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Bermuda remains the top offshore captive domicile

Bermuda remains the world leader among offshore captive domiciles — despite recording a decrease in the number of captives on its register.

The Bermuda Monetary Authority (BMA) confirmed yesterday that there were 831 captive insurers based in Bermuda at the end of last year — 25 fewer than a year earlier.

However, 24 new captives were established on the Island last year — double the number recorded in 2012. Of those, some 29 percent were from Latin America — a region where Bermuda has focused great efforts to attract business — and one third emanated from the US, traditionally the Island's major source of captive business. Captive insurance companies are set up to provide insurance coverage to their parent corporations.

Shelby Weldon, the BMA's director of licensing and authorisation, said in an interview that the decrease in the overall number of captives was principally a result of the BMA “cleaning up the register” by removing some ageing captives that were dormant.

“Because of the maturity of the jurisdiction, Bermuda has a good percentage of captives that are more than 25 years old,” Mr Weldon told The Royal Gazette. “We could have left them being dormant, but we thought it was important to speak with their owners and establish whether these captives were in ongoing use.”

Mr Weldon rejected the idea that the decline in the number of captives last year was due to some of them moving domicile to other jurisdictions.

“I'm only aware of about 20 of those over the past four years and that's probably balanced out by the captives that have left other jurisdictions to come to Bermuda,” he added.

Last week, rival offshore jurisdiction the Cayman Islands announced it had 761 captives licensed as at the end of last year after adding 39 new licensees in 2013. Of these, financial regulator the Cayman Islands Monetary Authority (CIMA) reported that 406 were “pure captives” and 148 were “segregated portfolio companies”.

Mr Weldon said it was difficult to compare rival captive jurisdictions and added that Bermuda did not include special purpose insurers in its captive numbers, unlike some jurisdictions, for example. Nor does the Island include segregated cells, or rent-a-captives “fronted” by Bermuda captive management companies.

“When you're comparing captive jurisdictions, then it's not the number of captives on the register that's important as much as the volume of business they do,” Mr Weldon said.

On that score, Bermuda rates highly. The most recent figures, calculated from regulatory filings, show Bermuda's captive sector wrote $20.3 billion of gross premiums, had total assets of $85.3 billion and total capital and surplus of $42.1 billion.

Cayman's captives wrote $12.9 billion in premiums last year and held $69.2 billion in assets at the end of the year, according to CIMA figures.

Onshore, a number of US states have set up regulatory frameworks to attract captive insurers. Vermont, the most successful of these, announced the licensing of its 1,000th captive last October. In 2012, Vermont's captive sector wrote $26 billion in gross premiums. Last year, it attracted 29 new captives.

In the US in particular, political pressure has mounted against companies sending business offshore. Mr Weldon said the important thing was that insurance professionals knew the advantages that Bermuda could offer as a captive jurisdiction, such as its intellectual capital and its huge reinsurance market.

The 24 captives that registered on the Island last year was double the number recorded in 2012. In addition, 16 commercial insurers set up last year and a record 51 Special Purpose Insurers (SPIs). This compares to 14 commercial insurers and 27 SPIs being recorded the previous year.

“Achieving this level of business in today's competitive environment reinforces Bermuda's unique ability to service the full spectrum of high-end, global re/insurance business,” Mr Weldon added.

“It also demonstrates the continued relevance of Bermuda as a jurisdiction as the market seeks diversification in alternative risk transfer.”

Shelby Weldon: BMA director of licensing and authorisation

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Published March 19, 2014 at 9:00 am (Updated March 18, 2014 at 9:31 pm)

Bermuda remains the top offshore captive domicile

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