29 May 2014Bermuda analysis

Outstanding service

The Bermuda BDA details the Island’s strengths within the captive space and the steps the agency is taking to welcome new entrants to the Bermuda market.

How was the BDA set up and what is its role?

The Bermuda Business Development Agency (BDA) was formed through the merger of the Insurance Development Council (IDC) and Business Bermuda to ensure that business development efforts—across multiple financial sectors—have a common strategic direction. The organisation’s overall objectives are to enhance and sustain existing business, while proactively targeting new business opportunities, in order to grow GDP and create jobs.

Instrumental in the success of the BDA was the launch of 10 industry focus groups which are used as a means to cultivate innovation, explore new opportunities and regions, and generate strategic initiatives that will raise international awareness and attract new business to Bermuda.

How significant is the captive industry to Bermuda’s business growth?

Bermuda is the largest captive domicile and one of the three leading reinsurance centres in the world, alongside New York and London. The presence of commercial insurance and reinsurance companies in Bermuda allows captive owners and operators to access open market underwriting capacity not found in any other captive domicile, making Bermuda a one-stop shop for insurance business.

The captive insurance business has played a founding role in the development of the Bermuda insurance market and remains one of Bermuda’s core business activities, recently providing nearly $20.3 billion in annual gross written premiums.

The US is the largest source of captive business for Bermuda, accounting for almost 60 percent of the Island’s insurance formations that are used to insure and reinsure healthcare, general liability, auto liability, workers’ compensation, property, marine and a host of other programmes.

New source markets have emerged in Latin America, Canada, the Asia-Pacific, Africa and Australia as companies look at alternatives to traditional insurance-buying practices and increase their use of self-insurance and alternative risk financing mechanisms.

Captives are also playing a role in the growing insurance-linked securities (ILS) sector. With nearly 50 percent of the world’s ILS listed in Bermuda, it is a leading centre for insurance securitisation transactions. A growing trend is to use captives as transformers to access this capacity.

What is the BDA doing to welcome and establish new captives?

The BDA offers a concierge service that can be used by potential captive owners to learn more about the Bermuda market and the process for establishing a captive. The BDA uses a team approach to work with key market stakeholders in the industry—hotels, Bermuda immigration, lawyers, realtors and professionals in the wider insurance industry—to help make doing business easier and more efficient. The BDA can help any new captive by providing a primary point of contact to help clients navigate through the respective ministries and facilitate dialogue with the Bermuda Monetary Authority (BMA) and key contacts within the business community.

Internationally, the BDA supports the growth of captive business by participating in international conferences, events and seminars where Bermuda’s captive market strengths can be shared. The BDA is committed to working with all its partners in the captive and service industries to ensure a high level of service. It is the BDA’s objective to make doing business in Bermuda easier and more efficient.

What can Latin American parents of captives expect from the BDA and the Island?

Apart from sensible regulation and a solid reputation, Latin American

parents of captives greatly value Bermuda for its quality expertise found in the many available world-class service providers and the presence of commercial insurance and reinsurance companies—15 of the top 40 global reinsurers are based in Bermuda. This allows captive owners and operators to access open market underwriting capacity not found in any other captive domicile.

Bermuda also recognises the value of establishing trade relationships with Latin America. By signing tax information exchange agreements (TIEAs) with Mexico, Argentina and Brazil, Bermuda is showing that diversification of the economy is not just about expansion of industries but of broadening its strategic links and economic partnerships. As more Latin American TIEAs are entered into, more parents of captives will come to recognise that Bermuda is a well-regulated, forward-looking, attractive and leading offshore financial jurisdiction, which is at the forefront of compliance with international tax information exchange and transparency standards.

What sets Bermuda apart from the captive competition globally?

Bermuda is known as a premier international financial centre that is highly regarded for its global standards of compliance, regulation and infrastructure.

The first Bermuda captive was formed in 1962, and almost 900 captives are currently domiciled on the Island. Bermuda captives have assets of more than $85.3 billion and retain healthy capital positions with a surplus of $42.1 billion. To remain attractive and to compete with other domiciles, Bermuda ensures that its regulatory standards are fit for purpose. This effort is led by the BMA which is internationally recognised for its pragmatic, risk-based approach to regulation.

In addition to regulation, Bermuda offers efficient incorporation procedures that allow a captive insurance company to be formed in three to six weeks. It maintains quality jurisdictional standards by continually re-engineering Bermuda’s regime to ensure alignment with relevant evolving global standards. With 41 signed bilateral TIEAs in place, Bermuda holds a very high rating within the Organisation of Economic Development (OECD) and is lauded as a first class domicile.

In addition, Bermuda is also home to a diverse group of industries which are supported by asset managers, fund administrators, trustees, wealth managers, re/insurers, captive managers, lawyers, accountants, brokers, private clients, and partnerships and is recognised as a preferred domicile by many international businesses for its ability to offer one-stop shop solutions.

With Bermuda providing intellectual capital, first-world infrastructure, government incentives and its strategic geographic location (Bermuda is well placed between most gateway cities and a direct flight from many key markets), it is easy to see how Bermuda is clearly an ideal and preferred location for companies looking for a captive domicile.