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Anguilla: An innovative captive domicile
Carlyle K. Rogers details the features of Anguilla’s 2004 captive legislation and the benefits it can offer to corporations and professional associations
April 2008
Anguilla launched itself as a captive domicile with the enactment of the Insurance Act 2004 (the Act). The approach of the Government of Anguilla was to adopt best industry practice and craft a simple but flexible piece of legislation that would position the jurisdiction as an ideal location for pure captives.
Three classes of licence, each of which fits the strictest definition of captive insurance, are provided for under the Act, as follows:
• Class B Association licence permits a foreign insurer to undertake
general and long-term insurance with two or more owners of the insurer and its affiliates, and to carry on up to 30 percent of its foreign insurance business (based on net premiums) or 100 percent of reinsurance business with persons who are not owners of the captive or its affiliates, providing that it has and maintains an issued paid-up capital of at least $100,000.
• Class B Group licence permits a foreign insurer to carry on general
and long-term insurance with a single owner of the insurer and its affiliates, providing that it has and maintains an issued paid-up capital of at least $25,000.
• Class B Single licence permits a foreign insurer to carry on general
and long-term business as the sole owner of the insurer, providing that it has and maintains an issued paid-up capital of at least $10,000.
For each licence class above, the annual government fee is $1,500.
These classes of insurance licence comply with the definition of what constitutes a captive insurance company for the purposes of the IRS Code, and this ensures that US persons do not run the risk of falling foul of domestic tax law. Under the Act, foreign insurance business refers to business where insured risks are situated outside of Anguilla, and a foreign insurer refers to an insurer that carries on such business through a legal form or mutual association acceptable to the Financial Services Commission (the Commission), which is Anguilla’s regulatory body.
In Anguilla, there is no statutory requirement for insurers to appoint local directors, auditors or lawyers, or to open local bank accounts. This is an extremely attractive feature, because it allows not only for lower costs through competition, but also flexibility in terms of which firms or individuals to utilise in these roles. While there is a requirement to prepare annual audited financial statements by an independent auditor approved by the Commission, the Act specifically allows for exemptions from this requirement or a part thereof. This is usually granted where a Class B Single licence applies, since no third-party risks are involved. In addition, for asset protection purposes, or mere issues of privacy, the Act specifically allows for the shares of an insurer to be owned by the trustees of a trust domiciled in Anguilla. The Commission must approve this, but it should not be a concern for bona fide clients conducting properinsurance business. Another feature of asset protection provided for under the Act is the inclusion of a section on protected premium accounts, which deals with the protection of premiums paid by an insured to an insurance company from being challenged by creditors, unless the payment of such premiums was made with the intent to defraud the creditor. The section also protects the insurer from action against insurance premiums paid to it, providing it maintains such premium accounts separate from every other account.
A major feature of Anguilla as a captive domicile is its enactment of the Protected Cell Companies Act 2004 (PCCA), which allows for the incorporation of protected cell companies. The PCCA specifically allows for usage in an insurance context. What this means in practice is that a group of say medical doctors who, for whatever reason, whether because they prefer to own their own captive or whatever, can create a protected cell company, which in turn would create protected cell accounts, each account of which could in turn hold an insurer’s licence under the aforementioned Act. Such a scenario would allow each doctor to be the owner of his own captive through a Class B Single licence, instead of being a part owner of a captive under the Class B Association licence.
Corporate entities, natural persons, and especially associations of professionals, would be well served through captives domiciled in Anguilla. Lower costs, a flexible regulatory regime and superior service are the hallmarks of the captive industry in Anguilla, and over time, this is likely to only get better.
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