By NEIL HARTNELL
Tribune Business Editor
The Bahamas has “risen from extinction” in captive insurance, a leading industry player said yesterday, with this nation’s growth rate over the past three years “exceeding any other jurisdiction”.
Peter Strauss, of The Strauss Law Firm, told Tribune Business that by year-end his firm expected to double the number of Bahamas-domiciled cell captives it had incorporated to 80, a figure just shy of Vermont - the “gold standard” jurisdiction.
The South Carolina-based attorney, a leading expert on the sector, said the Bahamas’ “pro-business” legislative and regulatory platform provided the ideal foundation for this nation “to become the biggest jurisdiction for captive insurance in the world”.
The key to achieving this, Mr Strauss said, was for the Bahamas to better market itself to the outside world and for local professionals to invest time and money in growing the still-fledging captive sector.
Noting the spin-off benefits that Bahamas-domiciled captives could generate for local attorneys, investment advisers, accountants and banks, Mr Strauss said that just holding annual meetings for the 40 cell captives already incorporated in this jurisdiction injected $500,000 into the tourism economy annually.
The Bahamas has long talked about re-establishing itself as a captive insurance domicile, but now appears to be taking concrete steps to back this up with action, as evidenced by the joint Insurance Commission-Bahamas Financial Services Board (BFSB) industry briefing on Wednesday that Mr Strauss addressed.
“The main message was really about awareness, and the fact the captive industry in the Bahamas is alive and well, vibrant you might say, and close - if not already ready - to compete on a global stage and be a pre-eminent jurisdiction for captive business,” Mr Strauss told Tribune Business.
“I think my firm is responsible for 95 per cent of the captives done in the Bahamas. There are over 40 licensed cells established in less than three years.”
Mr Strauss said the Bahamas’ main attraction was the “very pro-business” approach of the Insurance Commission, coupled with the competitive regulatory fees and captive capitalisation requirements.
Recalling the Bahamas’ somewhat chequered history in the industry, he added: “In the 1950s, you owned the captive insurance market, and then it disappeared almost overnight in the 1970s.
“All of a sudden, without noticing, the Bahamas is back in captive insurance. The Bahamas has basically risen from extinction in captive insurance, and is back on the map.
“We’re trying to raise awareness of that, because we think it’s a huge opportunity for local professionals in the Bahamas.”
In its simplest form, captive insurance is self-insurance for particularly expensive or unique risks, such as those faced by groups of doctors.
Apart from the attorneys and accountants required to do the legal and auditing work, Mr Strauss said investment managers were needed to manage surplus assets, with banks providing the necessary account services.
“Our annual meetings held in the Bahamas every year bring in $500,000 into the tourism industry,” he told Tribune Business.
“The interesting thing is how quickly the Bahamas has grown and how quick the growth rate has been. By no stretch of the imagination I think the Bahamas can become the biggest jurisdiction for captive insurance in the world, and it can do that quickly.
“In just the time we’ve been there, the growth pattern for the Bahamas, in just three years, has exceeded any other jurisdiction.”
Many jurisdictions had focused on attracting Fortune 500 company business, including Vermont, which was home to around 100 captives servicing such customers.
Yet there were 28 million small businesses in the US that could benefit from this product, and Mr Strauss indicated this was the market the Bahamas should concentrate on. Just 2,000 captives were formed annually to underwrite their risks.
“We project that at the end of this year there will be over 80 831(b) [small and medium company] captives in the Bahamas,” he told Tribune Business.
“You’re looking at creating probably as many small captives in four years as against Vermont, which is regarded as the gold standard.”
And Mr Strauss added: “The Bahamas can own that market. My feeling is that ultimately, the Bahamas will be able to compete for any segment of the captive market it wants, because of the growth prospects of the jurisdiction.
“It can be as big as they want it to be. If you get good support from the business community, and as long as the regulations are appropriate and the laws competitive with those in other jurisdictions, I don’t see any reason why the Bahamas can’t keep on growing at the rate it is.
“You can’t quantify the potential. To me, what it comes down to is what kind of involvement the local business community in the Bahamas wants to have in the captive insurance industry.”
The Government would also benefit from captive licensing and registration fees, and Mr Strauss said the sector’s capacity to attract wealthy businessmen would dovetail nicely with the high-end tourism product at Atlantis and Baha Mar.