Barbados: Why Form A Captive Insurance Company In Barbados?

Acknowledging the existence of a highly competitive captive insurance domicile market worldwide, the question is appropriately asked, "Why form a captive insurance company in Barbados?"

Apart from Barbados' reputation as one of the premier holiday destinations in the world and its recognition as being among the top developing nations worldwide, the island has developed and enjoys a reputation as one of the world's leading international business centres. This development is not by chance - successive governments have created a legislative framework and business infrastructure geared towards encouraging foreign investment, which has contributed to the island having this well-deserved reputation.

Certain key aspects of the business infrastructure can be highlighted in explaining why Barbados works for captive insurance companies.

International reputation

Barbados has an excellent international reputation and was included in the Organisation for Economic Co-operation and Development's "white list" from the beginning.  Furthermore, Barbados has an extensive tax treaty network, providing great opportunities for investors to optimise their tax planning.

Underlying legislation for international companies

In choosing Barbados, there is a relatively simple underlying structure available, with entities being able to choose between registering as Exempt Insurance Companies (EICs) or Qualifying Insurance Companies (QICs).

Normal domestic companies operating on the island are subject to corporation tax and have some exposure to withholding taxes. The EICs who register under the Exempt Insurance Act are exempted from such taxes, whereas the QICs, who register under the Insurance Act, are subject to the full domestic tax regime, but benefit from a tax credit for business originating outside the island. This tax credit results in corporation tax liability of approximately 1.75% for general insurance business and 0.35% on investment income for life business.

Infrastructure, professional services and workforce

The island boasts a well-developed infrastructure, including a robust banking system, modern telecommunications network, an international airport and access to world-class accommodation. There is a relatively large and highly literate population, resulting in the ability to provide an excellent range of professional services using highly trained professionals. The majority of the workforce is local, thus obviating the need for a significant "rotating" expatriate employee base. There is a well-established legal profession, with a number of firms specialising in corporate and international business-related law.

The major international accounting firms are represented in Barbados, existing alongside a number of local firms all offering assurance, tax, advisory and corporate services.

There are also several captive insurance management companies, comprised of those aligned with international insurance brokerage operations, along with several independent management companies.

Incorporation and regulatory environment

There is a relatively simple licencing and incorporation process, which generally takes between four to six weeks, dependent upon the timing and completeness of the required due diligence information and payment of initial capital. Barbados provides a robust and efficient regulatory environment, with all non-bank financial institutions regulated by the Financial Services Commission.

Costs

Initial set-up and ongoing operational costs are very competitive. A relatively low minimum capital of US$125,000 is required and a simple ongoing solvency structure.

Geography, climate and accessibility

The island is the most easterly of the Caribbean island chain. Barbados has a tropical climate with cooler temperatures during December through March, whereas the period July through November is generally more humid and wet.  Barbados is easily accessible, with frequently scheduled flights to and from most international destinations.

Why form a captive in Barbados?

In summary, Barbados has established itself as one of the leading international business domiciles, with its international insurance industry at the forefront of this development. It remains one of the largest global captive insurance domiciles. With its well-regulated business environment, excellent infrastructure, modern legislation and expanding treaty network, Barbados continues to attract significant international insurance business.  Simply stated, it makes eminent business sense to form your captive insurance company in Barbados.

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.

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