Insurance Industry in The Bahamas
In 1994, the Government of The Bahamas listed "Captive Insurance" as one of the areas especially targeted for overseas investment. The thrust is a cooperative movement between Government and the private sector, represented by The Bahamas Association of International Insurance (BAII), which encourages the formation of captive insurance companies.
| The insurance industry in The Bahamas is divided
into two distinct and separate sectors:
Property insurance is provided predominantly by British companies. There is only one Bahamian-owned company in this category.
International Insurance in The BahamasIn the early 1960s, a number of major US companies began to form their own insurance subsidiaries which today are known as "captives," primarily in offshore financial centres like The Bahamas. The aim of the captives was to insure the risk of the parent or subsidiary companies.
The International [Captive] Market is small, but growing. There are some 3,500 captives worldwide. A number of such companies are currently located in The Bahamas. The majority of the captives have a USA origin and the others are from Europe. Total premiums written with respect to all foreign risks amounted to $121 million in 1985. Local services for these international insurers are provided by a variety of offices, ranging from underwriting manager to trust companies.
In 1994, the Government of The Bahamas listed "Captive Insurance" as one of the areas especially targeted for overseas investment. The Government is beginning a new thrust to substantially develop the role of The Bahamas in the International (Captive) Insurance business. The thrust is a cooperative movement between Government and the private sector, represented by The Bahamas Association of International Insurance (BAII).
Benefits of Bahamian CaptivesAmong the many advantages of operating through The Bahamas are the following:
The Regulatory FrameworkThe country has two insurance laws, theInsurance Act of 1969 as amended and the External Insurance Act of 1983. Legislation governing this sector is currently being revised with the goal of making The Bahamas one of the premier offshore insurance centres.
Both insurance laws lay down statutory minimum net worth figures and net premium to capital and surplus ratios, notwithstanding the minimum figures (ranging from $100,000 under the 1983 Act for general insurers to $300,000 under the 1969 Act for life insurers). Applicants should be realistic in their determination of a suitable financial base for operations; the Registrar would not normally expect to see any application with less than $250,000 initial capital and, in any event, the proposed amount should be more than adequate to support the proposed volume business. Likewise, working ratios should be established in the light of current market thinking and practice; a net premium to capital and surplus ratio of not wider than 3:1 being considered a good starting point.
Initial capitalization, certainly to the statutory minimum, should be by way of cash. Letters of credit are not likely to be acceptable, unless they represent amounts over and above the working capital level. There is no legal requirement for capital funds to be held locally, but most companies do use the extensive local banking system. In that regard, companies planning to act as direct insurers (excess or surplus line) may be required by the Registrar to place deposits either locally or in the state where business is being transacted in order to provide the necessary level of comfort.
Ongoing reporting requirements are minimal, but their importance cannot be overstated. Basically, the requirements are that each company should continue to carry on its business in the manner described in the business plan and that an audited financial statement should be filed annually, within six months of the close of the financial year (which may be set by the company).
Companies registered under the 1983 Act are also required to furnish certain statutory statements indicating compliance with terms of registration. One such statement requires countersignature by the Underwriting Manager.
This sector is overseen by the Ministry of Finance, through the Office of the Registrar of Insurance. All information handled by the Registrar is treated in confidence (but it should be noted that the share register held by the Registrar General may be inspected by the public). The 1983 Act reinforces the confidentiality aspect by incorporating a special provision in that regard. Nevertheless, it is anticipated that as The Bahamas develops into an insurance centre in its own right, confidentiality will become less and less significant to market participants, which may well find it advantageous to release certain information, e.g. ownership and/or financial standing.
The Application ProcessGiven a satisfactory application, licenses are eventually issued on authority of the Minister of Finance, following recommendation by the Registrar of Insurance Companies. Detailed application forms are to be found in the Regulations attaching to the respective laws.
There are certain basic areas in which the Registrar needs to be satisfied before a positive recommendation can be made. These are as follows:
Fees & TaxesFees for offshore insurance companies are:
Further information can be obtained from the regulatory office dealing with insurance matters:
P.O. Box N3017
Nassau, N.P., The Bahamas
Tel: (242) 328-1068
P.O. Box N7147
Nassau, N.P., The Bahamas
Tel: (242) 322-2410
P.O. Box N3029
Nassau, N.P., The Bahamas
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