The pace of pure captive registration slowed in Bermuda in 1999 with sponsors looking for the flexibility to write third party business that a class 3 licence offers. Total new companies in Bermuda in 1999 were 84, a small drop on the record levels of 96 added in 1998 and 93 in 1997. There were only six new single owner captives writing sponsor-only business, class 1 companies, registered in 1999, and 16 new class 2 companies for larger captives writing up to 20% third party business. However, there were 43 new class 3 companies, which include larger captives with the ability to write material amounts of third party business as well as commercial (re)insurance companies. A class 3 licence enables the captive owner to use its capital more efficiently by taking on third party business, often for related parties.

The shift away from the simplest type of captive was already emerging from the statutory financial returns for 1998, published on 29 December 1999. Gross premiums written by class 1 companies were down 28% from $2.9 billion in 1997 to $2.1 billion in 1998. Class 2 companies increased their gross written premiums by 10% from $4.0 billion to $4.4 billion, and class 3 companies showed a 16% increase from $12.8 billion to $14.8 billion.

Bermuda's position as the premier captive domicile is not just about numbers of captives, but also about their size and stature. For example, OIL Insurance, the petroleum industry mutual, has been operating for more than 28 years. In 1998, it showed net income of $487.7 million and

shareholders' equity topped $2 billion, even though the company refunded $200 million to shareholders as a special dividend. OIL insures specific property, pollution liability, cost of well control and other catastrophic risks for its membership of 47 international energy companies.

Developments
Agency rent-a-captives are increasingly popular, according to Nicholas Dove, president of Skandia International Risk Management Ltd and past chairman of the Bermuda Insurance Managers Association (BIMA). Bermuda is planning to introduce public legislation to authorise protected cell/segregated portfolio companies, as the Cayman Islands and Guernsey have done successfully. A draft act was due to go to the Attorney General's Chambers as we went to press. According Warren Cabral, head of insurance for Appleby, Spurling & Kempe, who was involved with its preparation, it should be introduced into the House sometime in the summer and could be law by the end of July.

The new legislation should make it simpler, faster and cheaper to form protected cell captives or segregated portfolio captives. Currently, it has to be done through a private bill in Parliament, and costs are said to be between $8,000 and $15,000 with a process that may take as long as six weeks.

Michael Hardy of Liberty International Management (Bermuda) is the new chairman of BIMA. He was elected in January for a two year term.

In December 1999, ACE Bermuda announced it was setting up a new captive operation under Roger Gillett, who has extensive experience in captive and rent-a-captive management. Mr Gillett, senior vice president, business development “will identify how the new captive operation can capitalize on ACE's unique position in Bermuda as well as take advantage of opportunities in key markets such as Japan, Southeast Asia and Europe,” according to the announcement. Bermuda is increasingly optimistic that it will be not be included in a list of harmful tax jurisdictions being compiled by the Organisation for the Economic Co-operation and Development (OECD). As a British dependent territory, Bermuda has to meet OECD regulations and governments that refuse will be subject to OECD “coordinated counter measures”.

In his 2000 budget speech, finance minister Eugene Cox indicated that the news from the OECD was good - but he was not free to elaborate. The government has been working hard to avoid being designated a harmful tax jurisdiction since the OECD began consideration of national tax practices which were considered harmful to the world economy. The final list will be reported to the OECD general council meeting in June.

As one of the island's measures to increase overseas understanding and awareness of Bermuda, the Bermuda International Business Association (BIBA) at the end of last year appointed a public relations firm, Fleishman-Hillard, to handle its public relations and communications in Europe.