According to Peter W. Bates, the supervisor of insurance, 1998 was a year of steady if unspectacular progress.
Twenty four new captive licences were issued, 57 were renewed, with only five licences surrendered. Including the 59 credit life companies, BVI captives currently total 140. Sixty are single parent captives, three are rent-a-captives and 18 are group captives. 52 companies write direct business, 82 write on a reinsurance basis and six write both reinsurance and direct business.
Breaking all this down geographically, 129 captives originate from the US, with the remaining coming from Panama, Canada, Cayman, Netherlands, Philippines, Germany and New Zealand.
“Since the introduction of our insurance legislation early in 1995,” remarks Mr Bates, “the insurance industry has become a small but steadily growing sector of business in the islands. We have gained a new insurance manager this year already, and are anticipating another new manager's licence application in the near future. This will give us 10 managers in the islands.”
The domicile appears to be attracting a number of small to medium size companies insuring various product and professional liability risks which have a very good claims record, and who feel confident that a captive offers a long term economic advantage over commercial insurance premiums. As Mr Bates puts it: “Many of them are guided by their insurance brokers who again see the long term benefits of a regular fee income from being associated with a captive rather than the ‘win all - lose all' situation which comes from quoting annually in the commercial insurance market against very fierce competition.”
He goes on: “We are also attracting a few new group captives which we are particularly keen to have here. Group captives are without doubt one of the very best ways for groups of small businesses in the same industry to save money on insurance costs. They take some time and effort to put together, but if done properly will give their members long term benefits. The current very soft market in the commercial insurance industry is an opportune time to consider the formation of a captive, while it is possible to utilise reinsurance effectively and economically. This may well give a new company time to establish itself and build up some reserves, so that when the commercial market hardens, as it surely must, the captive is quite capable of survival.”
The BVI is currently considering some form of “protected cell” legislation, but this is not expected to happen in the near future. Mr Bates points out that BVI costs are such that even quite small captives can operate as a single unit on an economical basis.
Captives are not subject to any form of taxation in the BVI, and a number of the smaller captives emanating from the US are able to obtain relief from taxation in the mainland by virtue of specific provisions in the Internal Revenue Code.
Quality is the domicile's keyword. Mr Bates explains that :due diligence” and “know your customer” is very much the name of the game in the BVI. This extends downwards from the Financial Services Department of government, which includes all the financial services regulators, to all suppliers of financial services. “Reputation is everything in a small, so-called ‘offshore' island which generates in excess of $60 million annually in fees from the comprehensive financial services it offers to a worldwide customer base, and there is no way we would compromise our very enviable reputation for the sake of a $2,000 licence fee which we were not totally satisfied was bona fide.”
Mr Bates adds: “With the recent enactment of the Mutual Funds Act, the BVI is now able to offer a comprehensive range of services to the financial services industry, and we look to the future with confidence and optimism.”