PricewaterhouseCoopers spells out the details for those wishing to start and maintain an insurance company in Barbados.

Exempt Insurance Act

Features of the Barbadian Exempt Insurance Act include:

  • a zero rate of tax on income and exceptions from all withholding taxes, exemption from tax on the sale or transfer of any assets (including securities);

  • no requirements to file tax returns or to publish financial information;

  • exemption from exchange control regulations;

  • reasonable solvency requirements;

  • no necessity for `physical' meetings in Barbados;

  • accessibility to some tax treaties;

  • personal tax concessions for specially qualified employees;

  • inward and outward redomiciliation provisions;

  • fixed annual government fee of $2,500;

  • guarantee of benefits and exemptions for a period of 30 years;

  • modern and flexible corporate law; and

  • convention expenses allowed by US tax authorities.

    Qualifying insurance companies

    A company registered under the Insurance Act may apply for a certificate of qualification if at least 50% of its premiums, and at least 90% of its risks insured, originate outside the Caricom region. Benefits include:

  • a tax credit based on the level of premiums originating outside Caricom that can reduce tax payable on general insurance business to 2.8% of taxable income and on life insurance business to 0.35% of gross investment income;

  • exemption from most withholding taxes, exemption from transfer tax on the sale or transfer of any assets (including securities);

  • no requirement to publish financial information if zero premiums and risks originate within Caricom;

  • exemption from exchange control regulations;

  • reasonable solvency requirements;

  • tax treaty network fully accessible;

  • personal tax concessions for specially qualified employees;

  • inward and outward redomiciliation provisions;

  • fixed annual government fee of $2,500; and

  • modern and flexible corporate law.

    While some level of tax credit will be available if international insurance is carried on, the other tax benefits will not apply where the 90% threshold test is not met.

    Establishing an exempt insurance company

    Exempt insurance is defined as a business whose risks and premiums originate outside Barbados, and which is owned by persons resident outside of Caricom.

    In order to establish an exempt insurance company in Barbados, an application must be submitted to the Supervisor of Insurance. Permission to incorporate an exempt insurance company must first be obtained from the Supervisor, based on a draft application. Once this has been done, the final application is then submitted to the Supervisor with the required information, including:

  • objectives of the company, which must be restricted to exempt insurance;

  • the proposed source of business, together with the names and addresses of affiliates;

  • the proposed reinsurance programme, if any;

  • estimates of the gross and net premium income for the first year;

  • the proposed capitalisation of the company, with $125,000 as the minimum stated capital (or, in the case of a mutual company, contributed reserves) required to obtain a licence. Additional capitalisation may be required to meet solvency margins, and irrevocable letters of credit may be included in capital in establishing solvency under the Act;

  • the proposed fiscal year end of the company;

  • the name and address of any guarantor, and the amount of any guarantee, if applicable;

  • copies of reinsurance cover notes and contracts;

  • the full name, nationality, home address, country and date of birth, and business experience (including directorships held) of persons to be appointed directors. There may be any number of directors, one of whom must be a resident citizen of Barbados;

  • the name and address of an individual resident in Barbados on whom notices from the Supervisor of Insurance may be served. This may be the Barbadian director, the local management company or any other person;

  • the name and address of the actuary, if any, to be engaged by the company; and

  • supporting documents, which are copies of incorporation documents, the auditor's certificate on opening balance sheet (following capitalisation), a list of directors, a copy of the management contract, and a letter of acceptance of responsibility by the resident representative.

    To ensure the efficient processing of an application, certain steps should be taken. Firstly, the applicant should engage a firm of chartered accountants or attorneys-at-law or an exempt insurance management company in Barbados to prepare the application on the company's behalf and submit it to the Minister of Finance for his approval. The next step is to select and appoint relevant Barbados professional service providers, including an exempt insurance management company (unless the exempt insurance company has in-house management), a firm of auditors, a firm of attorneys-at-law, and bankers. Finally, the applicant should appoint the first directors of the company, including at least one resident citizen of Barbados.

    Registering an insurance company

    To register under the Insurance Act, a company must submit to the Supervisor of Insurance a completed application containing the same basic information as for an exempt insurance licence, supported by the relevant documents. Where the Supervisor is satisfied that at least 90% of the company's premiums do or will originate outside of the Caricom region, a certificate of qualification will be issued.

    Solvency

    The solvency requirements for both exempt and qualifying insurance companies are the same. For general insurance business, the value of assets must exceed liabilities by $125,000 during the first year, and in subsequent years if the annual premium income does not exceed $750,000.

    Otherwise, after the first year, the required solvency margin is 20% of annual premium income on the first $5m and 10% thereafter. All calculations are based on the net earned premium of the preceding financial year.

    For long-term insurance business, the value of assets must exceed liabilities.