BVI Captive Management Services

The BVI captive, or closely held insurance company (CHIC), is a great financial tool for middle market companies. These tax efficient structures are especially beneficial for estate planning purposes and to write some 'difficult' risks of the family business.

Our BVI insurance team has tax attorneys, CPAs, Chartered Insurers and risk managers able to take your enquiry, look at your risks, design a program and implement a BVI captive in just a few weeks.

With an international clientele drawn from different countries, we service a geographically broad and diverse client base. We provide a bespoke, turnkey service for clients designed to save you time. We'll suggest what risks may be sensibly underwritten, draft your policies, form the company, manage the accounts and handle all the BVI paperwork for you. We'll even introduce you to a bank and an auditor, experienced in handling BVI insurance companies.

Advantages of Captive Insurers

The use of captive insurance has many advantages. The reason for the success of the captive insurance industry has to do with some of the advantages available. These include:

• Cost savings
  The risks taken on by a captive generally do not reflect the industry as a whole, but rather that of the parent. It is therefore possible to allow risk management to improve the profitability of the captive which enables the organisation to share in underwriting profits. Similarly the costs of traditional insurers can be eliminated including their overhead and the costs of commissions incurred in the retail market.

• Investment Income
  The retention of investment income is one of the major benefits of the use of captives. Due to the delay between premiums being received and claims paid, the investment income over time can be significant. This can be fed back to the parent group either as a dividend, be retained in the captive, or take the form of lower premiums.

• Direct access to Reinsurance Market
  A captive may have direct access to the reinsurance market which would be difficult or impossible for the parent itself to obtain. This ability to deal directly can lead to cost savings, as well as an ability to insure difficult risks.

• Control of investments
  Although most jurisdictions, including the BVI, have admissible assets in which investments may be made, the use of a captive allows for some discretion as to the nature of that investment.

• Smoothing of costs
  The use of a captive allows costs to be smoothed over a period of time, and a reduction of volatility caused by external factors to the business.

• Insuring the Uninsurable
  At certain times some risks are very difficult if not impossible to insure. Examples of these include professional indemnity issues. By utilisation of a captive, the parent can provide for the risks inherent in these claims which provides the protection needed.

• Tax Advantages
  The use of a captive historically allowed tax advantages to be obtained. These have reduced over time, but tax planning is still important. For example the US has particularly interesting rules contained in Sections 831(b) and 501 (c) of the Code, which has resulted in a number of captives being formed to fall under these provisions.

• Licences and Capital Requirements
  Licences may be awarded for both Long Term in the form of Annuity, health, accidental Death and Disability or for General which is anything other than Long Term.

  The capital required for General is $100 000, and for Long Term is $200 000. Please bear in mind that these are minimum requirements, and that minimum levels of solvency must be maintained. Generally these are in line with 20% of net retained premium income up to $5m, and 10% for net retained income in excess of $5m.

  All insurers must be licenced under the Act, and must appoint an insurance manager authorised to act in the BVI. The licence is renewable annually.

• Admitted assets
  Certain categories of assets may not be included when calculating admitted assets. The Financial Services Commission is currently undergoing extensive discussions with the industry as to what this should constitute.

• General requirements
  There must be at least two directors; Books and records must be maintained in the BVI, although the funds need not be; An application must include a detailed business plan; An annual audit is required.

  For more information please contact us directly.

The BVI Captive Success Story

The BVI captive market has grown in size to around 350 insurance companies since 1999. It's no accident that the BVI has enjoyed such growth over competing jurisdictions.

Geared to providing timely, cost effective and tax efficient insurance structures, the BVI has a business friendly approach. A 'can do' attitude coupled with low bureaucracy, no currency controls, British legal system, and US$ as official currency means that applications are turned around quickly, and funds may move with no messing around. Unlike some jurisdictions with their own unique currency, there is no need for exchange rate adjustments or stamp duties.

Services for the US Market

Over 90% o the BVI captive insurance structures have their origins in the USA. In the same (EST) time zone for most of the year and with the US$ as the official BVI currency, no exchange controls and not even a requirement to appoint resident BVI directors, its easy to see why.

In 2004, for the first time in over twenty years the favourable tax treatment for insurance companies got even better. Just when sensationalist press articles predicted tax reforms that would decimate the captive market, the financial thresholds were increased, making them even more attractive.

If you have a family business with annual revenues of between say $5M & $100M annually then you could almost certainly benefit from the use of a closely held insurance company (CHIC). A family held insurer, writing risks on the families enterprises in the US could not only achieve economic risk financing benefits for the US businesses, but the profits retained in the captive may accrue for the benefit of the family member shareowners - a great way of estate planning.

From manufacturing to medical malpractice, production to the professions, the BVI captive is a way to finance risk in a controlled, managed way.

Talk to us about your business. We'll develop a financial model and take you through it in simple, understandable terms.

Captive insurance for African Clients

Companies in Africa often face problems unique to the region. These issues include exchange controls, weak or unstable currencies, and often a complete inability to access normal insurance markets. Allied to this, income tax systems are often relatively unsophisticated by First World standards.

We are able to design insurance programs that seek to address these problems. Firstly we are able to offer access to the self funding of risks that are often currently being borne internally. Invariably, the use of a captive allows reserves to be extracted in a tax and exchange control efficient manner. This in turn allows the investment of reserves in a stable environment and in first world currencies.

Our team has many years of experience of operating in the African environment, and are able to put together an insurance package that will meet your requirements.

Asset Protection for Doctors & Physicians

The conventional insurance market for medical malpractice just gets worse. Physicians are often called upon to pay annual insurance premiums for limits of coverage not much more than the premium itself, and with substantial deductibles. In fact, many physicians either move state and their practices somewhere else, or even go uninsured.

When the premium to coverage ratio no longer makes sense, then using a captive definitely does. Better to enjoy the benefit of a premium deduction and start building your own 'war chest' of funds than say goodbye to a premium check to an insurer year after year.

Using segregated portfolio or protected cell companies, like-minded physicians may come together, pool a limited amount of risk and yet largely insulate their personal exposures from the others in a tax efficient insurance structure.

How much does it cost to establish a captive insurance company in the BVI?

We have illustrated the costs associated with establishing a captive in the order in which the fees would be incurred. They are as follows:

1. A once off fee of $500 levied by the Supervisor of Insurance to review the application.
2. Once the application has been approved, the insurance company has to be formed. The costs of incorporating an insurance company (with a capitalisation above $50 000) are approximately $700 plus registered agent fees of $500 and a government IBC fee of $1000. The government IBC fee can be reduced to $350 if a company with only $50 000 capital is used and the shares are issued at a premium to meet the minimum capital requirements.
3. The Annual fees for a captive are the following:
   • Insurance Licence $2000
   • Government IBC License Fee $350 (for capitalisation over $50 000 this would be $1000)
   • Registered Agent Fee $500
4. As an audit is compulsory this cost needs to be taken account of and would typically be in the region of $5000 - $10 000 depending on size.
5. It is a requirement to appoint a BVI Insurance Manager. These costs vary depending on complexity, and may be as little as $10,000 annually. With greater complexity the fees are of necessity larger, but in general they are very competitive internationally. An insurance company requiring a full host of services such as policy issue, loss settlement, negotiation of reinsurance treaties etc would be higher. Our fees for preparing the insurance application itself average around $8,000 - $12,000 for a straight forward application.