The Tribune

By NEIL HARTNELL

Tribune Business Editor

nhartnell@tribunemedia.net

The world’s largest captive insurance manager is in the “final stages” of obtaining approval to operate from the Bahamas, a Cabinet Minister describing this a major step “in re-establishing” this nation’s presence in the sector.

Ryan Pinder, minister of financial services, confirmed that Marsh & McLennan was poised to use the Bahamas as “a jurisdiction of choice” for captive management and domicile once its licence was formally approved.

Disclosing that two other major captive management firms also had applications 
“in the pipeline” with the Insurance Commission of the Bahamas, Mr Pinder said that together with Marsh, their interest “bodes well” for the country’s drive to establish itself as a competitive niche player in the sector.

Marsh, which manages more than 1,220 captive insurers worldwide, joined Mr Pinder and the Bahamas Financial Services Board (BFSB) last week to give presentations to the Bahamas Shipowners Association on the benefits of using this nation as a captive insurance jurisdiction.

Describing the company as “the largest captive manager in the world”, and a “strategic partner” for the BFSB and the Government, Mr Pinder told Tribune Business: “Marsh is in the final stages of the approval process.

“That is a significant, significant event in re-establishing the Bahamas as a domicile for captive insurance. They [Marsh] are clearly the world leaders, and are looking to use the Bahamas as a jurisdiction of choice.”

Although Marsh is unlikely to initially set-up a physical presence in the Bahamas, the mere fact it is licensed to operate from this nation should attract clients to domicile their captive insurance companies here for it to manage.

“It’s a very significant achievement,” Mr Pinder said of Marsh’s impending Bahamian arrival.

“When you go from a jurisdiction that is putting in the legislative framework to become the most up-to-date jurisdiction legislatively, to getting industry endorsement by Marsh coming to the Bahamas, that is significant and bodes well for the re-establishment of captive insurance in the Bahamas.

“Marsh views the Bahamas as a jurisdiction of integrity, a jurisdiction to base their operations out of, and one that clearly has modern legislative and regulatory requirements, and is consistent with international best practices,” the Minister told Tribune Business.

“We’re very proud of what we’ve developed in captive insurance and the prospects for growth.”

Mr Pinder added that Marsh was “dotting the ‘is’, and crossing the ‘ts’” with the Insurance Commission over its application.

“We have about two other captive manager applications going through the process,” he revealed to Tribune Business, declining to name them.

“They’re in the pipeline, and already in contact with the Insurance Commission.”

Mr Pinder said the Bahamas’ success in attracting Marsh and other captive managers would create a new business sector and revenue stream for the financial services industry, building upon - and diversifying - its private wealth management base.

The BFSB, in conjunction with the Government and Insurance Commission, has been pushing hard over the past two years to re-establish the Bahamas as a niche player in the global captive insurance market, particularly in the small and mid-sized captives niche.

It has regularly attended the major international captive insurance conferences with the regulator, and the Marsh development is the first tangible sign that its promotional efforts may be starting to pay off.

Aliya Allen, the BFSB’s chief executive and executive director, praised the joint efforts for helping the Bahamas to 
“land the biggest player in the captive management space”.

She added: “Marsh has already partnered with BFSB in promoting the jurisdiction and providing assistance with education.

“Though they will not have a physical presence at first, taking the decision to apply for a license is an acknowledgment that the Bahamas is poised to become a player of substance in the captive sector.

“If they are able to develop the critical mass then they may take the decision to have a bricks and mortar presence. That is why it is critical that we continue our investment in, and promotion of, this growing sub-sector. This is just the beginning as we move to target captive managers on an individual basis. We look forward to the continued support of the ICB, our member firms and the Government in this effort.”

Ms Allen told Tribune Business that the Bahamas was starting to develop “momentum” in its captive insurance efforts, which was an ‘added value’ product for its private wealth management clients - especially those from Latin America.

“We’ve been targeting the captive managers we want in the Bahamas,” she explained. “There’s been a focused effort to target the top guys, bring them to the Bahamas, show them around and introduce them to the Government and representatives of the private sector.

“We’ve shown them this is a real, substantive jurisdiction with infrastructure and expertise, and shown them there is a reason to be in the Bahamas.”

Suggesting that the Bahamas’ efforts were paying off “resoundingly”, Ms Allen said the Marsh application was an “indication of what’s in the pipeline”.

“I think we’re going to see a momentum develop in the captive space,” she told Tribune Business. “I don’t want to oversell it, and there’s still a huge amount of work to do.

“It’s going to take a lot of leg work and much more investment by the Bahamas to support the development of expertise locally, and we don’t want to lose the momentum.

“We’re really in a place where we have great opportunities, and we’re very positive on the growth of the captive sector.”

Captive insurance companies are, at their simplest, a means of self-insurance. They are often established to cover expensive and unique risks that the commercial marketplace either find difficult to place, or at too great a cost.

Apart from the direct jobs that may be created by captive managers establishing a physical presence, Ms Allen said the major benefits from the sector were the spin-offs to the wider Bahamian economy.

Besides the fees and other regulatory income for the Insurance Commission, Bahamas-based banks, attorneys and accountants would receive increased work volumes, while the hotel/tourism industry would benefit from captive directors coming to this nation for Board meetings and the like.

Ms Allen said the Bahamas currently has eight captives, and five licensed captive managers, although Marsh is expected to make that six before year-end.

Some 39 captive ‘cells’ are also domiciled in the Bahamas, a number the Insurance Commission expects to “double” before end-2013.