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P uerto Rico offers offshore tax incentives while remaining under the US rule of law.

Although Puerto Rico is not physically a part of the US, its banks use the US Federal Reserve, while the US Constitution protects Puerto Rican citizens.

The Caribbean island caters for multiple structures, including pure, association, protected cell and reinsurance captives, as well as risk securitisation programmes. Its capital requirements are set relatively higher than most other jurisdictions, at USD 500,000 generally, although differences between licences do exist. For example:

• Class 1: Pure captives, which have the authority to transact insurance and reinsurance related to risks from sole owner or an affiliate, must meet a minimum requirement of USD 500,000 for combined capital and surplus, and a 5:1 premium to surplus ratio

• Class 2: Association captives, which can cover the risks of the owners or any of their affiliates, as well as certain third-party risks, must meet a minimum capital requirement of USD 500,000, or USD 750,000 with surplus, as well as a 5:1 premium to surplus ratio and a 3:1 ratio for third-party risks

In terms of fees, Class 1 applicants must pay a general fee of USD 350 and an application fee of USD 750. Class 2 applicants must pay the same general fee, but their application fee has been set at USD 1,000.

More than a dozen insurance and financial service providers joined forces in 2016 to launch the Puerto Rico International Insurers Association, which can respond to and advise related parties on insurance issues in Puerto Rico.

More information on captive insurance in Puerto Rico can be found at www.priia.org.

Puerto Rico