Captive Insurance in The Bahamas

In recent years, there has been a resurgence in interest in The Bahamas as an international insurance centre. There are a number of reasons for this:

  • The introduction of new insurance legislation incorporating innovative features unique to The Bahamas
  • Increasingly restrictive insurance regulation in many onshore jurisdictions
  • The high cost of conducting insurance business – both onshore and in some of the other offshore insurance centres
  • Changes in onshore tax laws (notably in the US and Canada) that have removed most of the remaining tax advantages of offshore trusts and corporations
  • The continuing need for new products for the very substantial Bahamian banking and trust community
  • This latter has become a priority as a result of the recent blacklisting of The Bahamas, which has forced the financial sector to search much more aggressively for structural alternatives

In response to this interest, the Bahamas Government and private sector have made available the requisite legal, regulatory and professional infrastructure to facilitate both the rapidly growing offshore life insurance sector as well as the re-establishment of The Bahamas as a captive insurance centre.


Until 1969, insurance was not a regulated industry, but this situation was rectified by the 1969 Insurance Act which was followed by the 1975 Insurance (Amendment) Act. These two laws did not prove attractive to the captive insurance industry and it was necessary to provide certain exemptions under the Non-Resident Insurer (Exemption) Regulations of 1978.

Further encouragement was given with the passing of the External Insurance Act in 1983 and this is now the primary legislation governing the operation of offshore insurance in The Bahamas.

The 1983 Act was then enhanced by the External Insurance (Amendment) Act of 1996, which was specifically directed at the burgeoning demand for offshore life insurance in the US and includes several highly innovative provisions available only under Bahamian law.

The basic provisions of the Bahamian legislation are included in the appendices to this article. Suffice to say that The Bahamas now has very user-friendly and progressive legislation for almost all types of insurance business.

Regulatory Framework

The industry is supervised through the office of the Registrar of Insurance Companies. The legislation and supporting regulations specify the minimum levels of reporting that are required although the Registrar may request additional reporting for business that is deemed to be higher than normal risk.

However, for captive insurance companies the main responsibility for the ongoing operations of such entities rests with the “captive manager”. This must be a Bahamian company set up for the purpose of providing managing and providing insurance expertise to captives and which holds an appropriate license issued by the Registrar.

In addition to the above, all insurance companies are subject to annual audit in accordance with generally accepted accounting principles by an independent Bahamian auditor. Most of the major accounting firms have a presence in Nassau and can provide this service.

Market Opportunities

At present the Bahamian international insurance industry is focused on two markets – Life Insurance for the US market and Captives.

Offshore Life Insurance

Whilst still in its infancy, this market is growing rapidly in response to recent tax changes in the US. It is of particular relevance in The Bahamas where there are over 400 banks and trust companies many of which are seeking to maintain and develop their US client base. However, their traditional products – offshore companies and offshore trusts now have limited application for US clients. Life insurance provides a legitimate compliant alternative enabling them to access the US market.

When using offshore life insurance for US persons, the basic benefits can be summarized in the following table:

Tax Efficiencies
Asset Protection
Access to Offshore Investments


The following points should be made:


  • The tax objective here is to obtain the SAME tax treatment as the policy would achieve in the US. Life insurance is treated generously by the IRS and the policies written by the offshore insurers are generally “clones” of US products in order that they will be taxed in the same way.
  • Premiums paid to offshore insurers by Americans are subject to a 1% excise tax in the US and the client must submit a reporting form at the time of payment.
  • Arising from the above, it is evident that this type of business is not based on confidentiality. Everything can and should be reported as it is entirely legitimate.

Asset Protection

  • Insurance is by its very nature excellent asset protection. However, the degree of asset protection is obviously much greater when the policy is provided by an insurance company outside the US and where the assets are also held offshore.
  • The 1996 amendment to the External Insurance Act has the most powerful asset protection provisions in the world. These provisions relate to the distribution of assets held under a policy either during lifetime or on death and specifically preclude assets being diverted to third parties other than the named beneficiaries of the policy. There are also provisions relating to the forced cancellation of policies under duress.
  • The 1996 Act also provides for the establishment of “segregated accounts” whereby the assets held for clients are segregated from the assets and liabilities of the insurance company. Thus, in the event of the liquidation of the insurance company, the client’s assets will not be available to the creditors of the insurance company.
  • In addition to the insurance laws, The Bahamas has other excellent asset protection laws – notably the Fraudulent Dispositions Act, which is the law that provides the basis for offshore asset protection trusts in The Bahamas.

Investment Flexibility

  • US insurance companies are highly regulated and restricted in terms of what they can invest in. There are no such restrictions on offshore insurance companies.
  • Likewise, SEC regulations prevent restrict US persons from investing in many non-US investment products. US persons can obtain access to the complete range of international investments through offshore insurance.

Captive Insurance

The term "Captive" is used generally to describe an insurance company that insures the risks of its owners who are not in the business of insurance. In its purest applications, it is a means of self insurance but the reality is that many captives now buy reinsurance and do a proportion of their business with third parties.

There are many benefits in setting up a "Captive":

  • Cost reductions - Any person or entity paying an insurance premium to a conventional insurance company is paying commissions and contributing to the expenses and profits of the insurer. By setting up your own insurer, such costs and profits become your own and can be allocated as you wish.
  • Risk Management - Many businesses are forced to buy insurance at market rates when their risk profile is lower than the industry average. By using its own insurer, a business can control its exposure by use of deductibles and reinsurance such that it can cover itself more effectively at less cost. Medical groups often use captives for this reason.
  • Cash Flow Benefits - Having your own insurance company allows the owner to control the investment portfolio to which the excess premiums are applied. Obviously, this would not be the case when purchasing insurance from a normal third party insurer. Also, offshore insurance companies have much more flexibility in terms of what they may invest in that their highly regulated onshore equivalents.
  • Reinsurance - The owner of a captive clearly wishes it to remain solvent and profitable. Bearing in mind that all or much of a captive's business involves insuring the owners risks, the claims records of captives tends to be much better than a normal insurer. This is recognized in the reinsurance market and the premium rates for captives can often be substantially less than for onshore insurers.
  • Availability of Cover - Certain types of cover are unavailable onshore: either as direct insurance or as reinsurance. Offshore regulations enable the owner of a captive to insure almost any legal risk as well as allowing access to the enormous and flexible international reinsurance market.
  • Profit center diversification - Many mature businesses reach a stage where they wish to accumulate profits outside their own jurisdiction and in an activity separate and apart form their normal course of business. This may be for asset protection, tax efficiency or simple diversification reasons. The taxation of captives is well established in law with anti-avoidance provisions in many onshore jurisdictions. Nevertheless, correctly designed captives can provide a range of benefits for the owner.

Who sets up Captives?

For many years the use of captives was the exclusive province of the multinational companies, for example oil, shipping or manufacturing companies. These captives have been extremely successful resulting in substantial cost savings and profits for their owners. Recent years have seen the range of ownership expanding dramatically:

  • Medical captives - groups of doctors or medical practices have felt better able to manage their own risk rather than pay the excessive premiums now prevailing onshore.
  • Association captives - groups of specialized or related businesses have been able to reduce their insurance costs by pooling their risks and buying direct from the reinsurance market.
  • Family captives - set up by wealthy families with multiple interests in multiple jurisdictions to manage family assets often as an estate planning tool.
  • Credit Life captives - set up to insure/reinsure credit life policies purchased in conjunction with financing for auto purchase.
  • Export Receivables insurance - exporters or groups of exporters doing business across a range of jurisdictions are able to cover their multinational risk more effectively in the international markets.

This is a sample of the many applications of captive insurance. The reality is that any individual, group or entity who are paying premiums of more than BS$500k per annum are in the position to set up a captive. The appendix to this article shows the annual fee and capitalization requirements for such companies and there will be additional administrative and management costs depending upon the type of captive that is established. However, the days when captives were the exclusive preserve of multinationals are over. There are now over 3,500 captives worldwide with the number growing rapidly. The cost of creating them has come down dramatically and The Bahamas is well set up as a jurisdiction to provide the appropriate legal and regulatory infrastructure for captive insurance business.

The Bahamas is poised to re-emerge as an international insurance centre. The demand for insurance services is driven by The Bahamas' extensive institutional presence, which already has an extensive network throughout the global financial community and is ultimately the source of this business.

The offshore environment changes constantly in response to economic, fiscal and regulatory changes onshore. The Bahamas has proved to be proactive and flexible in responding to these changes and its reaction to the burgeoning demand for offshore insurance products is a good example of its sensitivity as a jurisdiction in the volatile financial services marketplace. Both the Bahamian Government and the Private Sector are committed to ensuring the continuance of this approach.

Registration of an External Insurance Company in The Bahamas

A Bahamian External Insurance Company is essentially an insurance company registered and licensed in The Bahamas, but doing business outside The Bahamas. Indeed, whilst such a company must be registered with The Bahamas Registrar of Insurance, it is specifically precluded from doing business in Bahamian dollars.

In addition, an External Insurance Company must acquire the services of a Bahamian Captive Manager licensed by the Registrar of Insurance.

Finally, the company must be audited in accordance with generally accepted accounting principles by an independent auditor with offices in The Bahamas.


Long-term business (that is, life insurance) Paid up share capital of at least BS$200,000.

Other than long-term business Paid up share capital of at least BS$100,000

and 20% of net premium income up to BS$7 million per annum plus 10% of the excess over BS$7 million.

It should be noted that the actual minimum capital requirements are subject to review by the registrar according to the scope of the business undertaken.

Annual Fees

Government BS$2,500

Licensed Underwriting Manager BS$10,000 subject to negotiation

Audit Fee BS$5,000 minimum subject to negotiation


Within 6 months of the end of it's financial year the following annual returns must be filed with the Minister of Finance

  • A statement signed by the auditor confirming the external insurer's compliance with its terms and compliance with its terms of registration and confirming that annual financial statements have been prepared and whether or not the auditor's report is unqualified.
  • A statement signed by two directors containing representations as to the completeness of the records produced and information supplied to the auditors.
  • A statement signed by two directors and the underwriting manager confirming the external insurers compliance with its terms of registration
  • A certified copy of its financial statements

Contact Persons in The Bahamas

Dr. Roger Brown
The Registrar of Insurance
P.O.Box N-4849,
Manx Corporate Building, West Bay Street
Tel: 242-328-1068 Fax: 242-328-1070

Licensed Underwriting Management

Brent Haynes
Winterbotham Insurance Management Limited
P.O.Box N-3026, 3rd Floor Bolam House, King & George Streets
Tel: 242-356-5454 Fax: 242-356-9432 e-mail:

Offshore Life Insurance

Hywel Jones
Britannia Consulting Group
PO Box CB-12724, 3rd Floor, The Tradewinds Building, Bay Street
Tel: 242-326-5205 Fax: 242-326-5349 e-mail:

Offshore Life Insurance and Investments

Pertti Hedkrok
Nordica Group of Companies
PO Box N-10222, Saffrey Square Building, Suite No.105, Bay Street & Bank Lane
Tel: 242-323-2600 Fax: 242-323-2300 e-mail: 

External Insurance Act 1996 Amendment

The 1996 amendment to the External Insurance Act in The Bahamas contained a number of innovative provisions. The following extract will be of particular interest to those interested in the Offshore Life Insurance:

"3. Section 10 of the principal Act is amended by the insertion after subsection

(2) of the following -

(3) A registered external insurer carrying on long term business may establish any number of separate accounts in respect of the respective premiums paid to it to provide -

(a) annuities on human life; and

(b) contract of insurance on human life,

and such respective premiums shall be kept segregated one from the other and independent of all other funds of the insurer, and, notwithstanding the other provisions of this Act or of any other law to the contrary are not chargeable with any liability arising from any other business of the insurer or arising from any activity carried out by the insurer in relation to any other separate account.

(4) Notwithstanding any law to the contrary, where any person shall die leaving a policy of insurance issued on his life by a registered external insurer, the said insurance shall inure exclusively to the benefit of the person for whose use and benefit such insurance is designated in the policy, and the proceeds thereof shall be exempt from the claims of any creditor of the insured, his estate, and of any beneficiary under the policy or of the owner or estate of the owner.

(5) Notwithstanding any law to the contrary, unless the insurance policy or annuity contract was effected for the benefit of such creditor, the cash surrender value of life insurance policies and the proceeds of annuity contracts issued by a registered external insurer shall not be liable to attachment, garnishment or legal process in favour of any creditor of the insured, his estate, and of any beneficiary under the policy or of the benefit of any Trust which is the owner of a life insurance policy or an annuity contract issued by a registered external insurer.

(6) Life insurance policies and annuity contracts issued by a registered external insurer, by their terms subject to cancellation or redemption by the owner thereof, shall not be subject to cancellation or redemption during any period during which the owner is acting under duress imposed by any lawful authority or otherwise other than lawful authority in The Bahamas.

Source: Registrar of Insurance Companies

© 2011 The Official Website of the Government of The Bahamas.
All rights reserved.