Insurance analysis
Captives
Captive insurance is one of the key product divisions in international insurance. The captives market is dominated by international financial centres. Out of the top five jurisdictions for captives worldwide, four were offshore centres. Bermuda and Cayman are the dominant markets but BVI and Guernsey are also major players. Vermont in the United States is the only centre which could not be described as an international financial centre in the classical sense.
A recent independent survey placed Bermuda at the top of the league with 960 captives. Cayman came second with 777 and Vermont third with 557. Guernsey - the largest European centre for captives - was positioned fourth with 370 and BVI was fifth with 332. The figures relate to the year 2008 and since 2007 Guernsey and BVI have swapped places. BVI suffered a loss 60 captives over the 12 months. Guernsey grew by only two but the relative decline in the captives business in the BVI was enough to propel the jurisdiction into fifth place.
This survey - conducted by Business Insurance magazine - was at variance with a recently published analysis of the global captives market which was conducted by the Bermuda Monetary Authority. In that report, the BMA said that Bermuda had 1149 captives at the end of 2007 - a year earlier than the Business Insurance report.
Bermuda attracts a broad base of business from a variety of organisations. The vast majority of its income derives from the US but has healthy business from European organisations. Cayman is the preferred domicile for captives in the healthcare sector. 90% of captives in Cayman are owned by US parents. Vermont is the dominant domestic captive insurer in the US. Since it passed its captives legislation in 1985, it has strengthened its position due to low premium rates and by permitting branch captives. This means that bigger businesses can keep their group captives in places like Bermuda and Cayman but they can open a branch captive in Vermont for local company benefit schemes.
Guernsey insurance sector leaders are delighted to have leapfrogged BVI into fourth position. Since the Business Insurance listing is largely read by a US audience, it increases the visibility of Guernsey in the minds of insurers and clients in America. It also confirms the Channel Island's position as top dog in Europe. With 370 captives, Guernsey is significantly larger than Luxembourg at 262, the Isle of Man with 156, Dublin on 131 and Switzerland having 50.
Setting up a captive in Hong Kong
The Insurance Authority (IA) in Hong Kong outlines the procedure for establishing in the jurisdiction. It also argues why Hong Kong should be the preferred dstination for the establishment of a captive insurance vehicle. The IA has twin roles: regulator and industry facilitator. This means that it directs owners of captives to an extensive collection of goverment incentives.
The Isle of Man Insurance and Pensions Authority (IPA) provides a brief but clear analysis of the structure and purpose of captive insurance companies. The IPA describes these flexible insurance vehicles as suitable for a range of risk management options. There are a number of reasons why captives may provide a better means of risk management than the conventional market.
The latest research from the Bermuda Monetary Authority confirms that Bermuda continues to dominate the captive insurance sector. This news report provides a summary of the most recent statistical data, plus the analysis of the Authority on which jurisdictions are the key players in this lucrative and attractive market. More than 70% of captives in Bermuda are North American-owned.
Captive insurance in Mauritius
Malcolm Moller, managing partner of Appleby in Mauritius, describes the development and market conditions for captives in Mauritius. The first captive in Mauritius was established in 1997 and the market has steady grown since, predominately from South Africa. The captive insurance business is now governed by the Financial Services Development Regulations 2001 and the Guidelines on the Regulation and Supervision of Captive Insurance Business in Mauritius.
The Isle of Man Captive Industry
Captives in the Isle of Man have also come a long way since the first captive licence was issued there in 1981. The Isle of Man is now a well established captive domicile with over 160 captives resident there, many of whom are owned by blue chip companies around the world. In 2006, these captives wrote annual premiums in excess of £1 billion and had assets under management of more than £5.5bn.
