THE BAHAMAS
“The Bahamas has always had market-
friendly insurance legislation in place, and legislative changes in recent years have consolidated the jurisdiction’s approach to the sector.”
The legislative and regulatory regime establishes a clear, predictable and efficient structure whereby a captive insurance company covering risks outside The Bahamas may be established in The Bahamas. It also provides a clear response to the demand for cost-effective means of entering into captive or self-insurance by small to medium-sized enterprises, while satisfying international standards.
Principal features of the regulatory requirements are:
• Captives must be registered as external insurers under the Act; such registration is renewable annually;
• Company name is subject to approval of the commission; • Minimum of two directors;
• Annual audited financial statement to be submitted to the commission four months after the fiscal year-end;
• Actuarial valuation of life insurers at least every three years; and
• Every insurer must appoint a resident representative in The Bahamas; this person must be able to represent the insurer.
The minimum capital requirements applicable to external insurers are $200,000 for insurers carrying on long-term insurance business, and $100,000 for insurers carrying out general insurance business. Life insurers are required to maintain assets in excess of liabilities (including actuarially determined reserves) of $200,000.
Accessibility to the US and South America makes The Bahamas particularly attractive for the development and expansion of a captive insurance industry. Since captive insurance companies are normally regulated in the jurisdiction in which they are organised, insurance policies and negotiations must be carried out in the country of organisation. For companies in the western hemisphere, ease of access to the jurisdiction is a real plus.
Life insurance and annuities are also excellent. Well known wealth management instruments for tax planning and asset protection are on-island. Private placement life insurance and annuity policies provide qualified investors with the opportunity to invest in more tailored investment solutions and to react quickly to changes in the market landscape. Due to its robust asset protection laws and its
100 CICA | Forty years of captive leadership
location, The Bahamas is an ideal jurisdiction from which to operate a private placement life insurance company.
The EIA 2009 provides for the establishment of segregated accounts by an external insurance company conducting “variable insurance business” as defined under the Act. The assets of a client held in any such segregated, or separate, account will not form any part of the liability of the insurance company. Accordingly, in the event of liquidation of an external insurance company licensed under the Act, the client’s assets will not form a part of the general assets of the insurance company and therefore will not be available to creditors of the insurance company.
The EIA 2009 restricts the distribution of any assets held under a policy of insurance issued on the life of the policyholder, or another person, to any third party not designated in the policy. It also makes the proceeds of such a policy exempt from the claims of any creditor of the policyholder, or the insured, or the estate of either of them, and of any other beneficiary (or other claimant other than a beneficiary under the policy), or the estate of any beneficiary under the policy. Similar protection is granted to the holder of any annuity contract issued by a licensed external insurance company.
In addition, the EIA 2009 has incorporated the asset protection mechanism set out in the Fraudulent Dispositions Act. This provides the basis for the offshore protection of trust assets, by providing the specific circumstances in which an action may be pursued by a creditor of a policyholder who hopes to be paid out of the assets of the separate account held by the licensee for the benefit of such policyholder.
This combination of location, a modern and compliant regulatory regime, market responsive insurance legislation and a long-established financial services culture are integral parts of ‘The Bahamas advantage’, and make it an attractive choice for insurance business. l
Aliya Allen is chief executive officer and executive director of The Bahamas Financial Services Board.
Michele Fields is the superintendent of the Insurance Commission of The Bahamas.
For further information visit:
www.icb.gov.bs and
www.bfsb-bahamas.com
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