The Bahamas’ participation in the captive insurance industry dates back to the 1960s. Given the islands’ rich history in this niche industry, The Bahamas Government has taken steps in recent years to ensure that this business actively contributes to the overall growth of the financial services sector.
Local insurance managers and other financial intermediaries are still finding ways to promote both their own services and the jurisdiction in the captive market. The Bahamas Financial Services Board (BFSB) has helped them do so, highlighting the jurisdiction as a competent and competitive international financial centre that promotes synergies between the industries of the financial services sector.
The Insurance Commission of The Bahamas (ICB), the insurance industry’s supervisory authority, continues to enhance the captive industry by streamlining the application process and maintaining a robust regulatory and supervisory framework which meets international standards.
Over the past 10 years, the number of licenced captive insurance entities registered in The Bahamas has grown – at first very rapidly and, in the last five years, steadily. As a result, growth has occurred in overall net premium volume, along with the expansion in the number of parent company regions throughout the US and Europe.
The growth in The Bahamas’ captive market is largely attributed to small-to-medium sized entities (SMEs) seeking to set up their own segregated accounts. This option has proven to be cost-effective for those SMEs, especially since they can and do outsource administrative and operational oversight to locally registered insurance managers, financial and corporate service providers, and other financial service professionals such as lawyers and accountants.
In 2021, as part of its strategic plan to amalgamate legislation, the Commission began a review of the jurisdiction’s two principal insurance laws – the Insurance Act, 2005 and the External Insurance Act, 2009. The purpose of the review, which is still in progress, is to streamline regulatory and supervisory requirements and to enhance legislation to help insurance structures.
The Commission’s intent in amalgamating those two pieces of legislation is to introduce categories of licenses that emphasise the type of insurance business that the entity will be conducting and the structure of the entity, rather than where the policyholders are located.
Currently the amalgamation is well underway, and it is anticipated that the draft legislation will be issued for consultation in Q3 2023. Following any feedback and proposed amendments from the consultation period, we would then seek to get the amended bill passed through parliament.
Amalgamating the legislation appropriately corresponds with our risk-based supervisory framework whereby as a jurisdiction we eliminate the perception of varying our supervisory oversight based on the current demarcation of international business versus domestic business.
We have a very robust domestic insurance market in The Bahamas. External insurers will have a similar level of supervision based on their risk profile. As such, our risk-based supervisory framework considers the size, nature and complexity of the institution which determines the regulatory measures that we take, no matter whether the policyholders are in The Bahamas or abroad.
Looking ahead, given the current hard market conditions, entities with a firm understanding of their risk and loss history may be seeking alternate ways to finance their cost of insurance coverage. Such conditions act as a catalyst for captive formations. The captive, as an alternative risk transfer mechanism, is always going to be a consideration for company owners, because they are looking at containing costs.
In this regard, The Bahamas is a competitive, cost-effective jurisdiction given the local and international expertise and resources present within the financial services sector. The robust nature of our regulatory framework is such that we can oversee any type of international insurance business.
Also, The Bahamas as a jurisdiction can boast of its professionally trained and highly skilled service providers who reside here, some of whom include accountants, lawyers, and insurance managers. Should the need arise for outsourcing specific services, this can be achieved with relative ease.
Key factors such as fair regulatory costs, highly skilled and varied professionals and the way that we employ a risk-based approach to our supervisory oversight of the industry, continue to be attractive considerations for international and captive insurance businesses.
Mrs. Fields served as a Commissioner on the Board of the Insurance Commission of The Bahamas from its inception, and in January 2012 she was appointed Superintendent of Insurance. She serves as an ex officio member of the Board of the National Health Insurance Authority. She is now the Superintendent of Insurance at The Insurance Commission of the Bahamas.