Domicile Update: Bermuda

Domicile Update: Bermuda This article is provided by Strategic Risk Services. Contact details for the company can be found at the end of this article. The world's first captive was set up in Bermuda in 1962. Today the Bermuda insurance market is the second-largest in the world. In 2003 annual premiums written were over US$ 62.7bn and estimated statutory capital and surplus exceeded US$ 75.5bn, a third of that premium was written in captives. Regulatory Environment. In 2002 the Supervisor of Insurance's department left the Ministry of Finance and became a function of the Bermuda Monetary Authority. This restructuring ensures that Bermuda's insurance regulations are managed by an independent and non-political body. The admissions committee of the Insurance Advisory Committee (IAC), meets weekly to consider applications for new registrations. Membership of the IAC includes representatives from regulatory, business and professional agencies and the Bermuda insurance industry is largely self regulating. Companies are classified into different categories, allowing for different levels of regulatory oversight. For captives, the relevant categories are:

• Class 1: Single parent captives
• Class 2: Multi-owner captives
• Class 3: Single parent, group, association or agency captives with more than 20% of net premiums derived from unrelated business.

A unique aspect of the Bermuda regulations is the formulaic approach to the minimum amount of capital and surplus that is required by a company. Why Bermuda? As the largest and oldest captive domicile, Bermuda offers several advantages to captive owners:

• Experience and reputation: Bermuda has more captives and has been regulating captives longer than any other domicile. Its regulatory environment is well developed and enjoys a sterling reputation with International regulatory authorities.
• Infrastructure: Bermuda has built an exceptionally strong infrastructure of captive managers and service providers. It boasts some of the leading insurance professionals in the world and has consistently been at the forefront of innovation in the insurance industry.
• Reinsurance market: Unlike other captive domiciles, Bermuda is supported by a reinsurance market offering significant capacity in support of captive programs. Meetings with underwriters can be scheduled to coincide with captive meetings.
• Premium Tax: Bermuda charges fees based on capitalization rather than premium taxes. This structure can be attractive for larger captives.
• Multinational domicile: Bermuda is a recognized captive domicile for organizations from all over the world. The acceptability of Bermuda's insurance regulations help in structuring captive participation in global programs.
Recent Developments - There has been considerable activity in Bermuda around Segregated Account Companies (SACs). Bermuda companies have for some time been able to segregate assets and liabilities within the corporate structure by means of a private act. Legislation to allow SACs was passed in 2000. A 2003 survey by Bermuda's captive management industry identified 83 SAC's with 6,246 cells and confirmed an increasing demand for this structure. We expect this trend to continue. About SRS SRS provides underwriting, management and wholesale brokerage services in the alternative insurance market. We design, implement, manage and grow captive and ART programs on behalf of corporations, groups and insurance companies. SRS is an approved manager of captive insurance companies in Arizona, Bermuda, Cayman Islands, South Carolina & Vermont. Through a wholly owned subsidiary SRS is also licensed as an insurance broker in Bermuda. For more information on SRS, visit us at www.strategicrisks.com. Contact: info@strategicrisks.com, Tel: 781 487 9800