Continuing our focus on jurisdictions where Association for International Life Offices (AILO) has members, this time we take a trip to the Isle of Man, writes Bob Pain, chief executive of AILO.
Over the past 40 years, the Isle of Man has built a strong reputation as a respected and trusted international financial services centre.
As one of three Crown Dependencies (the others being Jersey and Guernsey), the Isle of Man has a high degree of autonomy, including being able to make its own laws and set its own taxation. Politically, it has history which is unrivalled due to having the world’s oldest continuous parliamentary assembly, called Tynwald, which dates back over 1,000 years.
Today, the island’s long-term political, social and economic stability provides firm foundations for its financial services industry. Insurance (including life, non-life and captive insurance) is the largest single sector within that industry and contributes around 22% of the Isle of Man’s GDP.
A well-regulated & trusted jurisdiction The Isle of Man Financial Services Authority (IOMFSA) adopts what it describes as an ‘open, accessible and collaborative’ approach to its role as the industry’s regulator. Robust company law, and a long-standing commitment to complying with global standards, underpins the island’s international reputation as a well-regulated and trusted jurisdiction.
International and UK focus
There is both an international and a UK focus to the life companies based in the Isle of Man.
Not being part of the UK or European Union, the Isle of Man life sector has always had a truly international outlook, with policyholders located in all corners of the globe.
Over the years, this international focus has been supported by overseas branch and subsidiary businesses in markets such as Hong Kong, Singapore, Dubai and other regional hubs with the Isle of Man at its centre. Many of these businesses began targeting UK expatriates working abroad, but have now morphed into fully integrated local companies in their domestic markets.
Today, Isle of Man life companies are meeting the employee benefits needs of multinational companies and their staff located all over the world, as well as individual and corporate investors.
This international focus has created many career opportunities for the staff of AILO Member companies to live and work abroad, gaining experience that feeds into the island’s unique international skillset.
The UK continues to be the main focus for many Isle of Man life companies. In 2022 it is estimated to have written more than £2bn of new premiums.
As a Crown Dependency, life companies in the Isle of Man are able to access customers located in the UK in order to take advantage of the tax deferral benefits of investment-linked policies manufactured on the Island.
Since the late 1980s, Isle of Man life companies have led the way in creating a range of tax planning solutions for UK residents and UK non-domiciles, supported by trustee services and technical support for wealthy UK customers and their advisers.
The origins of the portfolio bond, now the most common form of single premium product, can be traced back to the Isle of Man in the 1980s. The average single premiums for such policies now typically exceed £500,000 ($656,000, €584,000).
Challenges & opportunities
In recent years the Isle of Man has not escaped the consolidation process impacting the sector globally. This has seen a reduction in the total number of life companies on the island, but the smaller number of companies has not resulted in a reduction in the total amount of business written.
However, similar to many jurisdictions, the Isle of Man faces a number of challenges in coming years, but with them come opportunities. The main challenge facing the sector comes from the costs associated with dealing with customers who are, by definition, located outside the Isle of Man.
These costs can be prohibitive, including:
- Handling multi-currency premiums and investment transactions;
- Managing distribution relationships at distance; and
- Dealing with time-zone and language differences.
As a result, much of the consolidation that has taken place in recent years has sought to achieve operational scale and efficiency in order to maintain profitability in an increasingly competitive market. Digital innovation provides the opportunity for Isle of Man life companies to meet this challenge and to leverage the skills and international experience it has gained in over four decades. There are many examples of this taking place at companies across the Isle of Man with more innovation sure to follow.
Summing up, the Isle of Man life sector is mature, self-confident, and taking an increasingly digital approach to managing its international business, and therefore appears to be well placed to meet future challenges.
This article was written for International Adviser by AILO chief executive Bob Pain.