Bermuda is losing its grip as the undisputed world leader in the captives market, lagging behind British Virgin Islands for the first time in new formations of captives, according to figures just released for 1999.

But Bermuda still hosts the largest number of captives in the world, with over 1,000 more registered captives than any rival offshore jurisdiction.

Predictions are that Bermuda will continue to lose part of its market share as more domiciles get in on the captive markets.

Captive Insurance Company Reports , an International Risk Management Institute official publication, states: "We predict that the new business market share held by the top six will become even more diluted as new domiciles spring up in the United States, new types of businesses are attracted to the captive market, and threats to the supposed tax havens inhibit offshore growth.'' According to the publication, in 1999 Bermuda has 1,493 captives registered in its official statistics, compared to 135 in the Virgin islands.

But the rival offshore jurisdiction has its sights set on capturing a larger section of the market.

Bermuda had 84 new companies licensed in 1999, 50 of which were tagged as captives. The remaining 34 were commercial insurers or reinsurers.

This compares with the British Virgin Islands, where 51 new captives were listed, taking the figure above that in Bermuda.

And the Virgin Islands is expecting many more captives to be formed this year to take its numbers up once again.

"A lot of companies have premiums less than $350,000,'' said Peter Bates, British Virgin Island's regulator.

This figure is significant because below that threshold, a captive insurer gets US income tax treatment as a small insurer under Inland Revenue Services rules.

Cayman Islands was the next most successful in attracting new captives to its shores. In all 39 new formations were made in 1999.

Out of these there were nine segregated portfolio companies and six special purpose vehicles.

Following closely behind Cayman was Vermont in fourth place with 34, then Guernsey with 18, Ireland with 17, Hawaii with 12 and Luxembourg with 9.

Other small numbers of captives were formed in Singapore, Luxembourg, Barbados, Jersey, Switzerland and Panama.

Globally the formation of captives offshore is slowing after four years of growth, with a total of 250 captives licensed in 1999, compared to 305 the year before and 294 in 1997.

The drop in number being formed on the Island comes after captive managers report new traditional single-owner captives (Class 1) are being formed elsewhere, not in Bermuda.

The big growth category here was in Class 3 with 41 new licences, 23 of which are captives.

According to the publication, current interest in Bermuda is in segregated cell companies, rent-a-captives, agency captives and captives of life insurance companies. The report hails the Electronic Transaction Act as a move that will facilitate legal correspondence by electronic means for all types of businesses, including captives.

The Segregated Account Company Act is still in the process of being drafted and it could be some time before it becomes law.

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