Photo: Jereme Ramsay, BDA
30 April 2018Analysis

Bermuda’s growing captive frontiers: LatAm and Canada

In the last few years, the Bermuda Business Development Agency (BDA) has been busy spreading Bermuda’s message to newer markets—for captives anyway—outside the US and Europe, in particular Canada and Latin America.

Jereme Ramsay, business development manager at the BDA, says that this process has been successful. Some BDA-led initiatives—for example forums and roadshows—in particular have generated direct results and brought in growth from these regions to Bermuda.

“In the last couple years, growth in Bermuda’s captive industry has been extremely favourable, especially out of the Canadian and LatAm markets,” says Ramsay.

In 2017 alone, Bermuda saw the formation of five new Canadian structures. Two of these were Canadian parent companies setting up captives locally.

Bermuda Monetary Authority (BMA) figures show that there were 17 new captive formations in 2017, registered as of December 31. That five of these come from Canada is substantial.

Look further back and the picture is even more encouraging. Between 2012 and 2017, there have been 16 new captives from Latin America. And Ramsay expects even more growth expected from Latin America with multiple transactions and conversations in the pipelines.

“We’re seeing significant lead generations in these markets from the outreach we’re doing,” Ramsay adds.

Furthermore, there were 61 new jobs generated in the risk industry in Bermuda in 2017, with around 42 across the captive insurance sector alone.

BDA-led Canadian roadshows have visited Toronto, Calgary, and Vancouver. The BDA also plans to attend the RIMS Canada Conference 2018 in Newfoundland in September.

Why Bermuda?

With an encouraging number of captive insurance registrations coming from the Canadian market, one might wonder why so many companies are looking to Bermuda’s shores.

Ramsay believes Bermuda’s reputation as a leading captive domicile, and direct access to the re/insurance markets, along with the existence of tax agreements between countries, have been very helpful in attracting new business.

Bermuda’s captive insurance market has close to 740 companies generating nearly $55 billion in annual gross written premiums.

“The access to the insurance and reinsurance markets really helps to upsell our story,” Ramsay says.

He notes that the pace of acceptance and growth in Latin America has been faster than in Canada, but progress is definitely increasing.

Captives are not an entirely new concept to Canada, but Ramsay explains it has typically been the larger companies that are more familiar with self-insurance. However, the BDA is now starting to see more companies in the middle market that would like to get to grips with the captive structure.

“I would say these companies are national, and on the brink of going international. These are the companies we hope to convince of the real value of a Bermuda-based captive,” says Ramsay.

“Another element of the initiatives is getting in front of some of the key advisors to these companies—the accountants and lawyers who have clients whose risk management is evolving, so that embracing the captive insurance structure makes sense.”

Industries that have been accepting the concept include real estate, construction, surety, financial services and energy companies.

The BDA is looking at engaging with entities both in and beyond Ontario, and is seeing some growth from cities such as Winnipeg and Montreal. Relevant industries are typically auto, mining, and some of the gas and oil companies—with energy companies, in particular, encompassing the bulk of the interest.

Bermuda may appeal to Canadian companies that have international operations, such as a Canadian company with LatAm operations, but captives are also cost-effective for those with operations inside Canada.

“We can provide provisions for both, it really depends case by case,” says Ramsay.

Another driver that has opened up a wave of new opportunity between Bermuda and Canada in the last few years has been the 2011 Tax Information Exchange Agreement (TIEA).

This bilateral agreement placed Bermuda on equal tax footing with jurisdictions that hold tax treaties with Canada. The TIEA allows Bermuda subsidiaries of certain Canadian corporations with international operations to be eligible for Canadian tax benefits, including the tax-free repatriation of certain dividends to Canada.

New initiatives, new business

Two of the BDA’s upcoming roadshows will include half-day executive forums in British Columbia and Ontario, in Vancouver on May 15 and Toronto on May 17, as well as business development meetings.

Here captive insurance experts will be promoting the risk management benefits of the Bermuda market to Canadian corporations.

These events typically kick off with discussions around captive structure and strategies, and move on to the regulatory, legal and tax framework—which is complemented with a case study.

“Sometimes an existing Bermuda captive owner out of Canada will be involved in the discussions, explaining why they took their captive to Bermuda. They’ll explain some of the innovation that is happening within the captive and why Bermuda made sense to them. It’s a complementary piece we feel is of interest to prospective captive owners,” says Ramsay.

As well as growth from these markets being reflected in captive formation statistics, he also suggests that from a lead generation perspective, these initiatives are incredibly helpful.

“We reach out to prospective captive owners and risk managers who are interested and we connect them with Bermuda stakeholders.”

A variety of insurance managers, regulators, representatives from accounting or audit firms and their advisory teams, and other services providers on Bermuda all benefit from more captive formation.

“We leverage their expertise and we showcase our talent to help clients make well-informed decisions when choosing a captive domicile.”

Ramsay believes the interactivity of these forums have also helped engagement.

“Getting clients to ask questions, interject and be able to get a better understanding of our regulatory regimes; understanding what’s entailed in a feasibility study; and what’s entailed in a tax regime, fronting requirements—these are all things that we discuss.”

Through these events the BDA is facilitating an environment to connect Bermuda stakeholders with prospective clients—which, Ramsay says, is working.

“Many connections are made,” he adds. “Our industry partners often follow up with clients to keep them engaged, and that’s what’s driving the business.

“In the past, many of our services providers and partners were working in silos. I think we've strengthened the whole ‘Team Bermuda’ approach and we make sure everyone has their jurisdictional hat on,” he continues.

“It's balancing out how to showcase everyone and ensure that everyone, representing various firms, has airtime as well. The roadshows have become very popular; it’s a good problem to have.”