The recent relaxing of exchange controls in South Africa has resulted in at least two Captive clients setting up Isle of Man based captives.
Jim Boyd, who heads up Willis Corroon on the island, has been on an extended business trip to the Continent visiting directors of the new companies and following up other positive leads.
While in Johannesburg, he also attended the SARIMA risk management conference, the calibre of whose delegates reflected the growing global business interest in the New South Africa.
We began noticing a real change around October-November last year following the South African government's relaxation of exchange control regulations, says Willis director Peter Foulger, who is responsible for underwriting in the Isle of Man operation.
"Since then we have been experiencing keen interest in the Isle of Man from South African domiciled companies looking to set up captives. We are certainly very bullish about what is going on out there at the moment.
The Isle of Man Insurance Authority began putting out feelers in the Continent a number of years ago and has established substantial contacts there.
As the New South Africa grows in industrial stature, there are likely to be significant opportunities for insurance companies looking to operate in the international market place.
Economic growth is expected to speed up significantly this year, with a figure of 3% being talked of in the wake of increased capital expenditure and favourable export opportunities.
What many companies are searching out, however, is the necessary credentials to once again operate successfully in a very changed and fast moving world economy.
RE-DOMICILE RULES MAKING IMPACT
The Isle of Man's new redomicilation rules are already making an impact on the Island's captive insurance market.
The legislation - which provides for the virtual free movement of captives between qualifying jurisdictions - has several companies making concrete plans to switch to the Isle of Man.
Willis Corroon, which enjoys the status of having the greatest number of Isle of Man based captives on its books, already has two clients looking to move from Bermuda to a new Manx base. Others are in the pipeline.
Bermudan companies are the ones currently in the spotlight. As Bermuda is second only to the Isle of Man in hosting captives belonging to the UK's "Top 100" performing companies, the legislation is bound to prompt further movement.
Of the two Willis clients, one company is already in the throes of finalising the switch to the Island. The other, currently operating on a permit basis, is making plans to re-locate shortly.
Up until now, such companies, whilst having a permit to operate in the Isle of Man, were still required to retain incorporation in the original foreign jurisdiction.
Under the new rules, permit holders can move their operation to the Island and make considerable savings on administration, travel and other overheads.
CHANGES WILL BOOST CAPTIVES CLIMATE
Proposed changes to Manx company law look set to enhance the Isle of Man's status as one of the leading centres for captive insurance companies.
The Island has already attracted substantial new investment business from its Limited Partnerships law, which it enacted ahead of its nearest rivals.
Now the Isle of Man Insurance Authority is seeking to effect further changes that will allow captives to take advantages of its International Company legislation.
In the Isle of Man captives pay the standard 20% Manx Corporation Tax or, alternatively, they can choose total or partial exemption from tax. Under international company rules, a captive could opt in any one fiscal year to pay on a sliding scale between one and 35%.
Being able to exercise this new option could have an impact on how Isle of Man based captives are viewed under proposed new legislation announced in last November's UK Budget.
QUALITY MEMBERSHIP UP
Members of the Isle of Man insurance institute with the descriptive title of either "Chartered Insurer" or "Chartered Insurance Practitioner", rose threefold over the past year, president Bob Martin told a record annual gathering of the Institute in Douglas.
INTERNATIONAL LIFE AWARD
Albany International, the Isle of Man based subsidiary of Metropolitan Life insurance has won the Micropal Award for Overall Offshore Life Group in 1995.
FIRST MOVE UNDER NEW REDOMICILE RULES
Captive And Manager Set Up Isle Of Man Operations
The first insurance captive to move to the Isle of Man under new Manx redomicile rules has received its registration.
LS Reinsurance, formed in Bermuda in 1983, is owned by the Manchester based London Scottish Bank plc which has set up a second Isle of Man based captive, London Scottish Reinsurance.
The new legislation provides for the virtual free movement of captives between qualifying jurisdictions. Previously companies operating on a permit basis still had to retain incorporation in the original foreign jurisdiction.
Convenient air links between Manchester and the Island also played a part in the decision. Businessmen can travel to and from the Island in one working day and this had been a plus over rival jurisdictions.
"It is obviously cheaper to fly to the Isle of Man for the day than to travel 4,000 miles to Bermuda and stay for at least three days", observed David Brown, Manager of the captives. But there were also economic and political reasons for making the move to the Island.
"Bermuda's independence debate has caused a great deal of unease amongst the business community there. Tied in with this has been the loss of the large US naval base. The British and Canadian troops have also moved out resulting in the loss of around 2,000 military personnel in the past 18 months.
"This has caused a big dent in the island's finances. The loss of the US base was a particular blow as it was responsible for operating Bermuda's airport".
"Another important point in favour of the Isle of Man was the help received from the Island's authorities".
ANOTHER MANX MOVE
As the newsletter went to press, it was confirmed that a captive managed by Willis Corroon has also moved to the Isle of Man under the new re-domicile legislation.
It was reported in the last edition of "Update" that Willis, which enjoys the status of managing the greatest number of Isle of Man based captives, had two clients actively looking to move from Bermuda.
Bermudan companies are the ones most likely to take advantage of the new rules. Bermuda is second only to the Isle of Man in needing captives belonging to the UK's "Top 100" performing companies.
CAPTIVES CAN BECOME "INTERNATIONAL COMPANIES"
Captive insurance companies can now apply for registration as international companies following the approval of new rules under the Isle of Man International Business act.
The move is designed to provide captive with another option in meeting recent requirements laid down by the UK's Controlled Foreign Companies legislation.
Under the ISA option, captives can elect to pay tax in the Isle of Man at a higher rate than the standard corporate 20% rate. This might enable them to satisfy the requirements of the UK Revenue.
To fall outside the CFC provision, an offshore insurer must pay tax in its domicile that amounts to at least three quarters of that which would be liable in the UK.
A captive might choose this route in preference to paying a 90% dividend, or profits which is required in order to comply with the Acceptable Distribution Test.
The new Isle of Man legislation means that captives can therefore build their reserves more quickly and assume a greater level of risk.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information on Captive Insurance in the Isle of Man contact:
James C Boyd Managing Director Willis Corroon Management (Isle of Man) Limited Ten Finch Road Douglas Isle of Man IM1 2PT
Telephone No: 01624 620274
Facsimile No: 01624 661586
or enter a text search "Willis Corroon" and "Business Monitor".
