Barbados A Preferred Captive Insurance Domicile

The Barbados Domicile

Barbados has had a long history of political and economic stability. Together with an excellent education system and sound infrastructure, it offers an attractive environment for global financial services and wealth management, ICT, medical schools, fintech, research and development, renewable energy and medicinal cannabis, in addition to captive insurance companies.

For decades, Barbados has been known as a domicile for captive insurance business, ranking among the top ten domiciles worldwide, according to Business Insurance. A sound business environment, favourable business solutions, facilitated through an expanding double taxation treaty network and the domicile's ability to respond to the needs of clients, are essential elements of the Barbados Business Brand. The introduction of new legislation and upgrades to current legislation are undertaken to improve Barbados' product mix and ensure that investors' needs are met.

Barbados has long-standing treaties with Canada, the UK and the USA. The country is also expanding its global business activity within Latin America and has treaties with Mexico, Panama and Venezuela. Barbados is at various stages of discussions for double taxation treaties with several other Latin American countries including Brazil, Colombia, Chile and Costa Rica. The country's recognition within Latin America, as a captive jurisdiction, continues to grow and the incorporated cell company is quite appealing to owners of the many privately held conglomerates in Latin America.

As of December 31, 2024, the Financial Services Commission (FSC) reported that there were 273 active captive insurance companies in Barbados with USA and Canada captives accounting for approximately 69% of the total number. In addition to the traditional property and casualty exposures, captives are also being used to ensure environmental liability, product recall, weather risk, intellectual property infringement rights and other business risks including disruptions caused by severe disease outbreaks like the coronavirus pandemic. Barbados continues to prove that it is well equipped to provide the captive insurance infrastructure to assist with navigating these realities.

Why Barbados for Insurance?

Barbados is a successful business centre that enables investors to enhance their global competitiveness. Following are the main advantages that make the jurisdiction attractive particularly for insurance businesses:

Good infrastructure for international insurance companies including experienced management companies, banks, investment companies, auditors and lawyers
Appropriate regulation and governance
Educated and experienced local workforce
Ease of business incorporation and licensing
Availability of segregated cells and separate accounts
Low capital and flexible solvency requirements
No restriction on insurance business written
For Canadian captives, dividends paid to a Canadian company out of income earned from an active insurance business in Barbados may be considered as exempt surplus for Canadian tax purposes and are therefore not subject to tax in Canada, when repatriated.
For USA Captives, under the Barbados/USA tax treaty, a company controlled by USA investors, may be able to carry out prescribed activities in the USA without being deemed to have a taxable presence there.

Other General Advantages

An expanding Treaty Network that gives investors operating in Barbados access to a number of partners in Africa, Asia, Latin and North America, greatly assisting in enhancing their global competitiveness
Capital gains not subject to tax in Barbados
Foreign Currency Permit (FCP): All business entities that earn 100% of their income in foreign currency are eligible to receive a FCP affording them the following benefits:
- Exemption from exchange control
- Exemption from withholding tax on all payments, including dividends to non-residents
- Exemption from payment of stamp duty and property transfer tax
Modern telecommunications and transport infrastructure: Barbados boasts an efficient ICT framework comprising a reliable island wide fibre-optic network, Wi-Fi and high-speed 4G data services. The country also has an international airport offering direct daily flights to major cities and a modern seaport
Nearshore location and favourable time zone: Location within similar time zone as the North American East Coast
Political, social and economic stability: Known for being one of the most stable countries globally, Barbados has continued its long-standing tradition of parliamentary democracy and pragmatic management of its economy. Additionally, the warm and friendly nature of Barbadians is a welcome attraction to global investors
Business friendly: The process to start a business is straightforward and is complemented by transparent policies and regulations, as well as a supportive institutional framework for global business. There are also no restrictions on the ownership of property
Quality of lifestyle: Barbados boasts a highly developed standard of living, which makes it an attractive place to live, work and enjoy. This is evidenced by the country's ranking in the UN Human Development Index 2021, of 11th in the Americas and 70th in the world

Insurance Regime

Insurance companies are licensed under the Insurance Act, Cap 310 and are categorised into one of three Classes with a single tax regime as follows:

The FSC decides the class of licence to be issued to each company. The classification process is based on the following:

The structure or operations of the company
The nature of the intended relationship between the body corporate and its intended policyholders
The interest of those policyholders
The nature of the risk
The level of regulation which is applicable to the risks associated with the insurance business

The annual requirements for insurance entities are as follows:

An annual licence fee must be paid by January 31
Audited financial statements are to be filed six (6) months after the financial year end of the company (under review)
Corporation tax returns to be filed on or before March 15 or June 15 based on the financial year end of the company
Annual general meetings of shareholders are required within 18 months of incorporation, and thereafter within 12 months of the previous annual general meeting

Substance Requirements

Resident companies engaged in "relevant activities" including captive insurance, are required to satisfy an economic substance test. The test involves an assessment related to the following:

The extent to which the company is being directed, managed and controlled in Barbados (i.e., no. of board meetings and quorum of directors physically present in Barbados, knowledge and expertise of board members)
Level of relevant activity (no. of employees, expenditure, physical assets in country)
Confirmation of the core income generating activities

Company Formation Requirements in Barbados

A company must first be incorporated or registered in Barbados under the Companies Act. The following information will be required to complete the incorporation process

A maximum of three (3) corporate names (in order of preference
The minimum and maximum number of directors (a company can have a minimum of one director)
The full name (including the middle name) and residential address of each of the proposed directors of the company
Details of the particular business that the company proposes to carry on
The classes of shares (if more than one) that the company is authorised to issue
The full name (including the middle name) and residential address of each shareholder of the company
At least two (2) references for each director, shareholder or other management personnel, including banker's reference and certified copy of passports of signatories on bank accounts.

Formation of an Insurance Entity

After incorporation of the company you must submit the following to the FSC:

A completed application form identifying the applicable class of licence required
A detailed business plan which includes financial projections
Three copies of the company's draft articles of incorporation
A list of directors including the full names, permanent address, country of birth, nationality, date of birth, business experience and other directorships
Character references of the shareholders, directors and officers
Satisfy FSC's fit and proper requirements
A letter of acceptance of responsibility by the person resident in Barbados with which documents may be served
The name and address of any actuary appointed by the company
Name of an exempt management company, unless the captive insurance company will be self-managed
An auditor's certificate with respect to paid-up capital or contributed reserves
A certified copy of the balance sheet

If the company is earning 100% of income in foreign currency, submit an application for an FCP inclusive of a declaration by a director certifying that the entity will generate 100% of its income in foreign currency as applicable.

The application, including accompanying documents and fees (US$125) must be submitted to the Corporate Affairs and Intellectual Property Office. Simultaneously, submit the application for the FCP to the Director of International Business. On approval of the application, the FCP fee of US$500 must be submitted to the Ministry of International Business and Industry.

Estimated Cost to Establish and Operate a Class 1 Licensed Insurance Entity

The typical cost for setting up a Class 1 captive is approximately US$26,400. However, costs can vary depending on the type and complexity of the captive.

Set-up Costs

Annual Operating Costs

Licence fees for other classes of insurance are available at www.fsc.gov.bb.

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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.