BVI Insurance Market Climate

The BVI has an independent legal and judicial system based on English Common Law, with a right of final appeal to the Privy Council in London.

The Financial Services Commission (FSC) has worked hard to create an attractive and responsive infrastructure for captives and offshore companies generally. FSC are members of the International Association of Insurance Supervisors (IAIS). They exhibit regularly at prominent insurance & risk financing conferences globally.

The financial services industry was expected to contribute over $100 Million to the BVI in 2001.

The BVI now ranks firmly in the top six captive domiciles worldwide.  It continues to expand by attracting new companies with a blend of modern legislation, sound yet straightforward regulation and a competitive fee structure.  The BVI has been particularly successful in offering an attractive jurisdiction to middle-market companies.

Indeed, from the initial introduction of the Insurance Act, 1994 the BVI has enjoyed consistent growth “taking its number of licensed insurers from forty in 1995 to over 260 today.

Whilst enjoying success and a winning formula, the BVI continues to embrace change and reform. The jurisdiction fared well in the OECD report on offshore domiciles and has implemented its recommendation to become an autonomous authority from January 2002 replacing the previous Financial Services Department (FSD) structure.

The year 2002 will see the introduction of Segregated Portfolio (or protected  cell) Companies legislation and also the general updating of its 1994 & 1995 legislation to tighten up the controls on errant companies and service providers.


The Regulatory Framework

The Financial Services Commission has divisional specialties of insurance, banking and mutual funds.

The Chairman appoints a Supervisor of Insurance with responsibility to regulate insurance companies under the Insurance Act, 1994. The Supervisor is Bill McCullough ACII who was previously Head of Insurance Supervision in the Cayman Islands. Bill is a career insurance professional who has been a broker, an underwriter, consultant and regulator in several countries around the world.

The Insurance Act 1994

This Act governs the licensing and monitoring of insurers in the BVI. It’s a modern act with a single class of insurance license enabling parental and third party business to be written. License are issued for either General Business (property & casualty) or Long-Term Business (Life, annuity & permanent health), sometimes both together.

There is no taxation of offshore companies in the BVI and there need be no meetings held in the territory although they are encouraged. Policy documents need not be produced since the captives Business Plan is usually sufficient to note the classes of risk being written provided they are supported by premium and loss records. Bank accounts need not be held in the BVI. Where reinsurance has been arranged there must be evidence of it and the Supervisor is also keen to review documents where there are risks borne by any third parties. There are due diligence requirements but a legitimate enterprise providing the necessary references would have nothing to fear.

The effect on on-costs of service providers is marked and the cost base of having a BVI domiciled captive is a major plus for the smaller entrepreneurial companies who may have looked at establishing a captive but were deterred by the initial and ongoing costs of other domiciles. Since meetings need not be held parent companies are spared the travel and opportunity costs of losing senior personnel from their everyday responsibilities. In this sense the BVI is an ideal domicile choice for those companies who wish to appoint their insurance manager and allow them to get on with it.

Some key elements of the Act are:

• The captive must be licensed under the Act before it can trade.
• It must appoint an Insurance Manager in the BVI.
• An auditor is required to return the captive’s annual financial statements within 3 months of the financial year- end.
• Captives must meet the prescribed capital and solvency requirements (given below).

Capital Requirements

For a General Business company the minimum requirement is $100,000 and for a Long-Term company it is $200,000.

Solvency Margins (General Business)

Net Retained Annual Premium **	Solvency Margin
Up to $500,000	$100,000
Over $500,000 but less than  $5,000,000	20%
Over $5,000,000	$1,200,000 plus 10% over $5,000,000

Note: Net retained premiums are gross premiums less reinsurance premiums.

Allowable assets for solvency calculation purposes are cash, bonds, premium receivables, reinsurance receivables, Letter of Credit and securities (maximum 20% of total assets). For Long-Term business the minimum solvency margin is a straight $250,000.