“
The reduced frictional costs of entry and speed to market of the SAC concept is clearly an opportunity that we expect to see develop further.
meetings and also placements into the commercial markets; it also assists with the quality and professionalism of the infrastructure in Bermuda.
”
While captives were the foundation of the insurance market in Bermuda, the development of the commercial market has ensured a steady source of talented individuals in management, auditing and legal services. Our management teams have significant years of experience, but in many cases our newer staff also have a captive background through the auditing firms and other local service providers.
Opportunities for growth
The growth and innovation of the commercial markets, whether hedge- fund backed reinsurers, insurance-linked securities (ILS) structures or life and annuity products, have provided management companies with increased opportunities to offer financial and administrative support and this interaction feeds directly into the ability to ensure the captive managers have well trained staff and the capacity to consider alternative structures and opportunities for captives.
The rapid growth of the ILS market and Bermuda’s positioning as the domicile of choice, due to the reinsurance market expertise already existing on the Island, has led to a steady increase in captive opportunities in this area.
Looking further afield, we continue to look for growth opportunities in Latin America in partnership with the Bermuda Business Development Agency. Each country poses its own unique challenges—Columbia, Peru and Chile have been particularly positive and we expect to have further engagement with the region. The opportunities are significant and Bermuda has a leading presence in the region, developed by one-on- one meetings, attendance at regional conferences and also thanks to the commitment shown to the region through Spanish-speaking sessions at the Bermuda captive conference. As an aside, the success of the June 2014 conference was highlighted by the record number of 745 attendees.
Although regulatory and tax issues continue to be a challenge and a significant administrative burden for all domiciles, some positive developments have been achieved, such as Bermuda’s elevation to the
48 Bermuda Finance | 2014
Organization for Economic Cooperation and Development’s ‘white list’ category. The signing of 40-plus bilateral tax information exchange agreements (TIEAs) has assisted with the entry to Latin America and also levelled the playing field in the Canadian marketplace with respect to favourable tax treatment when compared with Barbados, the previous stalwart of the Canadian captive market.
Finally, we should not overlook that the US remains Bermuda’s primary source of captives, with more than 60 percent of our client base being derived from its shores. Although the success of the Bermuda model has led to increased captive domicile legislation in the US, the clear competitive reasons for a Bermuda captive led to a third of the new incorporations in 2013 originating from the US.
While Bermuda has a wide breadth of industries as captive owners, it is worth noting that the largest industry sector is healthcare and with developments in US healthcare reform, primarily those following from the Affordable Care Act, opportunities for increased growth in this area are significant.
The overriding sense from the captive marketplace is of opportunity and potential even in a soft commercial insurance cycle. From a variety of sources we see the potential for new captives, from our traditional marketplaces, in emerging geographical locations and also through the new insurance and reinsurance sectors. Bermuda is uniquely positioned to take advantage of these opportunities to enhance and consolidate our position as the premier captive domicile.
Robert Paton is president of the BIMA. He can be contacted at:
robert.paton@
aon.com
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