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What COVID-19 means for the Caribbean manufacturer

November 3, 2020
3
min. read

There has been a proliferation of US domiciles adopting captive legislation over the past several years. The push began in the early 1980s with Vermont aiming to create jobs in an otherwise remote part of the country and several other states have followed suit. States hungry for revenue have jumped at what they perceive is an opportunity for a new source of both revenue and local jobs, given the fact that 50% of the US property and casualty insurance market is written through captives. We believe that these states will soon realise their false hope.

As several jurisdictions have already discovered, enacting captive legislation and regulation requires significant investment in infrastructure. Legal advisors have already recognized the problems associated with US domiciles’ efforts to collect taxes and fees without being adequately staffed or experienced in captive insurance regulation.

Selecting a domicile

Not all domiciles are created equal. Because a captive as an insurer has ongoing exchanges with its regulators, the chosen domicile must have a competent staff equipped to address regulatory issues in a timely manner. High on Capstone’s criteria when evaluating a domicile for a particular captive is that jurisdiction’s expertise, staffing levels and commitment to regulating intermediate sized captives as opposed to major conventional insurers. Industry expertise with the insureds’ businesses is also a consideration.

The economic crisis in the US continues to adversely affect onshore domiciles. Having concluded that their captive bureaus aren’t profitable, some states have left them without leadership, resulting in decisions to exit the captive business. Those who are active in the captive arena understand that a captive is a living, breathing insurance company with ongoing issues. The captive needs responsive regulators that can make timely decisions with regard to captive management. Operating in short-staffed states has proven to be very difficult.

Anguilla as an offshore domicile of choice

From formation and licensing to responsive regulatory oversight, Anguilla has met Capstone’s expectations. Others in the captive marketplace seem to have reached a similar conclusion, as evidenced by Anguilla’s growth over the last few years as the domicile of choice for smaller captives.
In cases where there are time-sensitive filings, there is willingness on the part of the Anguillan Registrar of Companies and Financial Services Commission (FSC) to accommodate reasonable deadlines and to put its onsite regulators on task to handle the extra work and meet these deadlines. The insurance regulator is both committed to the regulation of captives and is well versed in such.

The Anguilla Insurance Act and the Insurance Regulations also provide a sound regulatory framework for the operation of captives. Anguilla excels in enforcing its captive framework in a fair and consistent manner. The FSC’s focus has been on providing a secure, practical regulatory framework for the safe and sound operation of captive insurance companies, and not on creating and maintaining a regulatory minefield strewn with bureaucracy. Its rules are a balance between good regulation and a recognition that coverages are being written to affiliates of the captive’s owners. The FSC has responded in a timely manner to requests for interpret.

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