The Tribune

• Nation can be the 'Mom and Pop' jurisdiction

• But needs minister to 'get up on his soap box'

• Making inroads can 'stabilise the middle class'

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The Bahamas needs "just one spark" to re-establish itself as a major player in the multi-billion captive insurance industry and help "stabilise the middle class", a local operator is asserting.

Guilden Gilbert, a principal with Chandler Gilbert Captive Managers, told Tribune Business in a recent interview that his firm is already speaking to one sizeable entity - which he declined to name - that could drive this nation's "resurgence" in the sector if they can entice it to domicile in The Bahamas.

To aid this push, he said the minister responsible for financial services would greatly assist the effort by "getting up on his soap box and saying The Bahamas is open for business as a captive domicile" as this would provide a significant credibility boost and message that resonates around international markets.

With attendees at recent international conferences showing "renewed interest" in The Bahamas as a captive jurisdiction, and no sign of any reputational fall-out from FTX's collapse, Mr Gilbert said the country needed to capitalise on this momentum and the "substantial spin-off" earning and employment opportunities it provides for multiple financial services professionals - attorneys, accountants, investment managers, custodial services and compliance officers.

While Bermuda, the world's leading captive insurance jurisdiction, earned $25bn in gross written premiums in 2019, he added that The Bahamas needed to set its sights a little lower. With insurance markets hardening, and premium costs rising, Mr Gilbert said this nation can become "the Mom and Pop" captive domicile by carving out a niche catering to companies earning $100m-$200m in annual revenues through a multi-year, sustained promotional effort.

"It went well," he told Tribune Business of recent conferences. "There seemed to be a bit more attention on The Bahamas this year. Nobody seemed to be overly concerned with FTX's fall-out, and that's a good thing. As a company, we had some very good meetings with prospects and are looking to forge new relationships to bring business to The Bahamas. We'll continue those discussions and hopefully bring them to fruition."

Mr Gilbert, together with the Bahamas Financial Services Board (BFSB) and Insurance Commission of The Bahamas representatives, attended the Captive Insurance Companies Association (CICA) International forum earlier this year, which was followed subsequently by the World Captive Forum.

Working "hand in hand" with the BFSB to push The Bahamas as an alternative domicile for the captive insurance industry, he added: "When you're trying to redevelop or develop an economic pillar it takes a lot of time, a lot of patience and sometimes quite a bit of money. The only thing I would like to see is for the responsible minister just to talk that The Bahamas is open for business for captives.

"As a company, we're not looking for anything from the Government. All we want is for the Government to stand up and say The Bahamas is open for business, and that the Bahamas government fully supports the establishment of the jurisdiction as a captive domicile.

"The BFSB has done it, but I think it's important to hear from the minister responsible for the industry. I think here, the minister almost needs to get up on his soap box and say The Bahamas is open for business as a captive domicile. That would go a long way, and I think that statement said a few times will permeate."

Mr Gilbert said efforts to promote The Bahamas to the captive insurance industry had been interrupted by the COVID-19 pandemic and associated lockdowns plus travel restrictions. "I think we were making more inroads prior to COVID, but COVID came and you couldn't travel," he told Tribune Business. "A lot of irons we had in the fire dwindled out there, but we've had some interesting discussions with potential clients [at recent conferences].

"These are fairly significant clients. We have to wait and see where it goes, and if we can close the door. I think if we can get one fairly high profile entity to use The Bahamas as a domicile for captives that will start the burn. It will only take a spark to start the fire, and that's what we need. One that has some strength to it. One of the entities we had discussions with, who are interested in The Bahamas, if we can win them it will help to spark a resurgence."

The Bahamas was once a leading captive insurance jurisdiction, but legal reforms in the early years of the Pindling administration promptly saw the sector depart to rival international financial centres (IFCs) such as Bermuda and the Cayman Islands. Re-establishing this nation as a captive insurance player was one of many strategies mulled to diversify the Bahamian financial services industry in the wake of repeated blacklistings, but the effort has yet to grow strong roots.

Captive insurance, at its most basic, is a means of self-insurance. And captive insurance companies are typically entities wholly-owned and controlled by their insureds, insuring the risks of its owners who also benefit from the captive insurer's underwriting profits. They are often used to insure large and/or unusual risks and liabilities, such as those faced by specialist doctors, as the premium costs can be managed and controlled, and kept lower than with private carriers.

Mr Gilbert, meanwhile, said "a very strong message" had been sent about The Bahamas' eagerness to re-establish itself as a captive domicile through his and the BFSB's presence at major conference. "The market is happy The Bahamas is here now, and looking to get back into the space," he added. "The work is ongoing. It's going to have to be a continual presence. This type of thing can't be developed through a Zoom call or phone call."

Rather than compete head-on with Bermuda, or try to steal its market share, Mr Gilbert argued that The Bahamas should focus on a different niche. "It doesn't make sense trying to target the Bermuda captives," he told this newspaper. "They tend to be the Fortune 500, Fortune 1,000 even the Fortune 2,000 companies.

"The Bahamas is probably what I call the 'Mom and Pop' operation; the $100m-$200m companies. They don't necessarily have major risks on their books but it's important for them to control their insurance costs because these are becoming a greater portion of their overall expenses. These entities feel it more because they're at the lower end of the economy, and don't have the same revenue streams as Fortune 2,000 companies, so controlling costs is very important to them.

"I believe there is a niche market there that The Bahamas can tap into." Mr Gilbert conceded that re-establishing The Bahamas' presence in captive insurance, which is considered less vulnerable to global tax regulatory initiatives, will not happen overnight but will be well worth it in the long-run due to gains in jobs, earnings and economic diversification.

"My goal is really looking at how this can impact The Bahamas in the next 10, 15, 20 years and beyond," he told Tribune Business. "It helps to stabilise, and is definitely needed. Insurance is a stabilising force, and it brings a more diversified economy. I think we have a good chance. I feel good about The Bahamas as a domicile, and it's really just continuing to pound the pavement.

"I think the market is ripe now for captive growth because the hard insurance market is driving up premiums. Captive users are looking to contain and mitigate insurance costs. The Bahamas has a fairly well-educated workforce. With the growth in the insurance sector that creates additional opportunities across the board."

Mr Gilbert said captive insurers require attorneys to incorporate them; auditors to audit them on an annual basis; banks to provide bank accounts; and investment managers and custodial services, as well as compliance officers. "The spin-offs can be significant and substantial," he added, "and employment can be enhanced as well. If we can grow the sector, it will increase the average salary in the industry and help stabilise the middle and upper middle class."