1 title captives & insurance november 2014 the bermuda advantage
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TITLECaptives & InsuranceNOVEMBER 2014
THE BERMUDA ADVANTAGE
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BERMUDA BUSINESS DEVELOPMENT AGENCY (BDA)Jereme Ramsay
Business Development Manager - Risk Solutions & LatAm Portfolio
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Why Bermuda?
Largest captive domicile
Access to reinsurance market; Bermuda is one of three leading reinsurance centres in the world
One-stop-shop for risk management solutions
Strong legal and regulatory framework
Proven track record of insurance capacity and claims payment when it really counts: 80’s Capacity Crunch, Hurricane Andrew, World Trade Center, Hurricanes Katrina, Rita, Wilma, Sandy… etc.
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BERMUDA REGULATORY ENVIROMENT, REPUTATION & TRANSPARENCYEduardo Fox
Economist (Appleby) & Head of BDA LatAm Committee
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What is a Tax Information Exchange Agreement (TIEA)?
A bilateral agreement
For the purpose of exchanging tax information
To assist administration and enforcement of domestic tax laws
To combat tax evasion and tax havens and to address harmful tax practices
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International Information Exchange
Today, Bermuda has information exchange agreements with over 80 countries, including 41 TIEA agreements in place with 90% of G20, 76% of OECD and 52% of EU member states. In September 2013, Bermuda joined the OECD Multilateral Conversation on Mutual Assistance in Tax Matters (i.e. the Multilateral TIEA “the Convention”) to facilitate cooperation between over 80 jurisdictions in the assessment and collections of taxes, in particular to combat tax avoidance and evasion.
Bermuda's 80 partner jurisdictions in the Convention include all G20 countries, and all OECD countries except for one, and all EU countries except for two because those three countries have not yet signed the Convention.
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Information Exchange with Latin American Region
Mexico TIEA in force
Colombia TIEA in force
Argentina TIEA in force
Brazil TIEA signed; awaiting ratification
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Bermuda Monetary Authority Overview
The Bermuda Monetary Authority is the integrated regulator of the financial services sector in Bermuda
Established in 1969 by an Act of Parliament
Functions independently from the Bermuda Government, however, the BMA often advises the Ministry of Finance in matters pertaining to financial services
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Pragmatic Approach to Regulation
Captive vs. Commercial
Risk-Based Approach
Role of Principal Representative
Role of Insurance Manager
Insurance Manager On-sites
Captive, Segregated Accounts Companies (Rent-a-Captives), and other forms of reinsurance.
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CAPTIVE 101 Daniel Message
AVP, Captives | R&Q Quest Management Services Limited
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Introduction: What is a Captive?
A special purpose (re)insurance vehicle
A SEPARATE COMPANY, set up by the parent company
Sophisticated risk management tool and designated profit centre
May be established onshore or offshore
Different layers of coverage can be retained or transferred
Captive owners actively participate in decision making
Captive = integral part of an Enterprise Risk Management strategy
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Introduction: Captive Uses
The captive (re)insures some or all risks of parent and/or related parties.
Many structures exist, including:
PURE CAPTIVES
SEGREGATED CELLS
AGENCY CAPTIVES
GROUP CAPTIVES
ASSOCIATION CAPTIVES
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Introduction: Typical Lines (Re)insured
Lines (re)insured via a captive are multitude.
Depend on entity, line of business, location, loss history, amongst other things.
Typical lines insured include (but are not limited to): Property Political risk Auto Professional liability Credit risk Cyber Difference in conditions Non-traditional and highly specialized lines
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Summary – How it Works
CAPTIVE
INVESTMENT INCOME
LOSSES
EXPENSESREINSURANCE
INVESTMENTS
PREMIUMS
CAPITAL DIVIDENDS
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Number of Captives: Continual Growth
6,000
Source: Best’s, Business Insurance
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The Key Reasons
COST REDUCTION
COVERAGE: ACCESS TO
REINSURANCE
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CASHFLOW:INVESTMENT
INCOME
CONTROL:ADMINISTRATIVE
TOOL
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Bermuda’s Captive Regulation: Classes of General Insurance
Pure Captives
CLASS 1 Group /
Association Captives
Captives writing less than 20% unrelated business
CLASS 2 Captives writing
up to 50% unrelated business
CLASS 3
Small Commercial Insurers
CLASS 3A Large
Commercial Insurers
CLASS 3B Property
Catastrophe / Excess Liability
CLASS 4
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Bermuda’s Captive Regulation
• Pure Long-Term CaptiveClass A
• Class 2 type Long-Term CaptiveClass B
• Varying commercial Long-Term insurers classified by asset size
Class C, D, & E
Assumes insurance or re(insurance) risks and fully funds its exposure to such risks through a debt issuance or some other financing
SPI
CLASSES OF LONG-TERM INSURANCE SPECIAL PURPOSE INSURERS (SPIs)
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New Business from the LatAm region
Formation of new Latin American captives continues in 2013, most recently from Colombia, Brazil and Peru.
Additional applications currently in progress
New captives were formed by quality (Fortune 500 sized) businesses from Latin America
Formed ‘pure’ captives / for ‘traditional’ uses
Located in Bermuda to access reinsurance market
Used to improve risk management practices, to move deductibles across entities/jurisdictions
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CASE STUDYJavier Mirabal
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THANK YOU!For more information about The Bermuda Advantage, please contact:
Jereme Ramsay Business Development [email protected]
Eduardo FoxEconomist (Appleby) & Head of BDA LatAm [email protected]
Daniel Message AVP, Captives | R&Q Quest Management Services [email protected]
Javier MirabalExecutive Director | [email protected]