Rating Sector: Offshore Life Companies

Introduction

AKG assesses and rates companies and other entities within specific peer groups or sectors. Such peer groups are fundamentally designed to reflect how customers and their advisers consider companies for use.

The Offshore Life Company Peer Group

Offshore business can be defined as business that is written by a company (or a branch) that is not based in the policyholder’s country of residence.

The market has its origins dating back to the Second World War. It was British in origin, designed to provide protection from the economic uncertainties that followed. The first products were based around private banking aimed at offering a tax free environment to the wealthy. It has moved on substantially since then and now offers a wide range of financial services in a number of jurisdictions.

The main reason for investing offshore remains the ability to benefit from a gross roll up of assets. An increasing number of investors are nowadays considering the offshore market, and doing business with an offshore company is no longer exclusively for the ultra-rich, although they remain a very important sector. Whilst the majority of products may have slightly higher minimum premiums than their onshore equivalent, offshore business is now aimed at a much wider customer base, who are increasingly becoming used to a more global perspective on investments.

Other attractions for some investors are the privacy laws that operate in some jurisdictions, and access to a wide range of investments throughout the world. Unit linked single premium bonds represent by far the major product line. A range of active and passive funds are offered with some providers specialising in certain areas. Products can also be broken down into investment bonds, where the funds are managed in-house, and portfolio bonds, where access to external fund managers is also offered. A number of providers have also designed their products for inheritance tax purposes. A limited number of providers offer access to a with profits fund, typically via reinsurance back to an onshore parent. More recently, some providers have extended their product range and now offer protection plans and long term care products.

This AKG peer group is currently exclusively comprised of life companies (hence its description), due to their dominant activity in meeting the requirements of the UK intermediary sector and other advisers for offshore propositions.

Offshore locations covered

Most of the offshore business from UK clients is placed with companies in the UK dependent territories, such as the Isle of Man and the Channel Islands, or in EU member states such as the Republic of Ireland and Luxembourg. Hence, AKG’s assessment is primarily focused on companies distributing into the UK market from these jurisdictions. All these territories benefit from stable governments, strong regulatory controls and investor protection measures.

Rating Sector Origin and Evolution

AKG’s original focus was predominantly on UK life companies. This was expanded over a decade ago to include offshore life companies, due to intermediary need.

The offshore life company market has its origins dating back to the Second World War. It was British in origin, designed to provide protection from the economic uncertainties that followed. The first products were based around private banking aimed at offering a tax free environment to the wealthy. It has moved on substantially since then and now offers a wide range of financial services in a number of jurisdictions.

The sector constituents are subject to ongoing review.

Rating and Report Availability

The ratings for this sector peer group are available in the AKG Rating Portal. More detailed assessment information and background together with ratings are available for many companies in reports within the Offshore Profile & Financial Strength Reports series (the report series which corresponds to this sector peer group), which are available for Purchase online or by Contacting AKG.

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