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By Keith Archibald Forbes (see About Us) at e-mail exclusively for Bermuda Online
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Bermuda-based international insurers, Bermuda Royal Gazette newspaper photos
2011. There were 504 Class 3 companies with total capital and surplus of more than $66.7 billion at year-end, with the firms writing more than $42 billion in gross premiums and representing about 34 percent of the total number of active insurance companies in the jurisdiction. In terms of SPIs, Bermuda Premier and Minister of Finance Ms Paula Cox recommended that an SPI's minimum share capital be set at $1, the margin of solvency requirement will require that the asset of an SPI exceed its liabilities, an SPI will only be permitted to write 'special purpose business', and will be allowed to fund its insurance liabilities through a debt issuance or some other form of financing approved by the Authority. Furthermore, she added that a recent study published by Swiss Re indicated that the Insurance Linked Securities market was worth $38 billion in 2007 and is projected to grow to $200 billion in 2013 and $600 billion in 2017.
2012. The challenge for the Authority is to strike the right balance between maintaining an effective regulatory framework that meets relevant international standards and ensures high standards of behaviour, while fostering an environment that remains attractive to business and enables them to grow and develop successfully. Bermuda remains the leading single top offshore risk financing center. Many Lloyds of London insurers and reinsurers have re-domiciled from London to Bermuda. More than 13 of the world’s top 40 reinsurers are based in Bermuda, and Bermuda is the fourth largest reinsurance market in the world after Germany, the US and Switzerland. Bermuda-based reinsurers’ total net written reinsurance premiums exceeds those of London-based reinsurers.
Today Bermuda remains by far the largest centre for captive insurance in the world with over 1,200 captive insurance companies, managed by more than 40 captive management companies. The committee members meet every week and over the years have made sure that Bermuda's insurance regulation continues to be well-designed to make it easy to create companies, while at the same time having strict controls to ensure companies have more than enough money in reserve to cover all claims.
Please note the following:
All Bermuda-based insurance companies shown below are incorporated with limited liability. They all have "Ltd" in their official corporate name. Purely to save space, the author avoids showing "Ltd" in each and every case.
No UK laws apply in Bermuda to Bermuda-registered companies. There is no equivalent to the UK's Companies House. To research any particular company, or any not shown below, ask the Registrar of Companies or the Bermuda Monetary Authority (BMA), both of the Bermuda Government, under whose jurisdiction they fall. Please do NOT ask this author.
Bermuda companies can incorporate and set up shop quickly. Advantages do not include no income taxes (because there is an income tax, called a Payroll Tax, payable by employers and employees, based on employment income) but there are few restrictions as to how Bermuda companies can invest their assets and deploy capital, not to mention the island's close proximity to the largest insurance market in the world, the USA. They are presently free to accept contingent commissions, which are payments to brokers from insurers based on the volume of business steered to them. These factors, along with the current favorable market conditions, have contributed to the robust financial performance of the Bermuda insurance and reinsurance market. They are exempted from Bermuda's domestic company requirements of being at least 60% beneficially owned by Bermudians. They can trade anywhere in the world except as a local company in Bermuda (They cannot write any business for Bermuda residents, only with other international or exempted companies). The regulatory environment is exceptionally favorable to them in Bermuda - so much so that many international businesses, including insurers, now have their Bermuda-incorporated and Bermuda-based companies as their registered offices and their companies beyond Bermuda as their subsidiaries. Unlike in the USA from where the vast majority of companies come for corporate inversions in Bermuda, there is no legal requirement in Bermuda for their CEOs to personally certify their company's financial results if of the requisite size, but some of the better ones do so on a voluntary basis. Insurance Business Fees are as shown.
They come mostly - but not solely - from the USA. There has been much publicity from the USA about this, especially from unions and certain Democrats. But reasons to relocate to Bermuda as corporate inversions arise out of the USA's own tax code. Amending it would be the best way to remove such unintended incentives.
Bermuda-based but USA-owned or USA-operated companies can sue or be sued in the USA following a US Supreme Court ruling. Also, from 2003, if relocating to Bermuda from the USA or owned by US investors, they may soon have to tell shareholders they may face capital gains taxes in the USA.
Some prominent American-owned insurance companies do not mention on their websites that they have an office in Bermuda. One reason for it is that they are not allowed to do in Bermuda what they are allowed to do in the UK, Britain, Asia, etc, namely to operate and sell local insurance products to local customers either in their own corporate name or through local subsidiaries and branches. In some countries - again, not Bermuda - they also offer products to small-to-medium sized businesses as well as life and health products.
Bermuda-based leading international insurer. Photo by author Keith Archibald Forbes solely for Bermuda Online.
Bermuda's insurers are in four classes of capital and surplus. They are mentioned in more detail below. They all have specific reporting requirements, solvency margins and actuarial certification. Insurance (and other) companies can be incorporated either by registration using the provisions of the Companies Act or by private Act of Parliament. Incorporation by registration normally takes about two weeks but in exceptional circumstances can be accomplished in a matter of days. Private Acts of Parliament usually apply when the company requires special objects, powers or abilities substantially different from the menu in the Companies Act.
The latter is responsible for processing applications and recommending to the Ministry of Finance that companies be incorporated, partnerships be formed, collective insurance schemes be established and permits be issued to effect an accredited business presence in Bermuda. When the application has been reviewed by all parties, the BMA will present the application to the Ministry of Finance with the appropriate recommendations with regard to the Minister issuing a consent to register the company. The Minister may, at his discretion, impose any terms or conditions on a consent to register a company.
More Bermuda-based international insurance companies. Photo by author Keith Archibald Forbes solely for Bermuda Online.
See Insurance Business legislation in Bermuda. The following can apply to Bermuda approved and licensed insurance companies with a physical presence and office in Bermuda and offering staff who, if not Bermudian, have an approved, current Work Permit to work (solely) for that office.
Unlike in the USA from where the vast majority of companies come for corporate inversions in Bermuda, there is no legal requirement in Bermuda for their CEOs to personally certify their company's financial results if of the requisite size, but some of the better ones do so on a voluntary basis.
A Bermuda insurance company's ability to comply with insurance and tax regulation in the policyholder's country can provide significant advantages. For example, it is possible for a USA domiciled policyholder to be provided with a policy that is federal tax compliant yet not subject to individual state regulatory perfidy. Likewise, in Switzerland, Swiss companies do not offer unit linked, indexed, or variable type products. But they can be acquired through a good Bermuda based international company. To varying degrees, many countries offer benefits for the owners and beneficiaries of insurance policies. In certain countries, premiums themselves are deductible for tax purposes and, in others, policies wrap investment oriented products that expand the tax deductibility of premiums paid which can include dividends, capital gains, and total investment return. Another major advantage is the deductibility or exclusion from estate taxes when benefits are paid.
|A major advantage of reduced policy costs is that for fixed or guaranteed rate policies, the policyholders may be provided with an increased investment return without any additional investment risk. If operating costs are reduced by one percentage point from various sources then that reduced cost can be provided to the fixed policyholder. Passing on this benefit is one of the purposes for the creation of a Bermuda based international insurer.|
Can be the hugely important. Basically, it is the amount paid to the insured, usually based on the gross profit that a business would earn if trading normally, in the event of a disaster, even if it has to wait for reconstruction. In the case of law firms it covers gross fees that would have been earned. Maximum indemnity periods can vary hugely, from 3 to 36 months. Can also include Increased Costs of Working (ICW) should a business wish to continue trading from alternative premises.
Bermuda is the principal domicile of captive insurance companies. More reside here than anywhere else. There are believed to be over 10,000 captives worldwide. Other jurisdictions with industry growth include the Cayman Islands, Vermont, Guernsey and British Virgin Islands. Captives in Bermuda are 65% owned by American interests, 18% by European, 10% by British, 2% by Far Eastern, 2% by Canadian and 3% by other countries' principals.
In Bermuda, there are five categories, all of which serve different clientele and purposes. There is also a single general class of companies dealing with captives. A summary is below.
Single parent captive by a professional insurer or reinsurer.
Captive writing a portion of its net premium from risks unrelated to the business of its owners and/or affiliates.
Insurance company writing a composition of life and general business.
Company writing unrelated risks where there are (a) clearly defined aggregate limits and (b) premiums that reflect the underwriter's anticipated investment income.
Owned by a hospital or health maintenance organization (HM0) and writing the risks of its owners and/or affiliates.
Insurance company writing life risks as a direct writer and/or insurer.
Owned by two or more unrelated persons or organizations and writing the risks of its owners and/or affiliates.
Insurance company writing unrelated risks as a direct writer and/or insurer.
Single parent captive writing only the risks of its owner and/or affiliates.
Owned by unrelated persons or organizations and providing captive facilities to others for a fee. Contract documentation is usually detailed and voluminous and there is substantial work in maintaining individual program funds in segregated accounts, etc.
|First, the policyholder does not need to disclose the existence of the policy to any entity. Many onshore jurisdictions require their residents and citizens to report the existence of any bank, financial, securities or investment accounts held in foreign jurisdictions or any interest in a foreign trust. The invasiveness of these requirements is obvious as is their potential for use as evidence. Failure to report, even unintentionally, is a crime with significant penalties. Generally, most jurisdictions do not view insurance policies as financial assets, but as contracts under statutory law.|
Therefore, insurance policies are generally exempt from disclosure because they are recognized as a contractually based agreement between the individual and an insurance company and not as a financial account. An appropriate insurance policy can give the policyholder additional confidentiality and privacy through a "Private Act" Confidentiality clause. Unless directed by the Bermuda government, it is required by Bermuda law to withhold all information relating to any policyholder or policy regardless of the stature of the person doing the questioning, All disputes over disclosure will be physically adjudicated in Bermuda under Bermuda law.
|Many countries and their regulators require extensive filing of policies, policy forms, actuarial documentation, and regulatory compliance which can reduce the ability of an insurer to respond to the needs of policyholders. Many insurance regulators also limit the number of policy types. Standardization suggests all policyholders have the same needs, timing, risk and return requirements. This is a mass market approach where large groups of policyholders are assumed to have identical needs and requirements. But a good Bermuda company may provide customized and personalized policies to its policyholders. Ask if your insurer can offer policy design and elements imaginative policyholders may need.|
Bermuda insurance provisions and a Private Bill statute can provide significant protection to policyholders along with annual actuarial and audit requirements, yet without a regulatory bureaucracy that significantly constrains the quality and increases the costs of policies to its policyholders.
|Insurance policies offer better advantages than a trust and are superior to drafting a will. The death benefits may avoid the process of probate and help ward off potential lawsuits from dissatisfied heirs. Drafting an insurance policy can also be cheaper than a trust or a complicated will. Insurance is an element of estate planning. But many advisors may not have explored the global advantages available to their clients and accepted the constraints associated with many onshore jurisdictions.|
The insurance policies of a good Bermuda company can allow a policyholder to avoid problems.
|Third world countries enforce various types. Residents of such jurisdictions are constrained from moving certain types of assets outside. Select a place where you have freedom. Recognize that insurance policies are based on contracts between the insurance company and the policyholder. Many domestic regulations do not recognize life insurance as a financial asset. Policyholders resident in jurisdictions that do not impose exchange controls may benefit appreciably. Cross border relocation with the use of global insurance products allow such individuals to optimize their insurance coverage internationally. Do present Foreign Exchange rates based on where you live have a good or bad impact on your Bermuda insurance premiums and insurance-covered assets? It could be a key question. Bermuda is tied to the US Dollar.|
|Some onshore and offshore jurisdictions or states or provinces or parts of countries may have forced heirship laws in whole or in part, such as Scotland, Quebec, etc. See http://en.wikipedia.org/wiki/Forced_heirship. They may not permit a person to disinherit certain family members regardless of the wishes of an insurer. A certain portion of the estate may have to be allocated to a spouse and/or heir. However, these laws do not always consider an insurance policy to be part of the estate (unless the estate is designated as beneficiary). Thus the policyholder may bequest the proceeds of an insurance policy based on the owner's wishes.|
|Insurers in most countries cannot accept premium payments other than in local currency. Under certain circumstances, a good Bermuda company can structure a policy which will allow the contribution of premiums to be made in kind. This means assets other than cash. This offers significant flexibility for clients who have the need for the advantages of various types of insurance policies yet choose not to liquidate significant assets to acquire insurance benefits. Payment in kind can take the form of securities, business interests, real estate - both earning and not earning.|
|Many countries restrict access to investment alternatives that, when properly structured, can offer significant diversification, return, and risk reduction characteristics. Switzerland, for instance, does not by regulation allow variable or unit linked products to be offered by its domestic insurance companies. It restricts investment opportunities available to Swiss nationals. In the USA, variable products are available only to the extent they are invested in registered mutual funds with the Securities & Exchange Commission which invokes significant additional investment restrictions. Other countries require that investments of the insurance companies be restricted by regulation of quality, type, country, region and even government. But Bermuda insurance law and a good Bermuda based international insurer can provide a degree of flexibility not available in most other countries.|
For some beneficiaries, location of benefit payment can also be of great interest. Because these issues vary significantly from country to country and region to region, the efficient global structuring of the affairs of the client to maximize such benefits can provide strategic advantages. Recent innovations by issuing companies, supportive domicile insurance regulation and country specific statutory legislation have also been provided to enhance the benefits of insurance.
|The costs of providing efficient insurance products is constrained by insurance regulation, administrative expense, capital reserve costs and company taxes controlled by the insurance company's domicile, tax and regulatory environment. These vary. While they may provide protections, they may also produce significant costs and efficiencies. Consider the economies of scale. Some Bermuda based international insurance companies are structured accordingly. Additionally, capital reserve costs in many established domiciles also lead to increased costs. The use of separate accounts by a particular Bermuda based international insurance company can isolate policyholders from creditors and litigants.|
This can provide lower capital requirements for the company and higher returns or better protection or both to the policyholder.
|Many countries, and/or their provinces and states or counties, require payment of premium taxes by insurers on and/or policyholders. A glaring example is the United Kingdom with 20% from 1 January 2011, was 17.5% until then) Insurance Premium Tax, similar to VAT, on all insurances, even travel insurance. Overall, such a tax or taxes do not benefit the policyholder. All incur higher costs for the insurer and policyholder, making some jurisdictions uncompetitive. In some countries, such as the USA, the purchase of a non American insurance policy outside the USA by an American requires the payment of a federal excise tax equal to 1% of the premium paid. It is not clear if this tax is deductible for Americans. Bermuda-based and Bermuda-incorporated companies have a marketing presence in the UK and make their UK-based policy holders pay the UK Insurance Premium tax.|
|Get a unique combination of benefits when a Bermuda insurer is enacted by Private Act of Parliament. The provisions provide more guarantees and benefits to policyholders and are protected by Bermuda law. A good Bermuda insurer can amend its Private Act to provide additional benefits deemed desirable in the future. Bermuda's common law system, based on British law, combined with a record of legal precedence, supports and ensures the legality of an insurer's Private Act. Within Bermuda, litigants may initiate a first tier appeal. A second tier appeal is accorded by the Privy Council, the highest court in the United Kingdom. Thus, policyholders can rely on the sovereign law of Bermuda to protect their rights and benefits from claimants of other jurisdictions.|
All in Bermuda's insurance industry are subject to the provisions of the Companies and Insurance Acts. The Companies Act regulates the activity of companies incorporated or licensed in Bermuda, including insurance-related companies. The Insurance Act is the basis for regulation of the insurance industry, both in the domestic Bermuda market and in the international arena when it affects Bermuda-based and/or Bermuda-incorporated insurance companies. It was introduced to protect Bermuda's image - and increase its world-wide credibility as an international center for insurance, captive insurance, reinsurance, and investments relating to insurance. In 2001, the new Bermuda Government position of Supervisor of Insurance was created, with full responsibility to oversee the licensing and regulation of Bermuda-based insurance companies.
Mailing address: Suite 197, 12 Church Street, Hamilton HM 11, Bermuda. Location address: Cedarpark Centre, 48 Cedar Avenue, Hamilton HM 11. Tel: (441) 295-1266. Fax: (441) 295-5876. E-mail: email@example.com. Works extensively in the field of getting Bermudians educated so they can make successful careers in the insurance sector. Registered charity 440.
The insurance program is submitted for the review of the Registrar of Companies and the Insurers Admissions Committee. The Committee is made up of members of the insurance market, the Registrar of Companies and the Bermuda Monetary Authority (BMA).
Minimum paid-up capital in Bermuda is $120,000 for general (property, casualty, etc.) business; $250,000 for long-term (life) business; and $370,000 for both types (composite). General business insurers must maintain liquid assets (called relevant assets) equal to at least 75% of general business liabilities. Relevant assets exclude such assets as real estate investments, investments and advances to affiliates and unquoted equity securities. However, these assets are included in the computation of the Minimum Solvency Margin.
Insurance companies, or their agents, must file an annual Statutory Financial Return with the Registrar of Companies. This must include an Auditor's Report and in certain situations actuarial certification. For example, all companies writing life insurance business must have their reserves certified by an actuary. In addition, companies writing a significant of products or professional liability risks must have their reserves certified by a loss reserve specialist who in most cases will be a qualified actuary.
For general business, when net premium income is up to $600,000 or from $600,001-$6 million and in excess of $6 million respectively then the minimum solvency margin is, respectively, $120,000 or 20% of net income or $1,200,000 plus 10% of net premiums written greater than $6 million. There is also a loss reserve of 10%. For long-term business, it is $250,000. For composite business, it is a combination of the requirements for general business and long-term business.
The minimum capital and surplus requirement is $125,000,000 and the actuarial certification requirement is yearly.
New in 2009. It focuses on fully collateralized SPVs that are set up to carry out specific insurance transactions. The new classification will make it less costly for SPVs to be established in Bermuda.
Shown in alphabetical order in Bermuda Government Boards. Bermuda Government appointed under the Insurance Act 1978, A statutory body. It is a joint private and public sector initiative. Its purpose is to advise the Minister of Finance on matters concerned with the insurance industry in Bermuda.
|Association of Bermuda Insurers and Reinsurers (ABIR)||XL House, One Bermudiana Road, Hamilton HM 11 Bermuda. Tel: 441-294-7221. Fax: 441-296-4207. Also with an office in Washington, DC. An insurance industry trade organization in Bermuda since 1986.|
|Association of Bermuda International Companies (ABIC)||Until April 26, 2001 the International Companies Division of the Bermuda Chamber of Commerce. P. O. Box HM 655, Hamilton HM CX. Phone (441) 295-8932. Fax (441) 292-5779. Members include all the "exempted" or "international" companies, exempted partnerships and trusts registered and with a physical presence in Bermuda - including those shown separately under Insurance Companies and Other International Companies.|
Last Updated: May
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