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  Professional offshore incorporations and offshore banking services since 1996

 

 

Offshore Captive Insurance
 

1. St. Vincent. Captive Insurance Co.
2. Cook Islands Captive Insurance Co.
3. Vanuatu Captive Insurance Co.
 

The Concept of Captive Insurance:
The existence of the "exempted insurer" status is designed to encourage that type of insurance known as "captive insurance". Captive insurance companies are primarily distinguishable from other insurance companies in that:
a) they are generally owned by, or associated with, the companies that they are insuring, and
b) they underwrite risks on a restrictive and selective basis only.

Captives may be used to underwrite 100% of a risk. Alternatively, the captive may reinsure, partially or wholly, through conventional underwriters.

Uses and Advantages of Captive Insurance:
There are a number of reasons why corporations establish captive insurance companies. The most common of these can be summarised as:-

the necessity or the desire of corporations to carry their own risk (self insure), due to:
a) the prohibitive level of premiums and excess of loss adjustments;
b) the low likelihood of claims on certain risks (e.g. executives' loss of income).
the taxation benefits arising from the deductibility of insurance premiums paid to captives;
the absence of taxation on premium income received by captives incorporated in a tax free
financial centre;
the avoidance of restrictive regulations in the corporation's own country, particularly in relation to the movement and investment of funds;
the opportunity for funds to accumulate at a greater rate due to the absence of taxation on investment income earned by captives in a tax free financial centre.

Self insurance through captive insurance companies offers several advantages apart from taxation:
It reduces costs by eliminating a portion of brokers' and insurers' administrative costs built into premiums.

It results in policies and risk insurance more tailored to the needs of the insured party, who would no longer need to rely on standardised policies.

It results in a reduction of the net insurance cost through reinsurance credits and commissions which are retained by the captive.

By aggregating corporate or group premiums in one company, better placement and management of funds will generally result.

By deciding when corporate/group premiums will be paid as against when reinsurance premiums fall due, overall cash flow may be improved.


St. Vincent.
How to the set up an Insurance Co. in St. Vincent.

Captive Insurance Companies in St. Vincent are regulated by the International Insurance Act of 1998. This legislation repeals the old International Insurance Act of 1996 under which TW Insurance Company was registered.
St. Vincent’s legislation on International Insurance provides (Part III, Art. 12.1) for the formation of five different classes of captive insurance companies as follows:
Class I: Permits the insurer to carry on any international insurance regardless of the line of insurance (long term or general lines)
Class II: Only allows the insurer to carry on general international insurance business (not long-term)
Class III: Permits the insurer to carry on general international business with related parties and no more than 30% with unrelated parties.
Class IV: Permits the insurer to carry on any international business only with related parties.
Class V: Permits the insurer to carry on any international business only with the sole owner of the insurer.

II- Who may apply for a Class V Licence?
Subject to St. Vincent’s Captive Act, Part III 12 (5), a Class V licence will be issued to a person where:
It is a St. Vincent IBC or Trust;
It has at the time of its application for license, or will have before it commences to carry on international insurance business, a net worth of at least $10,000;
It has a single owner, in the case of a company, or no more than five beneficiaries, in the case of a trust; and it intends to carry on international insurance business consisting only of insuring the risks of the owner of such company or the beneficiaries of such trust, as the case may be, or writing annuities for such persons.

FEES
We charge the following professional fees for each class:
Class 1 US$ 19,000
Class 2 US$ 17,000
Class 3 US$ 13,000
Class 4 US$ 11,000
Class 5 US$ 8,500

Additional fees required:
Application fee - US$ 250
License fee - US$ 1,500
Annual renewal fee to government – US$ 1,000
Registered Agent annual fee – US$ 3,000


ANNUAL MAINTENANCE FEES (2nd & Subsequent Year): We charge US$10,000 renewal to maintain and manage the Company. We have a really good relationship with the powers in charge in Saint Vincent.

Instruction applicable to Class 5 ONLY: Applicant must be a trust or a company formed in Saint Vincent with a net worth of US$10,000. In the case of a company, it must have a single owner, or in the case of a trust, no more than 5 beneficiaries. The entities must be formed for the purpose of carrying on insurance business consisting of insuring the risks of the owner only or of the beneficiaries of the trust or writing annuities for persons in that class.

The net worth can be shown as follows:

  • By cash in hand or on deposit with a recognized financial institution in an approved jurisdiction

  • Or bonds, debentures issued by the governments of UK, US, Canada or any other country approved by the Commissioner

  • Or equity or debt securities quoted on a recognized stock exchange. Securities will only be
    permitted to form 50% of the total allowable assets of the applicant.

A business plan is required.

Proof of capitalization of Applicant.

Appointment letter from a lawyer in Saint Vincent who will be provided by incorporating agent
for an annual retainer fee of US$1,000 (We can arrange for this.)


As you can see Offshoresimple has developed considerable expertise in this area, and through our partners have established similar entities for several clients. Once you have reviewed the general information, please contact us to determine your exact requirements and to assist with the application process.
Our fees for time incurred for assistance outside of the incorporation of an exempt company, such as preparation of an insurance application, business plans etc would be time based, as would our fees for the day-to-day administration of the company.

To proceed, we will need a down payment of $1000.
If you have any questions, feel free to Contact us .


2. Formation of a Cook Islands Captive Insurance Co.:

Cook Islands legislation allows considerable flexibility in the ability of a licensed Insurance Company to conduct business. The term "insurance business" is given a wide meaning and includes the issuing of, or undertaking of liability under all types of policies of insurance, assurance, reinsurance or indemnity.

The following is a summary of the requirements of the Cook Islands Offshore Insurance Act;

• The asset backing requirement is a surplus of tangible assets over liabilities of USD100, 000.
No part of the surplus or any other funds of the insurance company are required to be retained in the Cook Islands or invested in any particular form of investment.

• The licence is required to submit audited accounts to the Financial Services Commission within six months of the end of its financial year. The auditor must be approved for that purpose by the Commission and registered as a company auditor in the Cook Islands. In the case of a Cook Islands branch of a foreign company, branch account will suffice.

• The licence may, with the consent of the owner of any insurance policy, establish a statutory fund which becomes the sole source of assets to meet any liabilities in respect of that insurance policy.

• The licence is required to transact its business through a registered trust company unless approval is granted to maintain a permanent establishment in the Cook Islands.

Offshore insurance licences are granted by the Financial Supervisory Commission who reviews the financial and business integrity of the applicant.

The applicant must provide:

a. Information/documentation to show that the company will be able to maintain sufficient capital taking into account the type of risk that is intended to be covered;

b. A business plan describing the proposed business of the company. This plan should demonstrate satisfactorily that the company will be able to maintain a sound financial situation and meet its obligations at all times during the first years;

c. The business plan should include information regarding the types of obligations the company proposes to incur (life insurance) or the types of risk it proposes to cover (non-life insurance). Such a plan should not be restricted to the indication of the classes of the insurance according to accepted classifications. Instead, the nature of the risks should be described. The company should provide information on whether it also proposes to accept re-insurance business, and if so, in which insurance classes;

d. A description of how and to what extent the expected contracts are to be re-insured. The company should describe how the structures needed to manage the expected portfolio of contracts are to be set up and through which channels (e.g. brokers, agents, distribution outlets);

e. Provide if possible, a projection of the expected costs for the development of business in the form of model profit and loss accounts;

f. The suitability of management of the company for the type of business to be undertaken;

g. Details of applicable laws and regulations of the jurisdiction in which the insurance business is being carried on (and in particular details of how the Insurance business will be supervised in that jurisdiction);

h. details of the auditors; and

i. Appropriate due diligence on the owners and officers of the company as per the attached.

We provide the following services to companies wishing to obtain a Cook Islands offshore insurance licence.
• International company incorporation or foreign company registration, and provision of ongoing administration and company management services.
• Application for insurance licence and liaison with the Commissioner.
• Assistance establishing a statutory fund and ongoing administration.

The costs of obtaining a Cook Islands offshore insurance licence (including corporate
registration) are:

Fees:
First Year:

  • Our fee for company registration including US$ 5,265.00 Government registration fee
  • Our fee for obtaining insurance licence US$ 5,865.00
  • Commissioner’s fee for issuance of insurance US$ 2,000.00 licence
  • Incidental application fee payable to the US$ 70.00 Commissioner
    TOTAL US$ 13,200

Annual thereafter:

  • Our fee for renewal of registration including Government fee US$ 3,400.00
  • Commissioner’s fee for renewal of insurance US$ 500.00 licence
  • Our fee for renewal of the insurance licence US$ 5,930.00
  • Incidental application fee payable to the US$ 70.00 Commissioner
    TOTAL US$ 8,500.00

International company incorporation and foreign company registration can be undertaken within 24 hours. The time between receiving complete instructions and information required to be submitted to the Commissioner and approval of the licence is usually five to six weeks.


As you can see Offshoresimple has developed considerable expertise in this area, and through our partners have established similar entities for several clients. Once you have reviewed the general information, please contact us to determine your exact requirements and to assist with the application process.
Our fees for time incurred for assistance outside of the incorporation of an exempt company, such as preparation of an insurance application, business plans etc would be time based, as would our fees for the day-to-day administration of the company.

To proceed, we will need a down payment of $1000.
If you have any questions, feel free to Contact us .



3. Formation of a Vanuatu Captive Insurance Co.:

Insurance companies in Vanuatu are regulated by the Insurance Act [CAP.82] (“the Act”) which requires the registration of all insurers, underwriters, agents or brokers carrying on insurance business within or from within Vanuatu. A company may be registered as a "local", "external" or "exempted" insurer.

The Vanuatu Government is currently reviewing the existing insurance legislation with a view to introducing a new Act later this year. The legislation is currently in the drafting review stage and therefore no firm guidelines are available. We are however actively involved in the consultation process and the industry generally has been invited to contribute to the contents of the new legislation. At this stage we cannot state what changes may be made for exempt insurers, however we can say that the new Act will cater for Captive Insurance. It is likely that the new Act will formalise existing policy that exempted insurers maintain fully paid up capital of US$ 150,000, although the final amount is yet to be advised. A transitional period will be allowed for insurers registered under the existing legislation to comply with any new requirements.

The Current "Exempted Insurer" Status:
An exempted insurance company is precluded from insuring risks within Vanuatu and from soliciting business from the public within or outside Vanuatu. However, by virtue of its exempt status, the exempted insurer is not subject to the normal restrictive insurance company regulations which do apply to local insurers. Provisions within the Act which do not apply to exempted insurers include those relating to:
minimum capital requirements
minimum net asset requirements
restrictions on the type of investments permitted
detailed reporting requirements
restrictions on loans to directors
publication of financial statements.

Advantages of Using Vanuatu as a Base for Captive Insurance: Captive insurance companies may be formed in the countries where insurable risks are sourced but this normally means compliance with legislative requirements designed to protect the public and policy holders. Because such requirements do not apply to exempted insurers in Vanuatu, it is an ideal location for a captive insurance company. Vanuatu has no income tax, capital gains tax, withholding tax, or estate duty. In addition, the lack of exchange controls in Vanuatu enables the captive to adopt a very flexible investment policy and also facilitates the payment of claims overseas. Reinsurance facilities are readily available in Vanuatu.
Underwriters represented here include:
Australian Family Assurance Limited
Blue Shield (Oceania) Insurance Limited
Commercial Union Assurance Company of Australia
Limited Consolidated Insurance Limited FAI (NZ)
General Limited QBE Insurance (Vanuatu)
Limited Union des Assurances de Paris

Obtaining an Exempted Insurer's Licence:
To form an exempted insurance company in Vanuatu, the usual incorporation procedures need to be
followed. In addition, an application for an insurance licence must be submitted to the Vanuatu
Financial Services Commission. While there are few legislative requirements in regard to
exempted insurance companies, the Vanuatu Financial Services Commission has indicated that he
will follow certain guidelines as to who will qualify to obtain an exempted insurer's licence.
These guidelines are similar to those for obtaining an exempted banking licence and include:

1. Although there are no minimum capital requirements laid down in the Act, the Commission
requires evidence of a minimum fully paid up capital of at least VT15 million or US$150,000.
This capital should be in the form of cash or other liquid assets available for use in the
business. These assets are not required to reside in Vanuatu.

2. Details of the beneficial owners or principals behind the proposed company must be submitted.
These details should include evidence of:

the financial standing of the principals, and
the knowledge and experience in the insurance business of the principals, or if different, of
the persons providing the day to day management.

It is considered, then, that the following will cover these aspects:

a) curriculum vitae of the principals and management,

b) written evidence of the principals' financial substance and means, and

c) the latest audited financial statements of the principals' existing company(s).

3. Independent, written references that provide evidence of the good character and standing of
the principals. The Vanuatu Financial Services Commission has indicated certain guidelines
regarding these references, including the following:

a) The person giving the reference should satisfactorily establish his credentials as a person
upon whom he can rely.

b) The person giving the reference must clearly indicate that he is aware of the purpose to
which the reference is to be put, i.e. in application for an insurance licence, and it should be
addressed to the Vanuatu Financial Services Commissioner, Port Vila, Vanuatu.

c) The reference should contain detailed and relevant material.

4. Certified copies of the passports of the beneficial owners and anyone who will be involved in
the senior management of the bank;

5. A list of the jurisdictions in which the company will operate;

6. Police clearances for each of the principals from their current country of residence;

7. A detailed business plan, including cash flow, profit and balance sheet forecasts, must be
submitted;

8. A written undertaking by the principals that the activities of the insurance company will be
strictly of an in-house nature and that the company will not solicit business from the general
public.

If all these requirements are presented to the satisfaction of the Vanuatu Financial Services
Commission, an exempted insurance company can usually be incorporated within 2-3 months.
Generally speaking the administration of the captive (i.e. risk, reinsurance, claims and fund
management) should be in Vanuatu in order to add to the commercial reality of the restructured
insurance arrangement. However, in some cases the administrative function is performed in the
local jurisdiction or neighbouring jurisdictions. Assuming that the administration of the
captive is to take place in Vanuatu the company may either employ its own staff or enter into an
administration arrangement with professional insurers or insurance managers in Vanuatu.

Cost of Set up and Maintenance: The costs of forming and maintaining a captive insurance
company in Vanuatu can be summarised as follows:

First Year:

  • Government registration fee (for authorised capital of VT50 million or less) US$ 450.00
  • Exempted insurance licence US$ 900.00
  • Other disbursements (approximately) US$ 70.00
  • Our incorporation fee US$ 2,000.00
  • Our representation fee -for use of nominee services (maximum) US$ 2,500.00
  • percentage government levy US$ 100.00
    TOTAL US$ 6,020

Annual thereafter:

  • Government registration fee US$ 450.00
  • Exempted insurance licence US$ 900.00
  • Our representation fee US$ 2,500.00
  • percentage government levy US$ 65.00
    TOTAL US$ 3,915.00

Both the annual government registration fee and our annual representation fee are payable on 1st April. For the latter fee, a pro-rata credit is given for the first such fee on incorporation. Other costs of maintaining the company include accounting and audit fees, services in relation to the company's operations, administration and investment of accumulated funds and the provision of professional advice. These fees, if we are to act in this regard, are based on the time involved. Our charges range from US$50 to US$180, depending on the level of skill and care required.
 


As you can see Offshoresimple has developed considerable expertise in this area, and through our partners have established similar entities for several clients. Once you have reviewed the general information, please contact us to determine your exact requirements and to assist with the application process.
Our fees for time incurred for assistance outside of the incorporation of an exempt company, such as preparation of an insurance application, business plans etc would be time based, as would our fees for the day-to-day administration of the company.

To proceed, we will need a down payment of $1000.
If you have any questions, feel free to Contact us .


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