The likely differentiation of captives under Solvency II equivalency and growing links with Canada and Latin America look set to position Bermuda at the forefront of captive development once again.
It was pleasant news to hear that Bermuda’s captive insurance companies had increased in number to 862 as of the end of December 2011, once again cementing Bermuda’s long and well established position as the leading captive domicile globally, and by some margin.
There have been, and continue to be, challenges that captive owners and captive managers and consultants face, but as with many challenges, innovation and opportunities arise at the same time.
One of those perceived challenges has been the potential impact of Solvency II. While it has been well documented recently that Bermuda appears to be able to continue with its segmented regulatory environment between the commercial re/insurance market and its captive insurance sector (rightly referred to now as ‘limited purpose insurers’), we continue to see misinformation about this approach, so it is worth reiterating the current position.
"Mexico and other latin american countries with which tieas have been signed present yet further opportunities for prospects, for captive owners and bermuda alike."
Thanks largely to dialogue between the Bermuda Monetary Authority (BMA), the Bermuda Insurance Management Association (BIMA) and the European Insurance and Occupational Pensions Authority (EIOPA) and thanks, also, to the insurance licence classification system in Bermuda, EIOPA appears to have recognised that captives are, indeed, limited purpose insurers and that the policyholders, which Solvency II is intended to ultimately protect, are not the same for a captive as they are for the commercial (re)insurance sector.
Although we are obliged to await the final recommendations from EIOPA to the European Commission, and the Commission’s eventual decision, we are optimistic that the captive regulatory environment in Bermuda will continue to be beneficial to captives. The BMA has issued a consultation paper on enhanced reporting requirements for limited purpose insurers, which appears to have been generally well received, but the important point for captive owners and prospects to note is that the capital and solvency requirements have not changed. Being in the first round of equivalence testing for Solvency II appears likely to have been beneficial to Bermuda and its captive owners, and this has helped us remain upbeat about the future.
With this in mind, Bermuda can continue to market itself aggressively and proudly and, indeed, has been doing so. Recent examples include the numerous industry representatives presenting the advantages of Bermuda at captive conferences and breakfast seminars around the US and Canada. There are definite opportunities for Canadian-owned captive owners and prospects to consider Bermuda as their domicile of choice. Historically, Canadian-owned captives have established themselves in Barbados, but the tax information exchange agreement (TIEA) signed between Bermuda and Canada, coupled with changes to the tax rules in Barbados, has meant that the playing field has been levelled. Combining Bermuda’s dominance globally and its tremendous infrastructure for captive management and expertise, we have already seen positive take-up by Canadian firms opting for Bermuda’s shores. Mexico and other Latin American countries with which TIEAs have been signed present yet further opportunities for prospects, for captive owners and Bermuda alike.
Reflecting this changing landscape, and in addition to a strong schedule of subjects and speakers, the Bermuda Captive Conference in June will have specific sessions relating to Canadian and Latin American opportunities. Some great people have put these sessions together and I continue to be impressed with the high quality of professionals we have in the captive industry in Bermuda. It is largely thanks to this strength of expertise that Bermuda will continue to be innovative, provide global leadership and remain a dominant force internationally.
Lawrence Bird is president of the Bermuda Insurance Management Association. He can be contacted at: firstname.lastname@example.org
Bermuda, BIMA, captive, insurance