The original motivation behind the IFSC was to create employment by slowing the drain of highly qualified young people who in the past had emigrated to London, New York, Bermuda and Cayman. Not alone has the IFSC succeeded in slowing this drain, but many of the top positions in the IFSC are occupied by Irish Nationals who have returned from overseas IFSC bringing with them the many essential disciplines that are available to their clients today.
To date about 2,700 people are directly employed in the IFSC and a further 1,800 on stream to commence employment in the near future. This does not include the additional employment created in the supporting Banking, Legal and Accounting professions. Whilst this figure may not seem like a lot, if you multiply the figure by 20, you will get some idea of what the UK equivalent would be. Balanced against the original vision of 7,000 jobs when the IFSC was founded, 4,500 is not a bad start.
Insurance Companies and Captives were not initially targeted for the IFSC. It was originally aimed at Banking and Financial institutions but the insurance Directives emanating from Brussels caused a rethink and by enacting the second and third Life and non-Life Directives, the stage was set for the attraction of the Insurance Industry.
The Directives enable IFSC based Insurers and Captives to issue Policies throughout the EU and EFTA countries subject only to home-state control. This gives Dublin a significant advantage over other domiciles and it is being utilised with great effect.
Captives account for one third of all IFSC operations and this has contributed in no small measure to the success of the IDA in attracting companies such as J. Rothschild International, Old Mutual and Scottish Amicable to establish Life Operations.
Ireland has an EU approved low tax rate of 10% which has also proves attractive to companies establishing here. Eventhough tax considerations should not be the primary basis for establishing a Captive it may rank as an important consideration for some.
Also on the taxation front, Ireland provides access to a network of 22 tax treaties. Whilst they are more beneficial to some than to others, they do provide a powerful combination when allied to the low tax rate.
GROWTH IN CAPTIVE INSURANCE COMPANIES IN THE IFSC
No. of Captives 1989 31 1990 60 1991 72 1992 87 1993 112 1994 120 1995 130
These figures fairly demonstrate the consistent growth of Captives in Dublin since 1989. In looking at the IFSC today, it is important to bear in mind that one is looking at companies the vast majority of which are less than 5 to 6 years old. Comparisons with the Channel Islands or Luxembourg, both of which have been in existence for approximately 25 years, come into sharp perspective when the comparative ages of the Centres are taken into account. A comparison with a mature Dublin in 2012 will tell a different and interesting story.
Opportunities for growth are significant when some statistics are considered. Of the top 250 corporations in the USA, 90% own or participate in a Captive structure. This compares with a range of 10% to 15% of the top 250 Corporations in Germany and France. Other countries in Europe are relatively untapped such as Italy and Spain and of course we are not ignoring Far Eastern markets.
As far as Dublin is concerned, it needs to find its own level. We may aspire to Bermudan proportions but the reality is that the climate is changing all the time as onshore establishment is encouraged and new competing domiciles emerge.
European Corporations who might once have located in traditional offshore centres such as Bermuda or Cayman are increasingly likely to roost closer to home.
Ireland satisfies the requirements for credibility, political stability, qualified personnel, streamlined regulatory process and commitment from the government. The IFSC itself is nearing completion and we believe that all the elements are present to ensure sustained growth. In subsequent articles, we will address such factors as the licensing process, regulation and constitution, initial outlay/estimated annual costs, taxation and operational issues which effect captive insurance companies licensed in the IFSC.
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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