US banker Eugene Justus, who has in-depth experience of the insurance sector in both the US and offshore markets, talks about his company's experience in Barbados.
Global Reinsurance:Tell us something about your clients.
Eugene Justus: We have a very diversified portfolio of captive insurance clients in all the major domiciles and, increasingly in the past two years, a growing portfolio of relationships with the largest well-established and new insurance companies in Bermuda. Historically, our clients were primarily US companies, among them a large number of Fortune 1000 companies with captives in Barbados and other onshore and offshore jurisdictions. Now, however, the parent companies are broadly diversified in the US, Canada, Europe, South America and Japan.
Global Reinsurance: Barbados has been described as the captive world's `best-kept secret'. Do you agree?
Eugene Justus: Barbados has been far more successful in developing its international sector than many realise. A number of our largest and most important clients have chosen Barbados as their international jurisdiction of choice. These are world-class companies that would be welcomed anywhere in the world. The quiet but substantial success that Barbados has enjoyed has been developed through referrals from leading industry professionals, rather than by relying upon concentrated marketing efforts at industry conferences. Word of mouth, historically, is the route that has been taken.
Global Reinsurance: Barbados has succeeded in building a significant captive sector. To what do you attribute its success?
Eugene Justus: Barbados has thrived because it has carefully cultivated a partnership between the public and private sectors. The Barbadians have extended a warm and gracious welcome to our bank and to our clients. One of my favourite people, who epitomises Barbados hospitality, is Dr Trevor Carmichael, an attorney who specialises in captive insurance company formations, and who is an author and world traveller. He exemplifies Barbadian hospitality by never being too busy to meet with anyone interested in meeting with him to discuss their business requirements. Barbados also has a solid corps of extraordinarily hospitable and helpful professionals: leading audit firms such as Ernst & Young, captive management firms such as Aon, and local management firms such as Towner Management, where Chris Evans is an outstanding local captive manager.
Barbados has maintained its legislation to remain competitive with other domiciles, including segregated cell legislation and exempt insurance company provisions. The Government of Barbados has successfully resolved the OECD (Organisation for Economic Co-operation and Development) money laundering issue and has come to be recognised by our clients and others as a well-regarded offshore financial services centre.
Global Reinsurance: Bermuda and the Cayman Islands have well-developed insurance communities. Is Barbados `the next big thing' in offshore insurance?
Eugene Justus: Barbados already has a substantial presence in the captive insurance industry and is one of the major offshore domiciles. The industry is changing rapidly, however. The existing domiciles are marketing themselves much more aggressively. Barbados is vulnerable to the increased marketing efforts of other domiciles. Several of our clients told us that their business development plans for Barbados were put on hold while the OECD anti-money laundering initiative was dealt with. The insurance managers in Barbados are keenly aware of the increased business development efforts of other domiciles, for example the British Virgin Islands, under the very capable leadership of Bill McCullough, the insurance regulator there. They are equally aware of the establishment of new US domiciles, such as South Carolina, Vermont, Washington DC and Arizona.
The Barbados industry has also noted the success of the marketing efforts of Vermont and Hawaii, which have conducted business development seminars in various US cities to meet existing and new clients, as well as South Carolina's captive conference. Barbados is the only major domicile that does not host an annual or biennial captive insurance conference. Therefore, I expect Barbados to adopt a much more aggressive business development effort to remain competitive, to protect its existing client base, and to attract new business.
Global Reinsurance: Is it your understanding that the Barbados Government is hoping to follow the Bermuda model of physically present companies, rather than the Cayman model of managed captives?
Eugene Justus: Bermuda is unique, with a well-earned reputation as the world's premier offshore domicile, which has led to its remarkable success in attracting new insurance companies to be established with a physical presence in Bermuda. Barbados has also benefited by following the same business model by attracting leading insurance companies to establish a presence in Barbados.
A good example is London Life and Casualty Reinsurance Co, under the leadership of Paul Haddy, which established a physical presence in Barbados in 1990 to provide general and life reinsurance for a global customer base. With the legislative initiatives of the Barbados Government, the company has been able to expand into international trust and banking activities. AIG, arguably the world's pre-eminent insurance company, also established a physical presence in Barbados, as did Swiss Re, and during the past decade, the company has grown substantially. These successes highlight the fact that Barbados is perceived as a sophisticated insurance market.
Another notable success of Barbados has been to support international financial services by encouraging leading international banks to establish a physical presence here, including Canadian banks, Citibank and British banks. In that regard, Barbados is more progressive than Bermuda, which has actively resisted an expansion of its international banking sector. The physical presence of leading international banks in Barbados has enhanced its reputation as a stable, well-developed and well-regulated financial centre. This is one example where Bermuda could benefit by following the example of Barbados.
Global Reinsurance: Comerica is an American bank. How will the Patriot Act affect you?
Eugene Justus: The Patriot Act has actually been beneficial to us in our business, because, in this environment, our clients have increasingly examined the reasons they want to go offshore. The Act forces them to carefully think through and review their strategic business plan. Our clients are not locating offshore for tax reasons. They are there for sound reinsurance reasons. That means that leading offshore domiciles such as Bermuda, the Cayman Islands and Barbados, with well-established infrastructures, will remain attractive. We always advise our clients to carefully examine their logic for going offshore.
Global Reinsurance: Corporate executives who have visited Bermuda or the Cayman Islands might not know what to expect in Barbados. How would you describe it?
Eugene Justus: First, excellent air travel is available by US carriers and others. Barbados offers a full array of amenities for business executives. It offers exceptional quality golf at Royal Westmoreland as well as two new courses at Sandy Lane. Its hotels offer superb accommodations. Sandy Lane and my favourite, the Royal Pavilion, are located on the west coast and offer beautiful views of the Caribbean Sea. The hotels are well-equipped to meet the needs of modern business executives. The international business sector has become an increasingly important factor in the economic growth of Barbados. The restaurants in Barbados offer first class ocean-front dining on the west coast. They provide ideal settings for business meetings and have consistently met the demanding standards of our corporate clients.
Barbados has an excellent communications system, and its currency is tied to the US dollar. Once you visit Barbados, it is easy to see why it is such an appealing domicile in which to establish a captive or reinsurance company.
By Eugene Justus
Carlyle E (Eugene) Justus is first vice president, global insurance banking services at Comerica Bank, based in Detroit, Michigan, manager of Comerica Bank's Cayman Islands branch, and a director of Comerica Assurance Ltd, the bank's Bermuda-based captive.