Cayman-based United Insurance Company (UIC) is setting-up a subsidiary based in Guernsey.

The new entity, United Insurance Company PCC, has a core capital of £1 million. Guernsey is Europe's largest captive insurance domicile.

The initiative follows a recent relaxation in Guernsey law which allows the assets and liabilities of insurance business to be segregated within so-called individual "protected cells".

This means the company has access to the benefits of offshore captive insurance but avoids any harm associated with the adverse performance of other companies which also use the facility.

With a protected cell a company's premiums, expenses and underwriting results are retained within the cell, with dividends, profit commissions and bonuses allocated accordingly.

The benefits of a profitable year are retained and sheltered from any downside.