The Canadian
Market Explored
Paul Arbo, CPA, CA, ACI
BDO Cayman Islands
Partner
Stephen B. White, CPA, CA
Kane Group
Business Development Director
Canadian Captive Historical Overview
Starting in late 1980’s the Canada-Barbados drove significant business
to Barbados including captives, IBC’s and offshore banks.
There have been several changes over the past 25 years but the
benefits of using Barbados as a domicile have largely remained
unchanged.
1995 brought changes to third party unrelated business such as
extended warranty business and creditor life.
During the early 2000’s there was great debate on if a zero tax rate was
indeed a true tax rate.
Canadian Captive Historical Overview
Most Canadian owned captives ended up in Barbados from large
multinationals to smaller ones
In rare circumstances did a Canadian-owned captive locate in any
other domicile
• Only around 20 captives domiciled in British Columbia (BC)
today – mainly BC risks
• BC has had captive legislation in place since 1988
• Bermuda currently the second largest domicile for Canadian
captives
There have been several captives leaving Barbados for other locations
in more recent years
Canadian Captive Historical Overview
Use of captive insurance vehicles by Canadian companies historically
the domain of large multi-national oil & gas and mining companies, etc.
Mid-sized and even smaller entities now exploring captive insurance
options
Now over 250 Canadian-owned captives globally. New captive
formations include:
• Resources / commodities sectors
• Oil & gas, mining, agriculture
• Group / association captives
• Reciprocals / pools
Canadian Market Compared to US
Very different market vs. the United States
• Litigation environment
• Health care legislation
• Sheer number of multi-nationals
• Traditional insurance market
• Workers’ compensation regime
• Cost/benefit case a tougher one to make in Canada, generally, and
• Smaller population of larger companies/entities
... Group captive structures may be more suitable/feasible
Canadian Activity in Cayman
• There are now approximately 10-15 Canadian owned captives in
Cayman
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Most are either group or owned by owner-managed companies
Retail and investment banking arms of RBC, Scotia and CIBC
Various mid-tier investment management business have a presence
Holdco structures for non-Canadian investments
Private wealth management structures such as trusts
Tourism
“Transplanted” Canadians hold senior roles in many financial
services firms
• Provides a certain comfort level in terms of professional approach
and relationships
Recent Developments In Canada
There are relatively few large risk managed companies that either
do not have a captive or have decided that they do not need one
Today there is greater activity in the:
• “Middle” market
• Privately owned company space
• Group captive space
• Mid-tier brokerage firms are offering more risk management
advice
TIEA between Cayman and Canada has increased opportunities
TIEA – An Opportunity
On June 1, 2011 Cayman entered into a TIEA with Canada which
changed the competitive landscape
Cayman domiciled captives now subject to effectively the same tax
benefits that Barbados has enjoyed
A Tax Information Exchange Agreement is:
• designed to fight tax evasion,
• a bilateral agreement,
• designed to aid in the exchanging of tax information.
TIEA – An Opportunity
The OECD introduced them in the late 1990’s to promote
international co-operation in tax matters by exchanging
relevant information to combat the lack of transparency
and co-operation between countries.
Cayman currently has 30 TIEA’s in force.
There are discussion on what is better, a TIEA or a tax
treaty.
TIEA – Its Impact
 The TIEA effectively generates income in a captive free from
Canadian tax when earned and when paid.
 Exempt income is earned as opposed to FAPI (Foreign
Accrual Property Income)
 Qualifying income must be generated from an affiliate
outside of Canada and resident in a treaty or TIEA country.
 There are approximately 90 countries with tax treaties with
Canada.
 There are 16 countries with TIEA’s with Canada and 14
more are pending.
How to attract Canadian Business
Educate, Educate, Educate
Promoting the quality of the regulations, service providers and
regulators
• Put our people front and center
• Profile-building
Promote the long history of the Cayman insurance industry
Market Cayman to the brokers, lawyers, bankers and insurance
companies who can influence the decision makers
• “Grass roots” initiative
• Get our people in front of the right people
How to attract Canadian Business
Remain persistent in our marketing efforts
Show more of a concerted effort:
• “IMAC/private” partnership approach to Canadian conferences
• More marketing collateral and thought leadership specific to
the Canadian market
• Better knowledge sharing amongst Cayman service providers
in terms of Canadian producers/referral sources
Cayman not just “open for business”... must
do a proper sell job (i.e. when & why are we the
better choice).
Expected Activity In 2015
• Cayman will be considered as a leading domicile choice by
new Canadian captive owners
• Cayman will be considered as a potential new domicile for
existing Barbados-domiciled captives
• New business will be slow to come as Cayman has to
continue to market itself – “long play”
• Cayman must innovate to find ways to fund marketing
budget / “stretch” what dollars are available
Questions?