Nevis off-shore captive and re-insurance companies
Prior to making a decision of forming an offshore Captive or Re-Insurance Company in Nevis it is assumed that the person or organization involved has done a feasibility study of a captive program for health, property and/or casualty insurance. The following branch marks must be considered:
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the needs of members;
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critical mass of participation;
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service of initial capitalization;
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realistic loss projections and pricing;
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long-term commitment of participants; and
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long-term commitment of association to captive program leadership.
Once it has been decided to move ahead with the formation, professional
tax advise must be sought. The formation of an offshore captive or
re-insurance company has definite tax implications. Further a business
plan should be formulated as to the operation of the captive or
re-insurance. A captive or re-insurance has considerable costs including
the cost of formation, annual management, actuarial charges and
reinsurance. It must be noted that operating a captive or re-insurance
is a real business. The business plan should include whether a fronting
insurer should be necessary or if direct insuring would be carried on?
Whether a business partner has been secured prior to forming of the
captive or re-insurer?
Nevis At this point the captive or re-insurance is ready to be
formed. A sound business plan must accompany any application for the
formation of a captive or re-insurance in Nevis. It should be addressed
to the Minister of Finance or the Regulator. The business plan should
include the following information:
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what type of captive or re-insurance to be formed;
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what risks are to be covered;
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who are the directors and insurance manger(s);
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will the principal place of business be in Nevis;
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will there be a resident manager in Nevis and if so who?
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the qualifications of the directors and managers.
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who is the reinsurer of the captive (where applicable);
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fronting insurer if any; or direct writing;
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actuaries and auditors;
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the projected gross premiums for the first 3 years;
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the captive or re-insurer will pay its 2% gross premium tax annually;
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the anti-money laundering compliance regime to be set up in the captive or re-insurer.
Formation
Under the Nevis law an Insurance company must be a company formed under
the Nevis Business Corporation Ordinance 1984. A name search and name
reservation would have to be done.
After formation an application is then submitted to the Registrar for
approval to operate as an captive or re-insurer. The licensing fees must
accompanying the application.
Th cost of licensing a captive is as follows:
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Class A - single person captive US$1,000.00
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Class B - less than 5 owners captive US$2,000.00
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Class C - 5 or more owners captive US$5,000.00
The Registrar would submit the application to the Regulator (Part of the Financial Services Commission of the Federation of St. Christopher and Nevis) who would either recommend the approval or disapproval of the application. The applicant must satisfy the capital requirements for both a captive and re-insurance it is as follows:
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single person captive or re-insurance EC$27,000.00
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less than 5 owners captive or re-insurance EC$54,000.00
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5 or more owners captive or re-insurer EC$135,000.00
The paid-in capital may be deposited with the Bank of Nevis International Limited.
The Articles and Memorandum of Association must be filed with the
Registrar and then the licence is granted.
The NBCO 1984 allow for bearer shares to be issued for an NBCO but the
registered agent (formation) must keep a list of the beneficial owners
of the shares at his office for inspection by the Regulator. There must
be at least two directors who are natural persons and qualified to act
as directors. A professional insurance manager may be hired
(corporation) and may be resident out of Nevis provided that there is a
registered agent (insurance) with adequate knowledge and experience in
the insurance industry. The manager ought not to be a shareholder or
hold any interest direct or indirect in the captive or re-insurance.
The captive or re-insurer may then begin to operate from its management
office or principle place of business. Approval must be given by the
Registrar if it is outside of Nevis.
A Nevis captive can write up to 50% of unrelated business provided that
the Registrar approves in writing. The captive or re-insurer can invest
without hindrance provided that the Registrar approves of the
investments. The captive or re-insurer must maintain its capital
adequacy at all times and must give notice to the Registrar if it is
unable to do so.
As a Nevis captive or re-insurer is an NBCO it must comply with the
Anti-money Laundering Regulation and the Guidance Notes pursuant to the
Proceed of Crime Act 2000. A compliance regime must be established by
the captive or re-insurer. It entails establishing a methodology to
establish the identity of participants in captive or re-insurance
operations, create on-going verification and record keeping procedures,
adopt internal controls and communication protocols, train current and
future employees, provide for prospective training refresher courses and
establish in a sufficiently high-ranking officer oversight and
responsibility over the captive’s anti-money laundering activities.
A captive or re-insurance is required to renew its licence annually and
pay a premium tax of 2% of gross premium. Also the captive or
re-insurance must maintain adequate capital reserves. Financial accounts
prepared under IAS rules must be filed annually.
The Regulator is empowered and required to do due diligence audits to
ensure that a captive or re-insurance is complying with the Anti-money
laundering Regulations and the Guidance Notes and can examine any
documents. Further where the principle place of business is outside of
Nevis the Regulator may carry out his functions through the Regulators
of other jurisdictions. This is made possible by the Exchange of
Information Regulations made pursuant to the Financial Services
Commission Act 2000.
If you have questions about setting up offshore captive insurance company please contact us.
