Nevis’ natural beauty and responsive regulatory environment have spurred impressive captive growth as the island climbs into the top echelons of captive domiciles.
The most recent industry statistics show that Nevis has risen to take its place within the top 20 captive insurance domiciles in the world, climbing to 16th position in 2010 based on the number of licensed entities in the jurisdiction. Indeed, the same statistics show Nevis as the having the second-highest formation rate over the same period, with some 46 new captives being licensed during 2010.
Derek Lloyd, director and insurance manager within AMS Group’s captive insurance management division, seeks to explain why.
“Since the enactment of the Nevis International Insurance Ordinance, 2004 (NIIO, 2004) and amendments, the jurisdiction has witnessed the steady, consistent growth of Nevis as a credible, regulated and transparent captive domicile in an increasingly competitive environment,” Lloyd explained.
A sensibly priced professional and regulatory fee structure coupled with prudent and pragmatic regulation have all combined to make Nevis a viable and attractive option for parent companies around the globe seeking to establish and domicile their captive insurance company.
Lloyd goes on, adding that “whilst both the overall numbers of captives domiciled in Nevis and the growth rate enjoyed in the jurisdiction in recent years are encouraging, the most pleasing aspect for me is the increased attraction of the domicile to fellow captive insurance managers and their clientele”.
AMS Insurance (Nevis) Ltd (AMSIN) was the first licensed insurance manager in the jurisdiction back in 2004, complementing the company formation and trust services provided by its sister company, AMS Trustees (Nevis) Ltd, which has been present in the territory since the mid-1990s. AMSIN is also proud to have had the first licensed captive in the territory. AMSIN remains today as the largest insurance manager in the domicile, but far from being concerned by the rise in the numbers of fellow licensed insurance managers in the territory, Lloyd welcomes the increased competition as further evidence of the development that Nevis has made since the humble origins of the regulated captive sector back in 2004.
"Nevis has witnessed steady, consistent growth as a credible, regulated and transparent captive domicile in an increasingly competitive environment."
Equally pleasing to Lloyd is the continued evolution of the professional and regulatory environment within Nevis. Commonly, one of the most difficult things to maintain with sustained growth is the level of service standards. Against a backdrop in recent times of the global recession and the resultant economic fallout around the world, Nevis Financial Services has continued to expand the number of personnel within the insurance supervisory division, implemented a corporate governance regime of ‘on-site’ inspections for the insurance managers and their clientele, and maintained service standards and response times on new captive licence applications and other enquiries to the department.
At a higher level, government representatives of the Federation of St. Kitts & Nevis have been busy negotiating and signing an increased number of Tax Information Exchange Agreements (TIEA) and Double Taxation Conventions (DTC), essential to the very existence of any credible offshore jurisdiction going forward. At the time of going to press, the number of such agreements signed by the Federation, totalled 21 (19 TIEA and 2 DTC), with a significant number more still being worked on prior to anticipated execution during 2011.
All these factors have combined to raise Nevis’s profile and standing on the international stage, with the self-evident reward being the expansion of the captive insurance business within the territory.
At the grass roots level, Lloyd believes another key factor in the continued growth of the domicile is the overall flexibility of the legislation. In essence, the NIIO, 2004 provides the regulatory framework for the licensing and basic operations of the captive after licensing but, unlike some of Nevis’ competitor domiciles, the NIIO, 2004 provides a certain amount of flexibility to the potential captive owner to manage the captive in the most cost-effective and efficient way, considering its own particular circumstances. It does not impose a statutory requirement on the captive to have local directors, hold local board meetings or retain local lawyers. In Lloyd’s opinion, this does not impact adversely on the overall level of corporate governance, quite the contrary in fact, but it does give the captive owner greater choice, which can provide time and cost benefits to the operations of any given captive.
In reality, Lloyd suggests that an increasing number of captive owners are now seeking to appoint independent, local directors with suitable insurance experience to their boards and to hold annual board meetings in the territory. With the flagship Four Seasons Resort and golf course in Nevis now fully operational, together with a number of other excellent boutique accommodation and fine-dining restaurants, why wouldn’t captive owners take the opportunity to combine business and pleasure on this beautiful island. In line with the reopening of the Four Seasons Resort, American Eagle has also reinstated its commuter flights from San Juan, Puerto Rico to Nevis. St Kitts also has the Eagle connection from San Juan, Puerto Rico, but the international airport further allows direct and convenient access to the Federation of St. Kitts & Nevis from Europe and mainland US, with a charming ferry ride connecting the two sister islands.
Furthermore, the NIIO, 2004 does not impose a statutory requirement for local banks to be utilised, although the likes of The Bank of Nevis International Limited are always willing to assist with international bank accounts for licensed and regulated insurance entities. Again, the choice is the captive owner’s and whether it wishes to maintain its existing banking arrangements locally with the parent company, further afield or even a combination of both, the legislation provides that flexibility to make it the captive owner’s own personal choice.
The minimum capitalisation requirements, too, allow smaller businesses to enter the captive arena without being priced out by incongruous and prohibitive professional and regulatory fees and set-up costs commonly required in certain other jurisdictions. Lloyd adds though that the majority of AMS’s clientele elect to capitalise significantly in excess of minimum requirements under the legislation, whilst the solvency margin and admissible asset criteria within the solvency calculation combine with the minimum capitalisation requirements to ensure prudent, regulated operations and adequate collateralisation commensurate with the individual exposures for each and every licensed entity.
The captive insurance industry traditionally counters the market cycles in the conventional insurance sector, but the fall-out from the global economic meltdown has added further impetus to captive formations around the world. Many business owners have lost faith in traditional insurance carriers that have abandoned the very policyholders who had remained loyal to them in previous years and, equally, poor investment returns have also impacted underwriting results commonly used to artificially reduce premiums, all of which have combined to fuel the current demand for new captives.
As Lloyd concludes: “All in all, the signs remain very positive for the continued growth of captives generally and for the continued development of Nevis as a major domicile of choice for captive insurance business and to build on the solid foundations laid to date in the jurisdiction.”
Bernadette Lawrence is director of development and marketing at Nevis Financial Services. She can be contacted at: blawrence@ nevisfinance.com
Derek Lloyd is director and insurance manager at AMS Insurance Division. He can be contacted at: email@example.com
Nevis, domicile report, captive, insurance