The Bahamas continues to define itself as a financial services centre of repute, carving out new niches in wealth management and highly specialised investment vehicles to distinguish itself from other jurisdictions in the region, and to meet the evolving requirements of a global market amid far-reaching changes in international regulatory standards and transparency requirements. Indeed, the Bahamas prides itself on its ability to shape its own destiny as a sovereign entity but within the framework of evolving international standards.
I’m very positive about the competitive position of the Bahamas because we’ve managed to hold onto our comparative advantage and our focus on the complex needs of high net worth individuals. This in large part is due to the fact that we are an independent sovereign state. We also have a range of professionals with huge expertise in the sector, and our extremely progressive and innovative legislative framework.
The Bahamas always has led the way among countries in this region on issues relating to due diligence and anti-money laundering, and we were an early mover on the implementation of transparency and exchange of information standards in the 2000s. We have affirmed our commitment to clean business in recognition that the whole world is moving in that direction. We have much more to offer than tax neutrality.
I also stress the sense of partnership between the Bahamas Financial Services Board (BFSB), representing the private sector, and the government, along with the financial services industry regulators. The Bahamas has long believed in a public-private partnership in financial services.
Companies can be sure they are coming to a jurisdiction that values the fertile environment created by such collaboration, and that the regulator will always carry out its responsibilities in a way that enhances and protects business.
One of the most striking aspects of the Bahamas’s wealth management industry is the trend among wealthy clients to set up home in the jurisdiction. The Bahamas offers a first-rate financial and technological infrastructure, alongside highly appealing homes and communities in a very attractive environment. The financial services infrastructure includes a regulatory and legislative regime allowing people to carry on proprietary or other business as needed. This island nation is very close to the US, which means the amenities of New York, Atlanta or Miami are just a short flight away.
The BFSB sees the jurisdiction as an attractive option for captive domiciles—and for captive annual general meetings. We continue to see wealthy individuals relocating to the Bahamas by purchasing either developed or undeveloped real estate as a primary residence, often including a home office for the management of their own affairs.
While the primary focus over the past few years has been on the wealth management and asset management sectors, the Bahamas is seeing captive industry growth. This can be attributed this to a confluence of factors, including: an increase in small- and medium-sized enterprises in the US looking to manage the cost of premiums; a more business friendly and proactive regulator in the Insurance Commission of the Bahamas; and sustained commitment by the government and private sector to develop the domicile.
In addition, other factors include location, with the Bahamas being 30 minutes off the coast of Florida, US pre-clearance, and idyllic surroundings for board meetings, which often take place in the domicile. Cost is another factor, which we have been able to manage in terms of formation and ongoing regulation in a way that encourages growth.
The statistics speak for themselves. The number of captives has increased steadily since 2011. There is a vast opportunity for the Bahamas as a captive domicile but there are a few things the jurisdiction has to ensure that it gets right.
Firstly, the process for the formation of captives and captive managers has to be as clear and efficient as possible. In this regard, the Insurance Commission of the Bahamas has taken great strides and has been very responsive to revisiting its position on standards that do not assist in development or aid in regulatory oversight. The commission has also invested in the human resources necessary to assist the growth of the sector.
Secondly, the jurisdiction must continue to attract captive managers and has to ensure that all processes aid this effort. The licensing of Marsh, one of the largest captive managers in the world, is evidence that there is a business case that can be made for the Bahamas as a domicile.
At present, many of the captive managers are utilising registered representatives to fulfil physical presence requirements. As the industry grows, however, there is no reason why they would not put bricks and mortar on the ground to service the captives themselves.
Finally, the legal and audit fraternity must get firmly behind, and perhaps even in front of, the industry. The BFSB continues to be encouraged by the number of applications it receives for the annual International Center for Captive Insurance Education captive insurance designation scholarship, but we have to commit further resources in developing the expertise within the jurisdiction.