A mature environment for captives


A mature environment for captives

Kimone Moving, director of the Nevis Investment Promotion Agency, and Derek Lloyd, director of AMS Insurance (Nevis), review the figures from 2014 and speak to US Captive about the jurisdiction’s continued success and some of the challenges and threats facing offshore financial centres.

2014 was another successful year in the ongoing development of the Nevis financial services industry and in particular for the captive insurance sector and its continued rise to prominence within the global standings for captive insurance jurisdictions.  

“Forty-six new entities were licensed as captive insurance companies in the domicile last year, together with three new reinsurance companies. Furthermore, four new insurance management companies were licensed during the year, taking the total number of insurance managers now registered in the jurisdiction to 18,” says Kimone Moving, director of the Nevis Investment Promotion Agency.

“Early signs for 2015 suggest cause for similar optimism, with a number of new applications already approved for the year to date and the Registrar of International Insurance and his colleagues dealing with a further volume of current licence applications.”

Derek Lloyd, director of AMS Insurance (Nevis), who has now entered his second decade of service within the group, has been involved with the captive insurance sector in Nevis since enactment of the original insurance legislation in the territory, the Nevis International Insurance Ordinance 2004.

“AMS Financial Group has had a physical presence in the jurisdiction since the late 1990s with its sister company, AMS Trustees (Nevis), and it was therefore a natural progression to establish AMS Insurance (Nevis) in the domicile on enactment of the international insurance legislation in 2004,” says Lloyd.

“It has been an interesting journey over the last 10 years as the jurisdiction has climbed the ranks of captive domiciles globally and will no doubt continue to do so. AMS has been delighted to be a part of that growth as the domicile has continued to mature and evolve.  

“Like many of the Caribbean jurisdictions, a significant proportion of Nevis’s captive business has emanated from US parent companies and continues to do so. However, the raised profile and status of Nevis internationally has seen an increasingly diverse business stream coming to the jurisdiction in recent years, in terms of both insurance activity undertaken by the licensee and the geographical origin of that business.”  

Lloyd admits that the likes of Bermuda remain the domicile of choice for many of the major multinational reinsurance companies, but he says Nevis has an increasing reputation as the domicile of choice for the smaller start-up reinsurance entities seeking to establish a foothold in that sector.

“It has been an interesting journey over the last 10 years as the jurisdiction has climbed the ranks of captive domiciles globally and will no doubt continue to do so." Derek Lloyd. 

“Likewise, the appeal for potential captive owners from Europe, Asia and Latin American is presently gathering momentum, particularly for the latter two where the captive solution to alternative risk transfer mechanisms is relatively new as a concept in many of the countries,” he adds.  

The Nevis offering

There are a number of key factors behind the successful and sustained development of the jurisdiction.

a) Consistency of approach from the regulator, the Nevis Financial Services Regulatory Commission;

b) A pragmatic supervisory and regulatory regime;

c) A cost-effective professional and regulatory fee environment for the captive to operate in; and

d) Flexibility of legislation to allow captive owners to run their captives.

From the commencement of licensing back in 2004, the Nevis regulators have made themselves readily accessible to insurance managers and captive owners alike. As the volume of business has grown in the domicile, additional resources have been added to the regulatory body to maintain a consistent level of service that now spans 10 years.

There is total transparency in terms of the beneficial owning and corporate structure within any licensed and regulated insurance entity and extensive due diligence is required for anybody owning, operating or acting as a director to a licensed and regulated insurance entity from within Nevis. The regulators pride themselves on maintaining the ability for pragmatic supervision and regulation of those entities.

In common with many jurisdictions, 2015 has seen the first regulatory fee increases imposed since enactment of the original legislation with proportionate increments to the current application and licensing fees for the different types of regulated insurance entities. However, the jurisdiction still offers a competitive environment for the potential captive owner to establish its new entity in respect of both regulatory and professional fees. .

Similarly, the legislation further allows the captive owner to make its own practical decisions on the running and operations of the company itself, whether that be the appointment of local or international legal counsel, the engagement of local or international auditors, the hosting of board meetings within the jurisdiction or not and the flexibility to have the bank account(s) wherever may be most appropriate for the individual entity, whether that be within the international banking system or, commonly, with the same financial institution as the parent.

Challenges for Nevis—and elsewhere

While it is generally an upbeat message coming from the Nevis financial services sector, Lloyd feels that it would be naïve to believe that no continued challenges remain to be met by Nevis and other international financial centres. Such challenges fall into the following areas:


External regulatory bodies and government agencies; and

International banking.  

The growth in both captive entities and the number of domiciles now providing captive registration and licensing is a regular topic within the captive insurance media. Lloyd feels strongly that, as in any walk of life, competition within the industry is generally healthy.

“It inevitably provides wider choice and greater value for money to new and prospective captive owner alike. It should also ultimately improve service standards throughout the industry,” he says.

“Whether there is sufficient business to support the current volume of jurisdictions and service providers that have emerged in recent years is a moot point and certainly subject to debate at present. Many of the newer domiciles are individual US states, seeking to capitalise on a mixture of patriotism, political and media-generated paranoia about the international financial centres and lucrative, commonly tax-driven, incentives to bring existing captive business domiciled outside of the US back to the US in general and, commonly, to the home state of the parent company itself.”

Further challenges lie in providing knowledge and understanding to the international regulatory bodies overseeing the captive industry and in turn, addressing the often-seen media bias and resultant public misperceptions that commonly exist toward the sector generally, and to international finance centres.

Since the global economic crisis back in 2008, international bodies such as the International Monetary Fund, the Organisation for Economic Cooperation and Development, the Financial Action Task Force and the EU have understandably and correctly sought a commonality of operating standards and tax transparency within some of the smaller jurisdictions.

“Such operating standards and transparency have existed in the captive sector globally since long before the economic crisis,” says Lloyd. “This is commonly at a much higher level than certain of those bodies wish to regulate their service providers and customers in their own back yards.”   

Something that has bemused him in recent years, he says, is both a lack of understanding and a lack of desire to have any understanding of the licensing and supervision of captive insurance companies in jurisdictions such as Nevis.

“For all beneficial owners and directors of a licensed and regulated insurance entity there is a full and comprehensive vetting process, from both the licensed and regulated service provider and the regulatory authority itself,” he says.

“This includes on a personal level, bank and professional references, notarised photo ID, criminal and anti-money laundering affidavits, utility bills confirming residential address and corporate due diligence including submission of audited financial statements and tax returns for the operating companies.

“Furthermore, among the US parent companies licensed and regulated in Nevis, almost unilaterally they seek 953(d) election under the Revenue Service Code meaning that they are a foreign insurance company duly registered with the IRS as a domestic US corporation for tax purposes.”

However, Lloyd believes, the biggest threat to the current status quo is the global banking position.  

“The implementation of the Foreign Account Tax Compliance Act (FATCA) and other similar reporting programmes has created an environment of fear and uncertainty in many quarters, causing a number of international banks to no longer wish to deal with entities owned and operated by US citizens, and US banks are becoming increasingly reluctant to open accounts for international business companies.

“Whether that situation is individually motivated by the financial institutions themselves or part of a wider political agenda remains a matter of some debate at present.”  

Lloyd concludes that Nevis and the other international finance centres can only endeavour to continue to meet these challenges head on, and to persist in a transparent and professional manner in the conduct of their business.

Kimone Moving is director of development and marketing at Nevis Investment Promotion Agency. She can be contacted at:

Derek Lloyd is director of AMS Insurance (Nevis). He can be contacted at: derek.lloyd@amsfinancial.com

Nevis Investment Promotion Agency, Kimone Moving, AMS Insurance, Derek Lloyd, Asia-Pacific

Captive International