Bahrain: open for captives business

Jaffer Mazaal of Braxtone Insurance Management’s office in Bahrain explains what makes Bahrain an attractive domicile for captives.

Bahrain is a captive insurance domicile that can accept any captive business from around the world.

That’s the flag carried by Jaffer Mazaal, general manager at Braxtone Insurance Management, who told Captive International that while there is not a large number of captives in the Gulf region at the moment, the regulatory environment, openness to receive captives and high level of general expertise all make Bahrain a potential hub for captive insurance business.

“We see Bahrain as Bermuda was, for the region and the world, even for US-based risks.” Jaffer Mazaal, Braxtone Insurance Management

According to Mazaal, there has been increased regulation in the regional insurance markets, with Saudi Arabia’s insurance rules being now some of the most stringent in the region. Saudi and the United Arab Emirates (UAE) continue to be the leading markets in the region. 

“Penetration is lower in Saudi—the main reason for that is that Saudi does not have the high expatriate ratio that the UAE has, reaching 85 percent of the population, if not more in certain areas such as Dubai, and that is a factor impacting insurance penetration. At the same time, the hard cycle has generated interest among many insurance buyers to explore the captive insurance solution,” he said.

“These are very interesting days here and in our view at Braxtone, we see that it is very ripe for captives. There have been new captives and captive regulations.”

Mazaal agreed that the number of captives in the region is not as high as it is in Europe or the US, although he did note that if you look at Europe and compare it to the US, you could say the number of captives in the former is surprisingly low, given that Lloyd’s is there and the size of the European market.

“The Gulf region has 15 captives at least, it might now be closer to 20, and this includes entities in the region that have set up a captive in Bermuda, Guernsey, or other domiciles. That number cannot be used as the main measure of the captives industry here, but it reflects the opportunity,” Mazaal said. 

“If you look at the history of the Gulf region, it’s not surprising that numbers are so low, as the first ever insurance policy issued in this region was in 1950. But, with globalisation and how the global economy is moving, how regulations are developing, with data protection laws being brought in, all these factors are contributing to insurance clients’ better understanding of insurance as an important risk management tool and, in turn, leading to a more decisive mentality when considering the captive insurance concept,” he added.  

“The accelerating maturity of economies and regulations, at a rate much higher than 25 years ago, makes the Gulf region’s potential absolutely huge. Saudi is a prime example, with the Crown Prince’s recent reforms.

“Saudi Arabia is changing very quickly. If you go to Riyadh today, and you haven’t been there in the last six or seven years, you’ll find it is a completely different city. And in the UAE, for example, and the resilience of Dubai, they are going through phases of economic crises, yet maintaining the position they’re in.

“When I see the growth in the maturity of regulations in Bahrain, such as introducing captive insurance regulations, these changes in the last 10 to 20 years make me reflect that the potential is not just there, it’s growing as well,” he continued.

“The number of captives has recently started to increase, along with the awareness of the sector since COVID-19. I was talking to potential clients before COVID, when 95 percent had no idea what I was referring to. It was almost like talking about what a smartphone would do 50 years ago—that’s how it felt before the pandemic. 

“Today I’m meeting with large corporates to talk to them about captives. And not only have they read and researched the issue, I’ve received calls to say: ‘we want to talk about captives, can you come and meet us?’. That is new.”

Growth is coming

Growth may be slow, and the captives count is still small, but Mazaal pointed out that that’s how development happens in any industry, in any economy. Braxtone sees growth coming, and the company is already preparing for it. 

“For example, when Braxtone staff meet with government authorities to lobby for the promotion of domiciles during conferences such as CICA, one of the suggestions we make is that more captive managers are needed in Bahrain,” he said. 

“We’re the only captive manager in Bahrain. We’re asking the government to bring in more competitors. We see Bahrain as an ideal domicile for captives, similar to how many years ago Bermuda was seen as a good location. 

“We see Bahrain as Bermuda was, for the region and the world, even for US-based risks. I would say Bahrain is one of the leading choices of domicile. We’re already talking with the Economic Development Board (EDB) of the government of Bahrain, to work with them for the US market. 

“If there’s a risk based in the US looking at the idea of a captive, we’d like to tell them that Bahrain has captive regulations, zero tax, and a free trade agreement with the US—fewer than 10 countries around the world have that,” he explained.

An American in Bahrain has the same access and rights and ability as a Bahraini in Bahrain, to bring over what they need, and use Bahrain as a domicile for a captive. 

“You can have a special purpose vehicle in Bahrain and route your insurance funds through that,” Mazaal said.

Bahrain is a full signatory of the Financial Action Task Force. Compared to some other jurisdictions which have issues with money-laundering or similar concerns, Bahrain is very mature, he declared. 

“It doesn’t have the size of Saudi, or the global brand of Dubai, but it has an infrastructure that’s much better. And people don’t know that. Braxtone is working with the EDB to showcase this and, compared to UK and Europe, Bahrain does not have the limitations of Solvency II and other regulatory red tape.

“The oil money of this region started in the 1960s and 1970s. That’s why Abu Dhabi, Saudi, Kuwait and Qatar have their global positions—because of the gas and oil. 

“Bahrain today is small compared to those countries, but in the 1930s Bahrain was the first country to discover oil in the region. The first hospital, the first schools, the first universities, the first bank, Standard Chartered, and the first insurance company, Norwich Union, were in Bahrain. Infrastructure such as the digitisation of government services is much stronger than you might expect—even stronger than in Dubai,” he said. 

Boosting the region

Mazaal sees Bahrain, for the near and long-term future, as “the back office” for the Middle East. 

“Bahrain is where you introduce fintech and innovative solutions. Bring it out in Bahrain, as a stepping stone, make sure it works well and then expand it to the region for the real money-making. What’s the point of expanding something that’s not actually working? Bahrain is the perfect place for that. 

“You don’t need captives to be in the US or the UK or a major financial hub such as London—captives can be domiciled anywhere,” he said. 

For Braxtone the future looks bright: it has offices in Bahrain, Dubai, and Oman and the company is planning to expand to Saudi Arabia and Kuwait. 

“Braxtone is a group of companies: one of them started in 2013 and the company recently celebrated its 10-year anniversary,” Mazaal explained. 

“The company started with outsourcing and assistance services, specifically road assist, home assist and ancillary services to customers of insurance companies, for example, where the roadside assistance is embedded in the motor product of insurance companies, as well as telemarketing and secondment services. 

“In 2015 Braxtone Insurance Management was set up, which is the first entity using the Braxtone name.” 

Mazaal worked for the firm in 2017 as a consultant, and then joined the team. Today, he’s general manager of Braxtone Insurance Management, and also chief commercial officer of the Braxtone Group. 

“Over the years, we’ve achieved quite a bit,” he said. “Today, we have four divisions under the Braxtone Group: (i) outsourcing and assistance; (ii) claims management and loss adjusting—that’s in Dubai, we are licensed loss adjusters; (iii) advisory and consultancy; (iv) insurance brokerage and captive management,” he concluded. 

Jaffer Mazaal is general manager of Braxtone Insurance Management. He can be contacted at: jaffer.mazaal@braxtone.com

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