Navigating change: Bermuda’s captive insurance industry faces up to the new Corporate Income Tax and regulatory shifts

Ahead of the 2024 Bermuda Captive Conference, Captive International spoke with Thomas McMahon, BCC chair, to talk about likely topics of discussion at the event.

What are the main issues facing Bermuda’s captive insurance industry?

The one key topic that will be on a lot of people’s minds is Bermuda’s introduction of a Corporate Income Tax. Legislation was passed late last year in Bermuda which will result in the introduction of a 15 percent tax, effective January 1, 2025. This is a major change for the Island, but it shows Bermuda’s willingness to be part of the global community, and not isolating itself away.

The OECD has had its minimum tax project, with pillars one and pillars two, and Bermuda is now playing its role in that project.

When you hear about taxes being introduced, you wonder what impact they will have. But when you break it down, some captives will be impacted, but not that many. It’s not going to a significant impact on the captive sector as a whole, when you look at the thresholds and the exemptions that are available.

I’ve heard of one or two cases—not clients of mine—of captives domiciled in another jurisdiction, which are making a decision to relocate to Bermuda because Bermuda has introduced a Corporate Income Tax.

There has always been external pressure on Bermuda—from the OECD or the EU—to enhance regulations to meet their expectations. As a result, Bermuda has over the years enhanced its anti-money laundering and anti-terrorist financing, and economic substance requirements. The Personal Information Protection Act (PIPA) for example, is our equivalent of the GDPR. The PIPA legislation was passed here in Bermuda a number of years ago and the PIPA rules will become effective in 2025, so we’re all gearing up to that as well.

“It’s positive to see diversification in the types of business being written in these captives.”Thomas McMahon, BCC

What has the past year been like for captives in Bermuda?

It’s been positive. We’re seeing continued interest in captives. We have licensed a few already and we’re working on a few more with the Bermuda Monetary Authority (BMA). There’s positive growth in captives and in segregated accounts structures.

It’s positive to see diversification in the types of business being written in these captives, and also where these risks are—we’re seeing them in Europe, in the US and in Latin America, and I’m hearing similar stories from the other managers on the Island, which is good to see.

Aside from the new tax, have there been any significant regulatory changes regarding captives over the past year?

I don’t believe there is anything significant pending with the BMA. In the segregated accounts sector, the BMA issued a draft guidance note a couple of months back, which is now subject to public consultation between the industry and the Authority, where they’re looking to enhance the level of supervision over segregated accounts structures.

This has been a project for the BMA for many years, so it came as no surprise that it issued this draft guidance note. The consultation period ends at the end of September. Various industry groups, including the Bermuda Captive Network, have a subcommittee that is looking at this and already have a dialogue giving feedback to the BMA.

What is the outlook for this year’s Bermuda Captive Conference, and what do you have planned for next year?

This year the conference is at a new location, at Pier 6 on Front Street, which is a newly-renovated events complex which has been used for many events over the last number of years. This year we’re trying to transition, as we continue to rebuild our numbers post the COVID-19 pandemic, to get everybody back to the physical conference. So far, it’s been received very well and we expect around 400 attendees at the event.

This transition has allowed us to rebuild the conference as we look ahead to 2025 where we will be back at the Hamilton Princess, but with one key change, as the conference moves back to its original June dates.

It will be good to be back to the June date, the timeframe we’ve historically had for the conference. September is tough, in terms of the business calendar and also because we’re in the middle of hurricane season.

The other driving effort behind the conference is to promote the Bermuda Captive Network. We want to develop the association and use the conference as a forum for encouraging more and more people to join it.

Thomas McMahon is chair of the Bermuda Captive Conference and executive vice president of Davies Captive Management. He can be contacted at: thomas.mcmahon@davies-group.com  

Click here to read Captive International's Bermuda Focus 2024 publication. 

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