Barbados is a dynamic and growing locus for insurance and the equal of any offshore jurisdiction, says Carlos Belgrave.
The offshore insurance sector in Barbados is now well-established, having been in existence for more than 16 years. Under the Exempt Insurance Act - the legislation encouraging captive insurance activities and under which an insurer must be licensed - the insurance sector on the island has been growing in recent years.
The Exempt Insurance Act was introduced in 1983 and updated in 1986 to establish Barbados as a domicile for offshore insurance activities. The legislation is both modern and flexible, and caters not only to the traditional parent-owned captive, but also to the changing requirements of the international insurance market.
The Act controls the formation, regulation and winding-up of companies engaging in `exempt insurance' business, providing qualifying companies with exemption from Barbadian taxation. The primary purpose of the Act is to encourage the development of Barbados as a responsible offshore financial centre.
Barbados is a domicile with a stable political and economic environment. Its infrastructure is constantly improving and it has made dramatic strides over the last two decades.
The country also has a well-developed domestic insurance industry, regulated by the Office of Supervisor of Insurance, which is responsible for the operation of the various Insurance Acts.
In addition, Barbados remains a major offshore jurisdiction since it benefits from a number of treaties, including those with the US, Canada and the UK. Because of the tax incentives offered through these treaties, business in Barbados becomes more attractive and enhances Barbados's competitiveness as a preferred domicile.
The availability and standards of service from insurance managers, lawyers, accountants, banks and the communications industry are excellent. There are several major international reinsurance companies with operations in Barbados and recognised international insurance managers have offices in Barbados. This enhances the reputation of Barbados as an offshore insurance domicile.
It is worthy of note, too, that experienced and trained Barbadians hold senior positions in a number of these international re/insurance companies. What's more, several indigenous insurance management companies have set up, and also provide excellent management services.
From a regulatory point of view, Barbados is signatory to the International Association of Insurance Supervisors (IAIS) core principles, which set international standards for companies both onshore and offshore. This is complemented by the role assumed by the Barbados Government, which ensures that supervisory and regulatory practices meet international standards, and where necessary amendments are made to the legislation.
Other advantages of using Barbados as an offshore domicile include:
• the 30-year guarantee by the Government of Barbados, which means that the company will not be taxed in Barbados;
• business convention expenses incurred by US corporations and organisations are tax-deductible in the US;
• dividends paid out of income earned from a captive insurance business in Barbados to a Canadian company are considered exempt surplus and are not subject to Canadian taxes, providing the risks insured are not Canadian risks; and
• exemption from all corporate, capital gains or other direct tax, or any tax on the transfer of assets or securities to any person.
Over the 16 years of its existence, the Barbadian offshore insurance sector has experienced fluctuations in growth. Over the last year, business was generally slow, but increased towards the end of the year. This trend is expected to continue, particularly in the wake of the September 11 terrorist attacks, since more activity has been generated and more investors are looking to invest in the Caribbean.
At the end of 2000, there were 180 captives licensed, with an asset base of $15.9bn and gross premium volume of $5.9bn. The primary source of business is from the US and Canada, where Barbados is well-established because of both its size and logistics.
Segregated cell legislation and branch legislation have been implemented. This has put Barbados on par with countries such Bermuda and the Cayman Islands, and given a competitive advantage, though implementation of the legislation may create teething problems in the initial stages. Also, since the legislation is placed under the Companies Act, companies other than re/insurance companies will be making enquiries. The challenge will be Barbados' ability to respond to any enquiries, and to address them in a reasonable timeframe.
With the new statutes in place, the island hopes to see new types of companies developing in Barbados and business becoming more sophisticated. An increase in business activity is anticipated, as Barbados is on a par with the major competitors in the offshore insurance sector.
By Carlos Belgrave
Carlos Belgrave is the Supervisor of Insurance, Barbados. He is a Member of the Chartered Association of Certified Accountants and holds a Master's in Business Administration.