Canadian Underwriter

Paid Barbados Captive Insurance Executives Project Steady Growth

April 4, 2022   by Invest Barbados

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The global insurance market is experiencing hardening market conditions, with rising rates and capacity constraints posing challenges for risk managers. The starkest examples have arisen from the ongoing COVID-19 pandemic, and many of its related risks such as cyber terrorism and supply chain issues have resulted in more entities turning to captive insurance solutions for their unique requirements.

For example, Nicholas Crichlow, Senior Vice-President Marsh Management Services, observed: “Leading insurance companies have sought to limit their exposure to ransomware losses, and as a result, restrictions in coverage and the increase in pricing have created the perfect opportunity for captive use.”

Barbados has been a captive insurance domicile for about four decades and is ranked No. 7 among the global players. As of December 2021, there were 308 active captives in Barbados, with the USA and Canada accounting for approximately 74%. 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.

While economic substance standards are a barrier to expansion of the captive insurance sector in some jurisdictions, Barbados, a compliant and transparent jurisdiction that facilitates businesses of substance, possesses a cadre of professionals seasoned in many of the key insurance requirements such as legal, financial, actuarial, accounting, management and compliance.

As noted by Wayne Fields, President of DGM, and a veteran provider of captive management services: “Insurance companies operating in jurisdictions such as Barbados, which offer competitive tax rates, must implement substance legislation to prevent the use of shell companies being setup to exploit low taxation.”

The senior executive added: “The cost of doing business in Barbados remains favourable . . . Furthermore, engaging Barbados’ local workforce ensures that long-term relationships can be built with clients, avoiding the constant churn that results from . . . a transient workforce.”

Justin Cole, Vice-President, Management Services with DGM Captive Management also noted, “The Barbados insurance sector has always prided itself on being a jurisdiction with mind and management on the ground, which is always a consideration for the Canadian companies.”

Vice President of USA Risk Group (Barbados) Ltd., Jeanne Crawford, commented: “We have a number of clients, some that have been in Barbados for more than 20 years. They have found Barbados to offer a stable business environment, a good network of double taxation treaties and a regulatory environment that promotes business within a well-regulated structure.”

The Barbados-Canada Double Taxation Agreement continues to play a key role in facilitating business between the two countries, with Canadian captives, especially, benefitting from the highly effective double taxation agreements (DTAs) that Barbados has signed with 40 countries. Other jurisdictions have chosen to negotiate tax information exchange agreements, which are not viewed as being as comprehensive as DTAs.  Importantly too, Barbados is a strategic gateway to the growing Latin American market and has established DTAs with Mexico, Panama and Venezuela.

The executives are confident that Barbados remains on a trajectory for steady growth. Canada, a reliable mainstay, is expected to continue being a lead market for Barbados, while Latin America with its expanding conglomerates is set to make a greater contribution.

There is general agreement among professionals that the sector’s resilience will hold, as these entities are formed not for tax purposes but for risk mitigation, thus providing a shield for the owners. It is also noteworthy that Barbados continues to be open to all forms of international insurance business, even as it strengthens its global standing as a captive insurance domicile.