
• Additional controls: Depending on the structure and location of the producer, the Commission may require further controls or disclosure to ensure transparency and fairness for policyholders.

The note is framed as general guidance applied case by case, and does not override existing contractual, agency law or standard licensing obligations relating to fitness and propriety, corporate governance and board structure.

Key obligations

• Applicants and managers of proposed PORC or POIC structures must identify and manage potential conflicts of interest between the producer and other related parties and provide evidence of this to the Commission
• Where required, applicants must provide policyholders with detailed information about the structure and its financial benefits to producers to obtain fully informed consent, or otherwise demonstrate fair treatment of clients
• EU established producers with an interest exceeding 10% in a POIC must disclose that interest to their clients under the regulations applicable to them, and confirm compliance to the Commission via a Manager declaration or due diligence
• Non EU established producers will be subject to licence conditions requiring the POIC to impose equivalent disclosure requirements on the producer

Applies to

Producer Owned Reinsurance Companies (PORCs), Producer Owned Insurance Companies (POICs), insurance intermediaries/introducers (producers), insurance managers, fronting insurers, applicants for insurance licences