Insurance in the Bahamas

The Domestic Insurance Market

The domestic market is relatively large and supported by seven locally-owned and forty-nine foreign-owned insurers. Business is written directly or through a variety of brokers and agents.

In 1992, total accounted gross premiums amounted to $203.5 million (62% Life and Health insurance and 38% Property and Liability insurance). Life insurance is dominated by subsidiaries of Canadian and US companies, which account for about 78% of the market. Bahamian-owned companies account for 20%, with UK companies accounting for the remaining 2%. Property insurance is provided predominantly by British companies, with only one Bahamian-owned company in this category.

Bahamas International Insurance

In the 1960s, several major US companies began to form their own insurance subsidiaries in offshore financial centers like the Bahamas. These subsidiaries are today called "captives," The goal of  captives was to insure the risk of the parent or subsidiary companies.

The International (Captive) Market is small, but growing. There are some 3,500 captives worldwide. A number of such companies are currently located in the Bahamas. The majority of the captives have a USA origin and the others are from Europe. Total premiums written with respect to all foreign risks amounted to $121 million in 1985. Local services for these international insurers are provided by a variety of offices, ranging from underwriting manager to trust companies.

Benefits of Bahamian Captives

Among the many advantages of operating through the Bahamas are the following:

- Strong professional infrastructure, with financial, legal, and accounting services  readily available
- Responsive, well-informed regulatory department able to react promptly and intelligently to new proposals
- Acceptable communications with the United States and Canada; full telephone and telex services, airline services, including direct flights to major US and Canadian centers
- High-quality, world-famous leisure activities and facilities, including sport fishing, sailing, snorkeling, championship golf and tennis.

The outlook for international insurance in the Bahamas is positive. The supportive infrastructure already exists, the legal framework is similar to that found in other jurisdictions, and the supervisory system is well-equipped to handle the demands arising without losing the personal touch, which is so important in fostering good relationships with market participants.

The Regulatory Framework

The Bahamas has two key insurance laws that make up the regulatory framework: the Insurance Act of 1969 as amended and the External Insurance Act of 1983.

Both insurance laws lay down statutory minimum net worth figures and net premium to capital and surplus ratios, notwithstanding the minimum figures (ranging from $100,000 under the 1983 Act for general insurers to $300,000 under the 1969 Act for life insurers).

Applicants should be realistic in their determination of a suitable financial base for operations; the Registrar would not normally expect to see any application with less than $250,000 initial capital and, in any event, the proposed amount should be more than adequate to support the proposed volume business. Likewise, working ratios should be established in the light of current market thinking and practice; a net premium to capital and surplus ratio of not wider than 3:1 being considered a good starting point.

Initial capitalization, certainly to the statutory minimum, should be by way of cash. Letters of credit are not likely to be acceptable, unless they represent amounts over and above the working capital level. There is no legal requirement for capital funds to be held locally, but most companies do use the extensive local banking system. In that regard, companies planning to act as direct insurers (excess or surplus line) may be required by the Registrar to place deposits either locally or in the state where business is being transacted in order to provide the necessary level of comfort.

Ongoing reporting requirements are minimal, but their importance cannot be overstated. Basically, the requirements are that each company should continue to carry on its business in the manner described in the business plan and that an audited financial statement should be filed annually, within six months of the close of the financial year (which may be set by the company).

Companies registered under the 1983 Act are also required to furnish certain statutory statements indicating compliance with terms of registration. One such statement requires countersignature by the Underwriting Manager.

This sector is overseen by the Ministry of Finance, through the Office of the Registrar of Insurance. All information handled by the Registrar is treated in confidence (but it should be noted that the share register held by the Registrar General may be inspected by the public). The 1983 Act reinforces the confidentiality aspect by incorporating a special provision in that regard. Nevertheless, it is anticipated that as the Bahamas develops into an insurance center in its own right, confidentiality will become less and less significant to market participants, which may well find it advantageous to release certain information, e.g. ownership and/or financial standing.

The Application Process

Given a satisfactory application, licenses are eventually issued on authority of the Minister of Finance, following recommendation by the Registrar of Insurance Companies. Detailed application forms are to be found in the Regulations attaching to the respective laws.

Areas in which the Registrar needs to be satisfied before a positive recommendation can be made, include:

- The identity of all key parties involved (sponsors, shareholders, directors, officers and managers).
- The fitness of those key parties to engage in the proposed operation.
- The business ethics involved.
- The feasibility of the planned business.
- The security of any outward reinsurance.

Fees and Taxes for Offshore Insurance Companies Insurance Companies

Fees for offshore insurance companies are $2,500 for registration and an annual fee of $2,500. A $650 fee is imposed per underwriting manager employed. The offshore company obtains a 15-year tax holiday from the date of registration. Resident insurance companies writing local business pay a premium tax of 2% of gross premiums collected each quarter, or $25, whichever is higher, plus an initial registration fee of $1,000.