The Bahamas Financial Services Board (BFSB)
Aliya Allen of the Bahamas Financial Services Board tells CIT how the country has managed to put itself back on the captive map
What can the Bahamas offer that other captive domiciles may lack?
Importantly for the support of the captive industry in the Bahamas is our highly experienced and diversified asset and wealth management industry. We have developed a reputation as a leader in these areas, which has helped us recognise the synergies with the insurance market. There are any number of jurisdictions that have similar positive attributes, but few of them will have all of the combined advantages that we do as a long established international financial services centre. At the bedrock is the fact that our government and the private sector work hand-in-hand together. This is echoed throughout our industry to ensure that the environment is one that is business friendly and highly skilled.
Lawyer Peter Strauss recently stated that the Bahamas has managed to market itself better to the outside world. How has it done this?
The level and intensity of the interaction between the private and public sector has been a fundamental factor in enabling us to tell a very compelling story about the advantages of the Bahamas as an attractive location for captive business. This partnership is the basis of the modern and compliant regulatory regime that we have in place and the market responsive insurance legislation that exists in the Bahamas. These factors combined with our experience and expertise in other areas of international financial services allows us to position and speak confidently about the benefits and advantages of the Bahamas as a location for captives and other insurance related business.
Other than marketing, how else has the Bahamas managed to re-establish itself as a captive insurance domicile?
When we started over 80 years ago as a destination for capital investment, we really followed the coming of the winter residents in the Bahamas. Since that time, we have grown in depth and expertise as an industry. We are no longer a destination for capital or money. We are a place for real and substantive businesses. We are a place where you can follow your money, and ground your business. We are a place where you can invest from the Bahamas and manage your businesses all around the world.
The captive insurance market is a case in point. We have worked hard to ensure that the legislative and regulatory environment awaiting new arrivals is proactive and recognises the business needs of entities.
We have minimum capital requirements, which are competitive with other jurisdictions. We encourage our potential licensees to work through an insurance manager who is familiar with the Bahamas, but we are quite flexible. With potential licensees we always make it a priority to ascertain that they have the necessary expertise required to run the business and have an assessment of their feasibility of how they would operate if they were to be licensed. The Insurance Commission of the Bahamas (ICB) carries out due diligence on risk managers and directors of the companies interested in coming here, so we can confirm that the policy holders have adequate protection.
Why do you believe that cell captives have become so popular in the Bahamas?
There are clear advantages to choosing the Bahamas as a domicile, including stability, location and accessibility, attractive capital requirements and banking infrastructure. Our cell legislation also is very attractive, providing robust statutory protection to ensure that the assets and liabilities of each account are truly considerate separate and distinct. Further, cell captives benefit from the natural economies of scale created within such structures and our regulatory regime is a clear response to the demand for cost effective means of entering into captive or self insurance for small to medium sized enterprises while satisfying international standards.
In addition, and just as important as the previous factors mentioned, the government of the Bahamas has affirmed in the clearest possible terms a strong desire and willingness to maintain the necessary framework which will ensure that the Bahamas is an attractive business centre for insurance.
Has the country noticed a decline in business due to US firms moving back onshore?
The main challenge in 2013, as it has been in the past few years, will be the general soft conditions in global markets as this has impacted the growth of the industry in general. As more locations throw their weight into the captive sector, it is vital that we have efficiency and flexibility on our part to respond to the changing market demands. From out perspective there are still a lot of people looking for alternative domiciles since diversifying risk remains as important as ever, and that also means diversifying captive domiciles that host the captive setup of a parent company. There is the opportunity for international mid-market companies and also for domestic companies and professional associations to consider alternative risk solutions. The Bahamas is a very attractive choice for this type of business.
Strauss also commented on the renewed interest in captives. What were the causes of the lull in business before the expansion?
As noted above, international financial services has been an integral part of the business culture in the country for more than 80 years. Over that period we have seen the bedrocks of our financial services industry—private banking and trust services and more recently asset management services—grow in size, stature and significance.
This has not diverted our attention from other areas of international financial services since, by example, the Bahamas has always had market friendly insurance legislation in place. The difference now is the legislative changes in recent years have consolidated the jurisdiction’s approach to the insurance sector and provided a stronger, more dynamic platform for insurance business.
