TITLE
THE BERMUDA ADVANTAGE
Captives & Insurance
NOVEMBER 2014
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BERMUDA BUSINESS DEVELOPMENT
AGENCY (BDA)
Jereme Ramsay
Business Development Manager - Risk Solutions & LatAm Portfolio
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Why Bermuda?
 Largest captive domicile
 Access to reinsurance market; Bermuda is one of three leading reinsurance centres in the world
 One-stop-shop for risk management solutions
 Strong legal and regulatory framework
 Proven track record of insurance capacity and claims payment when it really counts: 80’s Capacity
Crunch, Hurricane Andrew, World Trade Center, Hurricanes Katrina, Rita, Wilma, Sandy… etc.
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BERMUDA REGULATORY ENVIROMENT,
REPUTATION & TRANSPARENCY
Eduardo Fox
Economist (Appleby) & Head of BDA LatAm Committee
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What is a Tax Information Exchange Agreement (TIEA)?
 A bilateral agreement
 For the purpose of exchanging tax information
 To assist administration and enforcement of domestic tax laws
 To combat tax evasion and tax havens and to address harmful tax practices
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International Information Exchange
 Today, Bermuda has information exchange agreements with over 80 countries, including 41 TIEA agreements
in place with 90% of G20, 76% of OECD and 52% of EU member states. In September 2013, Bermuda joined
the OECD Multilateral Conversation on Mutual Assistance in Tax Matters (i.e. the Multilateral TIEA “the
Convention”) to facilitate cooperation between over 80 jurisdictions in the assessment and collections of
taxes, in particular to combat tax avoidance and evasion.
 Bermuda's 80 partner jurisdictions in the Convention include all G20 countries, and all OECD countries
except for one, and all EU countries except for two because those three countries have not yet signed the
Convention.
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Information Exchange with Latin American Region
 Mexico
TIEA in force
 Colombia
TIEA in force
 Argentina
TIEA in force
 Brazil
TIEA signed; awaiting ratification
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Bermuda Monetary Authority Overview
 The Bermuda Monetary Authority is the integrated regulator of the financial services sector in Bermuda
 Established in 1969 by an Act of Parliament
 Functions independently from the Bermuda Government, however, the BMA often advises the Ministry of
Finance in matters pertaining to financial services
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Pragmatic Approach to Regulation
 Captive vs. Commercial
 Risk-Based Approach
 Role of Principal Representative
 Role of Insurance Manager
 Insurance Manager On-sites
 Captive, Segregated Accounts Companies (Rent-a-Captives), and other forms of reinsurance.
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CAPTIVE 101
Daniel Message
AVP, Captives | R&Q Quest Management Services Limited
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Introduction: What is a Captive?
 A special purpose (re)insurance vehicle
 A SEPARATE COMPANY, set up by the parent company
 Sophisticated risk management tool and designated profit centre
 May be established onshore or offshore
 Different layers of coverage can be retained or transferred
 Captive owners actively participate in decision making
 Captive = integral part of an Enterprise Risk Management strategy
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Introduction: Captive Uses
 The captive (re)insures some or all risks of parent and/or related parties.
 Many structures exist, including:
PURE
CAPTIVES
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SEGREGATED
CELLS
AGENCY
CAPTIVES
GROUP
CAPTIVES
ASSOCIATION
CAPTIVES
Introduction: Typical Lines (Re)insured
 Lines (re)insured via a captive are multitude.
 Depend on entity, line of business, location, loss history, amongst other things.
 Typical lines insured include (but are not limited to):
 Property
 Political risk
 Auto
 Professional liability
 Credit risk
 Cyber
 Difference in conditions
 Non-traditional and highly specialized lines
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Summary – How it Works
INVESTMENT
INCOME
PREMIUMS
CAPITAL
LOSSES
CAPTIVE
REINSURANCE
INVESTMENTS
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DIVIDENDS
EXPENSES
Number of Captives: Continual Growth
6,000
Source: Best’s, Business Insurance
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The Key Reasons
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1
2
3
4
COST REDUCTION
COVERAGE: ACCESS
TO REINSURANCE
CASHFLOW:
INVESTMENT INCOME
CONTROL:
ADMINISTRATIVE
TOOL
Bermuda’s Captive Regulation: Classes of General
Insurance
CLASS
1
CLASS
2
Pure Captives
Group /
Association
Captives
CLASS
3
Captives writing
up to 50%
unrelated
business
Captives writing
less than 20%
unrelated
business
CLASS
3A
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Small
Commercial
Insurers
CLASS
3B
Large
Commercial
Insurers
CLASS
4
Property
Catastrophe /
Excess Liability
Bermuda’s Captive Regulation
CLASSES OF LONG-TERM INSURANCE
Class A
• Pure Long-Term Captive
Class B
• Class 2 type Long-Term
Captive
Class C, D,
&E
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• Varying commercial LongTerm insurers classified by
asset size
SPECIAL PURPOSE INSURERS (SPIs)
SPI
Assumes
insurance or
re(insurance)
risks and fully
funds its
exposure to
such risks
through a debt
issuance or
some other
financing
New Business from the LatAm region
 Formation of new Latin American captives continues in 2013, most recently from Colombia, Brazil and Peru.
 Additional applications currently in progress
 New captives were formed by quality (Fortune 500 sized) businesses from Latin America
 Formed ‘pure’ captives / for ‘traditional’ uses
 Located in Bermuda to access reinsurance market
 Used to improve risk management practices, to move deductibles across entities/jurisdictions
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CASE STUDY
Javier Mirabal
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For more information about The Bermuda Advantage, please contact:
Jereme Ramsay
Business Development Manager
Jereme@bda.bm
Eduardo Fox
Economist (Appleby) & Head of BDA LatAm Committee
EAFox@applebyglobal.com
Daniel Message
AVP, Captives | R&Q Quest Management Services
Daniel.message@rqih.com
Javier Mirabal
Executive Director | Fundalarys
jmirabal@alarys.org
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THANK YOU!