"With the induction of a new government on the island, the time is right to reflect on the evolution of the captive insurance industry in Bermuda, from its humble beginnings to its world-leading present," Ross Law, Bermuda Report 2017 Editor, Captive Review.
In this year's Captive Review Special Report: Bermuda 2017, associate Phelecia Barnett looks at the development of Bermuda's captive insurance industry against the backdrop of global political and economic change.
"Bermuda's captive industry began in the 1960s with Fred Reiss, a risk manager from Ohio, who coined the term 'captive' and initially developed the captive concept. Although met with much opposition in both Bermuda (to preserve Bermuda's reputation by keeping 'funny money' off of its shores) and the United States (with the introduction of the United States Tax Reform Act 1962 (Tax Reform Act)), Bermuda's captive sector developed and thrived. The Tax Reform Act was designed to clamp down on the escape of foreign profi ts from current taxation and outlined the fi rst provisions for the taxation of offshore US foreign controlled companies.
Ironically, it could be argued that the Tax Reform Act created a way for Bermuda's nascent captive industry to grow. Regulations made it expensive to establish and operate captives in the US. Unable to receive insurance at home, US companies began to look offshore in order to self-insure. At the end of the 1960s Bermuda had become the leading captive domicile, with more than 100 captives..."
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