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November 5, 2007
Offshore Explorations: Isle of Man
by Martin A. Sullivan

Full Text Published by Tax Analysts®

Document originally published in Tax Notes
on November 5, 2007.

The Isle of Man is a pint-sized economic powerhouse in the middle of the Irish Sea. Over the last five years, its economy has grown at an annual rate in excess of 6 percent — more than twice as fast as the EU's. Unemployment is low, and the triple-A-rated government never runs a budget deficit.

SIDEBAR: Isle of Man Facts

In the middle of the Irish Sea, 31 miles from the United Kingdom and 31 miles from Ireland

Population (2006): 80,058

Size: 227 square miles (about the size of Chicago)

Gross National Income (2004-2005): £1.50 billion ($2.74 billion)

Unemployment Rate: Below 2 percent for over a decade

Per Capita GDP (2005): £19,228 ($35,502; 83 percent of U.S. figure)

Median House Price (2006): £210,000 ($387,100)

Size of Financial Sector (2004-2005): 35 percent of national income; 9,395 people (23 percent) of the total workforce are employed in insurance, bank, and finance services

Status: Independent of the United Kingdom in fiscal and legislative matters. Not part of the EU.

Source: Isle of Man Treasury, 2007 Digest of Economic & Social Statistics.


The Isle of Man economy is more diversified than the economies of Jersey and Guernsey. Still, like its rivals on the other side of England, the centerpiece of its economy and the key to its remarkable growth is its financial sector. Banking generates typically around one-quarter of the island's GDP, with the rest of the finance industry adding another 15 percent to 20 percent. Figure 1 shows that over the last decade, employment in the financial sector increased by 58 percent, from 5,491 employees in 1996 to 9,395 in 2006.

This article is third in a series of quantitative investigations into the potential for tax evasion by individuals in offshore financial sectors. Many of the estimating methods in the prior installments about Guernsey (Tax Notes, Oct. 8, 2007, p. 93) and Jersey (Tax Notes, Oct. 22, 2007, p. 294) are used here.

There are three primary data sources for this article: the Isle of Man Financial Supervision Commission (FSC), Isle of Man Finance, and the Isle of Man Insurance and Pension Authority (IPA). The FSC is an independent statutory body responsible for the licensing and supervision of banks, funds, and company and trust service providers ( Isle of Man Finance promotes the financial sector (see And the IPA regulates the island's comparatively large insurance sector and its fledgling pension business (see

On the following pages, we examine in sequence the four major components of the Isle of Man financial sector: (1) banking; (2) funds, including both traditional mutual funds and alternative investment funds, like private equity and hedge funds; (3) trusts and companies (the fiduciary sector); and (4) insurance.

From the research described in the following pages, we conclude that at the end of 2006, there were $150.5 billion of assets in the Isle of Man financial sector that were beneficially owned by nonresident individuals who can easily avoid tax on those assets in their home jurisdictions because of the shortcomings in cross-border information reporting. Previous estimates of comparable figures for Guernsey and Jersey were $293.1 billion and $491.6 billion, respectively. The estimates for the three jurisdictions combined total $935.2 billion.

Figure 1. Growth of the Isle of Man Financial Sector

Income data are fiscal years beginning on April 1 of
year indicated.
Economic Affairs Division, Isle of Man Treasury,
"2007 Digest of Economic and Social Statistics," Table 3.3,
"Employment by Sector 1961-2006," and Table 15.1, "National Income at
Factor Cost by Sector at Current Prices 1995/96-2004/05."
available at, and
"Isle of Man National Income Accounts 2005/06," Table 1, available

Figure 2. Isle of Man Bank Assets, 1998-2007

Isle of Man Government, Financial Supervision
Commission, "Statistics," Oct. 7, 2007, available at


Isle of Man Coat of Arms (Isle of Man Government, Crown Copyright, vested in the Treasury of the Isle of Man)Isle of Man Treasury Minister Alan Bell recently told the members of the island's 1,000-year-old, Viking-founded legislature that "the importance to our economy of the banking sector cannot be overstated." (Treasury minister's speech to the Tynwald, Feb. 21, 2006, available at Figure 2 shows that over the eight-year period from December 1998 through December 2006, deposits at banks on the island more than doubled, from $37 billion to $85 billion. During the first six months of 2007 they jumped another 15 percent to $98 billion.

Rushen Castle in Castletown on the Isle of Man, British Isles (MedioImage/Corbis)As of March 31, 2007, there were 47 banks operating in the Isle of Man. Thirty were subsidiaries and branches of U.K. banks. Five of the banks had Irish parent companies, three were from South Africa, and two each were from Spain, Switzerland, and the Isle of Man itself. (FSC, "Annual Report 2006-2007," available at

At the end of 2006, approximately 70 percent of Isle of Man bank deposits were denominated in British pounds. That is a small increase from the 67 percent figure for the end of 1998. (FSC, "Statistics," Oct. 7, 2007, available at It represents a huge difference from Jersey and Guernsey, where in both jurisdictions only 32 percent of deposits at the end of 2006 were in pounds.

In 1998 an official U.K. report on the Isle of Man stated that "the majority of banks are engaged in providing private banking services to nonresidents." (Andrew Edwards, "Review of Financial Regulation in the Crown Dependencies, Part II — The Isle of Man Finance Center," presented to Parliament by the secretary of state for the Home Department, Nov. 1998, commonly referred to as the "Edwards Report," available at Figure 3 shows the geographic distribution of ownership of Isle of Man accounts according to bank records. The two jurisdictions accounting for most of the ownership at the end of March 2006 were the Isle of Man with 35 percent and the United Kingdom with 27 percent. It is important to remember that listed ownership need not coincide with beneficial ownership. We strongly suspect that the majority of accounts listed as owned by Isle of Man residents are for deposits made by Isle of Man service providers on behalf of the beneficial owners of trusts and companies. Similarly, we suspect that a large portion of the deposits categorized as non-EU Europe are from Swiss banks made on behalf of their customers.

According to data from the Bank for International Settlements (BIS), deposits by foreign banks are only 8 percent of total cross- border deposits in banks in the Isle of Man. That is another distinct difference between the Isle of Man and its Channel Islands rivals. As shown in Table 1, BIS data indicate interbank deposits equal to 65 percent of the total in Guernsey and 48 percent of the total in Jersey as of December 2006.

We commented above that non-EU Europe deposits in Isle of Man banks are likely from Switzerland and that it is likely a large portion of those are Swiss fiduciary deposits designed to avoid Swiss withholding tax. At the end of March 2006, that category accounted for 15 percent of total deposits. If, as in our study of Jersey bank deposits, we assumed 80 percent of this total was Swiss fiduciary deposits, those deposits would account for $10.2 billion (12 percent) of total deposits. That exceeds the $4.3 billion (8 percent) interbank figure for cross-border deposits shown in Table 1. Because the latter figure is data and not an estimate, we assume that it is the better figure for Swiss fiduciary deposits held on behalf of individual investors with deposits in Swiss banks. Therefore, in this study we consider those deposits a potential source of individual tax evasion, and we also implicitly assume that none of the interbank deposits in the BIS data are made on behalf of the banks themselves (as opposed to their customers).

      Table 1. Interbank Deposits in the Crown Dependencies, Dec. 31, 2006
Total         Nonbank         Bank      Bank Percentage

 Guernsey       $145.9          $50.7          $95.1           65%
 Jersey         $304.4         $157.1         $147.4           48%
 Isle of Man     $51.7          $47.4           $4.3            8%

Source: Bank for International Settlements, "Locational Bank
 Statistics," Tables 3A and 3B, Oct. 2007,
available at

Figure 3. Distribution of Deposits in Isle of Man by Legal
Residence of Depositors

Isle of Man Financial Supervision Commission,
Annual Report 2006-2007, available at

Domestic Deposits

Figure 3 indicates that 35 percent of deposits in Isle of Man banks are from depositors recorded as resident in the Isle of Man. At the end of 2006, that would amount to $29.8 billion. Although these are Isle of Man resident companies and individuals, nearly all of these deposits are attributable to the Isle of Man's offshore sector (for example, trusts and shell corporations domiciled in the Isle of Man). In the United States, the average bank deposit per capita is approximately $28,000. Bank accounts in the Isle of Man held by Isle of Man depositors amount to approximately $371,600 per person. If we assume that accounts related to domestic residents and businesses are equal per capita in the Isle of Man and the United States, the Isle of Man (with a population of approximately 80,058) would hold approximately $2.24 billion. On the basis of those U.S. data, we assume that 2.6 percent ($2.24 billion) of total Isle of Man deposits ($85 billion) at the end of 2006 are held by Isle of Man residents and businesses related to the domestic economy.

Other Deposits

We now turn our attention to the ownership of the remaining 92.3 percent ($78.5 billion) of deposits that are not Swiss fiduciary (5.1 percent, $4.3 billion) or purely domestic (2.6 percent, $2.24 billion). In particular, we want to know whether they are (a) personal accounts, for which evasion would be likely, or (b) institutional and business accounts, for which evasion would be unlikely.

No data are available directly on this point for bank deposits in the Isle of Man. From the Bank of England, however, data are available on the composition of deposits in Jersey, Guernsey, and the Isle of Man (combined) for depositors resident in the United Kingdom, Jersey, Guernsey, and the Isle of Man. Excluding deposits by banks, the division of ownership, according to the latest data, is as follows: nonbank financial corporations — 29 percent; private nonfinancial corporations — 20 percent; public sector — 1 percent; and households — 50 percent. (See notes to the Oct. 8, 2007, article in this series for details.)

Using the data from the Bank of England, we assume that 46.15 percent ($39.2 billion, one-half of 92.31 percent) of deposits are held by households that are likely to be evading their home countries' taxes.

Combining the 5.1 percent figure for Swiss fiduciary deposits with the estimated 46.15 percent figure for deposits beneficially owned by individuals yields 51.21 percent of bank deposits. Multiplying the corresponding fraction by the data for total Isle of Man deposits as of December 31, 2006 ($85 billion), yields $43.5 billion in potential tax evasion assets (PTEA). The modifier "potential" is used because there is no proof that those assets and the income they generate are related to tax evasion. To the extent that taxpayers are honest and report their foreign earnings to domestic tax authorities (despite the lack of information reporting by banks to tax authorities), the potential will not be realized.

           Table 2. Summary of Findings on Isle of Man Bank Deposits
Billions    Billions             Evasion
                                      ($)        (£)      Percent   Assets?


 Total deposits                      $85.01     £43.39    100.00%
 Swiss fiduciary                      $4.30      £2.19      5.06%     Yes
 Domestic (Isle of Man) resident      $2.24      £1.14      2.64%     No
 Other — Individual                 $39.23     £20.03     46.15%     Yes
 Other — Institutional              $39.23     £20.03     46.15%     No

Source: Calculations described in text.


The Isle of Man's funds sector is considerably smaller than either Jersey's or Guernsey's. As in the other crown dependencies, however, the business has expanded rapidly, thanks both to the rise of hedge funds and the willingness of Isle of Man officials to accommodate that business with business-friendly regulatory rules.

Figure 4 shows the growth of the Isle of Man's fund business assets as reported by the FSC. In the 18 months from June 2005 through December 2006, Isle of Man fund assets more than doubled from $19.9 billion to $41.9 billion. In the first nine months of 2007, the total increased 27 percent and now stands at $53.3 billion. According to island sources, much of this growth was sparked by availability of the Experienced Investor Fund (EIF) structure, which requires no regulatory preapproval. The EIF is the vehicle of choice for offshore hedge and private equity funds in the Isle of Man.

The core business of the funds sector on the Isle of Man is fund administration, and administration is relatively more important to the Isle of Man than it is to the Channel Islands. According to the treasury minister's most recent budget speech, more than 400 people work in the Isle of Man funds sector. (Treasury minister's speech to the Tynwald, Mar. 20, 2007, available at The major employers of those individuals are Fortis, HSBC (formerly Bank of Bermuda), Barings, and Anglo Irish.

In terms of size, the Isle of Man geographically is much larger than its Channel Islands rivals. "You can fit Guernsey, Jersey, the Caymans, and several other islands inside it, so we don't see the same pressures produced by growth," remarks Mike Simpson of PricewaterhouseCoopers (as quoted in "Isle of Man Hedge Fund Services 2007," Hedgeweek Special Report, July 2007, p. 17 ( This room to grow is a major selling point for promoters of the Isle of Man.

Figure 4. Isle of Man Funds, 1999-2007

Isle of Man Government, Financial Supervision
Commission, "Statistics," Oct. 7, 2007, available at

At the same time, however, the powers that be recognize that the island is minute and costly compared with its competitors for the provision of back-office fund administration services. Given the limitations of the island's geography, economic planning in general for the Isle of Man is always seeking to promote growth through increasing productivity. Consistent with that general strategy, the government would like the funds sector to shift more toward higher- value-added services, such as fund management. This movement up the value chain was one of two major goals set out in the February 2007 Isle of Man Funds Review Group report (also known as the "Smith Report," available at

The other goal was growth. Following the recommendations of the Smith Report, the Isle of Man has also set the ambitious goal of $100 billion of funds under administration before 2010. (As of September 30, 2007, the level was $53.3 billion.)

To help meet both goals, the government officially proposed on September 20, 2007, a new suite of fund categories to replace the EIF structure first launched in October 1999. Those new products include Specialist Funds and Qualified Funds. The focus is on alternative funds with special emphasis on encouraging incorporation, and establishment of fund management operations in the Isle of Man. The new Specialist Funds product is designed to encourage major fund managers in London and other key financial centers to relocate their front- and middle-office functions to the Isle of Man.

Data Issues

Most fund assets shown in Figure 4 are not from funds legally domiciled in the Isle of Man. There is no breakdown between domiciled and nondomiciled funds in the official data. We do know, however, that by definition, overseas funds are domiciled outside the Isle of Man (mostly in the Cayman Islands or the British Virgin Islands). Figure 5 shows the composition of Isle of Man funds by asset value as of March 31, 2007. Of all fund assets in official data, 30 percent were in overseas funds. Therefore, we know that no more than 70 percent of funds are Isle of Man-domiciled. Other fund categories may either be domestic- or foreign-domiciled.

Other available information from the Smith Report allows us to get a better feel for the percentage of fund assets that are domiciled on the island. The study tells us (p. 22) that in 2006, out of a total of 65 new funds, only 25 — that is, 38.5 percent — were domiciled in the Isle of Man. Assuming that the split between domestic- and foreign-domiciled funds has not changed and that domestic and foreign funds on average are equal in size, domestic- domiciled funds at the end of 2006 held 38.5 percent of the official total of $41.9 billion, or $16.1 billion.

The problem of double-counting in the funds sector because of funds of funds is discussed extensively in the text and appendix of the first article in this series. The net result of those adjustments was a $23 billion reduction in potential tax evasion assets in Guernsey. There are several reasons to believe the double-counting problem for mutual funds will be significantly less in the Isle of Man than in Guernsey. First, official and commercial commentary on the funds industry has much less discussion of funds of funds in the Isle of Man than in Guernsey. Second, Isle of Man statisticians do not provide funds of funds with their own category in the official data. And third, a search of the Morningstar funds of hedge funds database ( found only 51 funds of funds domiciled in the Isle of Man compared with 89 for its rival Guernsey. On the basis of those data, we estimated a flow of funds adjustment for the Isle of Man equal to 57.3 percent (the ratio of 51 to 89) of the $23 billion adjustment for Guernsey. That reduces our adjusted $16.1 billion total by $13.2 billion to $2.9 billion in domestic-domiciled funds.

Figure 5. Percentage of Composition of Type of Isle of Man Funds,
March 2007

Isle of Man Financial Supervision Commission,
Annual Report, 2006-2007, available a

The final step in our funds calculations is to remove the portion of funds owned by the institutions like pension funds, university endowments, and large corporations for which evasion is unlikely. Unfortunately, there are no data on ownership of mutual fund shares in the Isle of Man. As in prior articles, we assume here, based on data on the distribution of ownership of fund shares in the United States, that 60 percent of fund shares in the Isle of Man funds are held directly by individuals. Therefore, we conclude that $1.8 billion (60 percent of $3 billion) of assets in the Isle of Man funds sector are potential tax evasion assets.

Fiduciary Sector

There are more than 200 licensed corporate and trust service providers on the Isle of Man. The latest annual report from the FSC reports 39,399 companies and partnerships and 39,881 trusts under the administration of those service providers. In 1998 the Edwards Report stated: "About two-thirds of the companies registered are established and maintained for nonresidents who wish to benefit from the jurisdiction's tax regime and financial services sectors."

Corporate and trust services are closely related, and jointly they are commonly referred to as the fiduciary sector. In this article, we will sometimes use the terms "trust business" or "trust sector" to refer to the entire fiduciary sector (that is, corporate and trust service providers as well as the entities they manage).

Unfortunately, there are no data available from the Isle of Man government on assets held in trusts and corporations managed by the Isle of Man fiduciary sector. Nor are there data on fees generated or profits generated. Furthermore, neither the 1998 Edwards Report nor the 2003 IMF report ("Isle of Man — Crown Dependency of the United Kingdom: Assessment of the Supervision and Regulation of the Financial Sector Volume I — Review of Financial Sector Regulation and Supervision," Nov. 25, 2003, available at provides data on trust assets in the Isle of Man.

One way to estimate the amount of assets in the fiduciary sector is to relate other investment assets on the island — in banks, in funds, and in insurance companies — to the size of the trust assets. This makes sense for two reasons. First, a lot of assets in Isle of Man intermediaries are held in the name of Isle of Man trusts and corporations. Second, several commentators have noted the positive relationship between trusts and the rest of the financial sector in offshore financial centers: The fiduciary business is commonly considered the seedbed of the entire financial services industry. For example, Debbie Sebire of the Jersey Financial Services Commission told trust practitioners:

      The marketing arms of your organizations not only bring you business back to your offices in Jersey, but also your efforts bring back business to the island's banks, fund and investment managers, law firms and accountants. The point I am trying to make is that your business is truly critical — pivotal — to the economy and reputation of our island. ("Key Issues for the Trust Company Business Sector," Nov. 10, 2004, available at

In our study of Guernsey, we found that at the end of 2006 that jurisdiction had a total of $423.8 billion (unadjusted) of assets in the banking, funds, and insurance sectors. That's 1.66 times the amount of assets ($254.8 billion) estimated for the trust sector.

Similarly, in our study of Jersey, we estimated total bank, fund, and insurance assets to be $722.7 billion. That's 1.6 times the amount of assets ($450.8 billion) we estimated for the trust sector.

                  Table 3. Estimating Isle of Man Trust Assets
                    (in billions unless otherwise indicated)

Method 1: Relationship of Trust Assets
           to Rest of the Financial Sector

 (unadjusted)    Jersey    Guernsey    Isle of Man


 Banks           $371.8    $181.0        $85.0
 Funds           $350.9    $206.1        $82.1
 Insurance          $—     $36.7        $63.3
 Total of above  $722.7    $423.8       $230.4
 Trusts          $450.8    $254.8       $141.1     <- Estimate #1
 Ratio of total     1.60      1.66         1.63    <- Assumed relationship
   to trust                                           based on Jersey and
   assets                                             Guernsey data

Method 2: Relationship of Trust Assets to the Number of Employees

Jersey      Guernsey   Isle of Man

 Employees       4,544                   1,300
 Assets per     $99.21                  $99.21     <- Assumed relationship
   employee                                           based on Jersey data
   (in millions)
 Trust assets   $450.8                  $129.0     <- Estimate #2
                                        $135.0     <- Average of estimates

Sources: Described in text.

Taking the average of those two ratios (equal to 1.63) and dividing it by total (unadjusted) bank, fund, and insurance assets in the Isle of Man ($230.4 billion) yields an estimate of $141.1 billion of assets in trusts and companies in the Isle of Man.

A second method of estimating trust assets in the Isle of Man is to assume there is a fixed relationship between the number of employees in the trust sector and the amount of assets managed. On the island of Jersey, with estimated trust assets of $450.8 billion and 4,544 trust sector employees, the per-employee asset figure is $99.21 million. (We did not use Guernsey data because the Guernsey employment totals are inconsistent with Jersey's and the Isle of Man's — that is, they include lawyers and accountants, and the others do not.)

Isle of Man Finance reports 1,300 employees in the Isle of Man fiduciary sector ("Fiduciary — Key Statistics," available at If we assume $99.21 million of trust fund assets per trust business employee, we arrive at an estimate of trust assets in the Isle of Man of $129 billion.

We will use the average of our two estimates, $135 billion, in this study. That figure is consistent with common descriptions of the Isle of Man trust sector that imply a significant amount of trust business in the Isle of Man but significantly less than in Jersey. These calculations are summarized in Table 3.

As with funds of funds, there is the large potential for same- country and cross-country double-counting. Fiduciary assets can be divided into two categories: (1) directly held stock, bonds, and small-business assets and (2) investment through intermediaries like banks, mutual funds, and insurance companies. To determine the amount of investment flowing through Isle of Man that is potentially related to tax evasion, we want to exclude from our calculations any of those assets held in either Isle of Man or foreign intermediaries.

Figure 6A. Isle of Man Insurance, Life Insurance Companies

Isle of Man Government, Insurance and Pension
Authority, Insurance Statistics, available at

Figure 6B. Isle of Man Insurance, Nonlife Insurance Companies

Isle of Man Government, Insurance and Pensions
Authority, "Insurance Statistics," available at

Data with that level of detail are not available for the Isle of Man, but — as detailed in our prior articles in this series — they are available for the United States. Using U.S. holdings as a guide, we assume that 31 percent of the total of $135 billion of Isle of Man trust assets are investments not made through financial intermediaries. That leaves us with $41.9 billion of PTEA held in Isle of Man trusts (and not invested in mutual funds) at the end of 2006.


Like Guernsey and unlike Jersey, the Isle of Man has a large offshore insurance business. And unlike either Guernsey or Jersey, the insurers in the Isle of Man are not regulated by the same body that regulates banks and mutual funds, but have their own regulator, the IPA.

         Table 4. Summary: Potential Tax Evasion Assets in Isle of Man,
                                  End of 2006
                                 (in billions)

With          With              Adjusted to
                             Preliminary   Adjustments for   Remove
 Sector          Raw Data    Adjustments   Double Counting   Nonevaders = PTEA


 Banking         $85.00        $43.50          $43.50            $43.50
 Mutual and      $41.90        $16.10           $3.00             $1.80
   other funds
 Trusts           See         $135.00          $41.90            $41.90
                 Table 3
 Insurance       $73.30        $73.30          $73.30            $63.30
Total          $335.20       $267.90         $161.70           $150.50

Life Insurance

The island's life insurance sector was established in the mid- 1980s and has grown steadily ever since. The Manx Insurance Association claims that the island's life insurance sector is "without doubt the best developed of any offshore centre." Recently, industry growth has been especially rapid. As shown in Figure 6A, in the three years from December 2003 to December 2006, life insurance assets under management have more than doubled — from $30.6 billion to $63.3 billion — and premiums have more than tripled — from $5.5 billion to $18.4 billion.

It is important to recognize that life insurance not only insures against the risk of death but also serves as a tax-advantaged savings vehicle. And so, in most respects, Isle of Man insurance companies compete with banks and mutual funds for rich investors' money, as described by the Manx Insurance Association on its Web site (

      All [member] companies share a common objective of providing appropriate financial planning solutions whether it be straightforward investment on a regular saving or lump sum basis, saving for retirement, life assurance protection or a tailor-made personalized investment portfolio. . . . Generally clients are high net worth individuals or high earners.

Approximately 90 percent of premiums received in 2005 and 2006 were attributable to single-premium contracts, which are the insurance products most akin to mutual fund investments and most unlike term life insurance. In many cases, an existing portfolio of investments makes up the initial premium.

Because offshore life insurance is a close substitute for mutual fund investment, we will treat life insurance assets in this study as if they were all mutual funds owned by individuals. Therefore, we conclude that at the end of 2006, the $63.3 billion held by life insurance companies on behalf of their customers are potential tax evasion assets.

Captive Insurance

Most of the Isle of Man's nonlife insurance is captive insurance. (Reinsurance and general commercial insurance are not a significant part of the island's insurance business.) A captive insurance company is a subsidiary of an industrial or commercial parent formed to insure risks of the parent. It is a do-it-yourself option for purchasing commercial insurance. According to the Manx Insurance Managers Association (, the Isle of Man captive insurance industry directly employs more than 100 people.

Facing stiff competition from both onshore and other offshore jurisdictions — Vermont is a leading domicile for captive insurance companies, and Bermuda is the world leader — growth in the Isle of Man's captive insurance market, unlike in the island's life insurance market, has stagnated in recent years. One problem is that because the Isle of Man is outside the EU, many of its insurance products are often difficult to market to EU customers.

In its most recent annual report, the IPA acknowledged that the nonlife sector faces "challenging conditions" and a "difficult operating environment." (Isle of Man IPA, Annual Report 2006-2007, available at To begin the process of revitalizing the sector, the Manx Insurance Managers Association and the IPA have sponsored an external review of the island's captive insurance industry.

As shown in Figure 6B, assets and premiums of nonlife companies peaked at the end of 2004 at $10.8 billion and $3.1 billion, respectively. At the end of 2006, in contrast with the growth in the rest of the island's financial sector, assets had declined to $10 billion and premiums to $2.2 billion. Offshore captive insurance is predominantly a corporate tax issue, and therefore none of the $10 billion in assets from the Isle of Man's nonlife business is categorized as PTEA.

Putting It All Together

All the calculations described in this article are summarized in Table 4. At the end of 2006, there were $150.5 billion of assets in the Isle of Man financial sector beneficially owned by non-Isle of Man individuals who were likely to be illegally avoiding tax on those assets in their home jurisdictions. Rapid growth of bank deposits (15 percent during the first six months of 2007) and of mutual funds shares (27 percent during the first nine months of 2007) suggests this total could edge close to $200 billion by the end of 2007.

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