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Domicile Showcase · British Virgin Islands

The British Virgin Islands (BVI) is the fastest growing captive jurisdiction with some 260 or so registered insurers, placing it firmly in the top six domiciles globally. Since 1998 the BVI has averaged around 40 new captive registrations each year. Captive legislation has been in place since 1994.

Location and Infrastructure

Located 60 miles east of Puerto Rico, the BVI has a population of around 20,000 people across several islands with a total area of around 60 square miles. The principal island is Tortola (about 21 square miles). The BVI enjoys political and economic stability with Her Majesty the Queen, through an appointed Governor retaining responsibility for defense, foreign policy and internal security. An elected BVI government sets domestic policy. The BVI is English-speaking.

The BVI has a UK style common law legal system, and the US$ is the official currency. There is no taxation of International Business Companies (IBCs), and the overall tax regime is extremely favorable. Financial services accounts for over half GDP although tourism, particularly sailing, is still the major source of employment in the islands.

Tortola has a new airport terminal and is served by several flights daily. The regional hub is Puerto Rico operated by American Airlines/American Eagle. Telecommunications are handled by Cable & Wireless.

BVI Financial Services

The Financial Services Commission (FSC) is responsible for regulatory control of captives. Established in January 2002 to replace the former Financial Services Department in response to recommendations of the KPMG report, the FSC is an autonomous and responsive executive.

The BVI has received favorable press for its supervision of financial services and for embracing the recommendations of the KPMG and Caribbean Financial Action Task Force initiatives.

The Supervisor of Insurance in the BVI is Bill McCullough ACII who was previously head of insurance supervision in the Cayman Islands. The Financial Services Commission is headed by Robert Matthavious.

Captive Legislation

Insurance companies are regulated under the Insurance Act 1994, and Insurance Regulations 1995. 2002 saw the introduction of Segregated Portfolio Company (SPC) legislation (often termed Protected Cell in other jurisdictions).

Forming and managing a captive in the BVI (in the view of experienced captive managers) is less bureaucratic than in many other jurisdictions. There are no multiple classes of insurance license, merely a distinction between property & casualty companies and long-term (life & annuity) companies. One distinguishing characteristic of the BVI approach when compared to other jurisdictions is the prevalence of career insurance professionals rather than accountants, both at the regulatory level and among the Resident Insurance Managers.

In terms of easing the administrative burden for captive owners, the BVI approach offers the following benefits:

• No requirement for resident BVI directors
• Funds need not be held in a BVI bank account
• Director's meetings not required to be held in the BVI (although they are encouraged)
• No requirement for a retained attorney or corporate secretary on the island

Captives in the BVI are required to comply with the following requirements:

• They must file an acceptable business plan and five years of financial projections
• They must be managed by a Resident Insurance Manager in the BVI
• The holder of the insurance license must be a licensed BVI company and there must be a local registered office with records of the company kept there
• Statutory capital and solvency margins must be observed (see below)
• An audit report prepared by an independent firm must be submitted each year (if it's a long term company as must an actuarial report). Audits are generally done to International Standard.

Captive Growth in the BVI

The BVI has enjoyed notable success in attracting "middle-market" business, particularly from the US and is attracting clients from Europe, and Latin America.

The BVI offers a cost effective alternative to aspiring companies. Whereas large publicly quoted companies have traditionally opted for the Bermuda, Cayman & Vermont jurisdictions, the BVI has positioned itself as an attractive home for privately owned companies and high net worth individuals with its competitive pricing and a responsive regulatory climate.

Many of the captives in the BVI are large, privately owned companies that have formed captives to resolve problems of unavailable coverage in the traditional market, or who have leveraged certain tax concessions to fund, and manage risk in a very efficient way.

The introduction, in early 2002 of Segregated Portfolio Company legislation will further enhance the position of the BVI as a responsive and flexible jurisdiction for captives.

New captive registrations in the BVI over the past few years have numbered:

In simple terms the requirement is:

In the case of Long-term companies, a different solvency test of a simple $250,000 is applied. For composite insurers writing both property & casualty and life business, the solvency margins are added together.

Allowable assets taken into account in the solvency calculation are cash, bonds, CDs, premiums, reinsurance receivables and (approved) Letters of Credit. Up to 20% the money may be invested in securities listed on a recognized exchange. Real estate, unlisted securities and parental investments do not qualify as admissible assets at all.

This is a brief summary only. For additional information on BVI captives and management services visit www.amsbvi.com website. You'll find extensive commentary, flow charts, downloads of legislation and articles.

For questions on this article, contact Derek Lloyd at AMS Group E-mail Derek Lloyd