Analysis of captive domiciles in the Bermuda and Caribbean regions, based on data from the 2023 World Domicile Update

KEY NUMBERS

2021 captives: 1728

2022 captives: 1698

2022 approvals: 60

2022 surrenders: 90

Net difference: -30

Growth rate: -1.74%

Surrender rate: 5.21%

2021 estimated premium: $42,793,000,000

2022 estimated premium: $42,500,000,000

Premium change: -$293,000,000

2021 premium per captive: $24,764,000

2022 premium per captive: $25,029,000

Taken as one region, Bermuda & the Caribbean island domiciles endured another decline in captive numbers during 2022.

However, when separated between the region’s three leading domiciles, Bermuda, the Cayman Islands, and Barbados (BCB), and the other Caribbean domiciles, the picture is different.

The BCB domiciles housed 1380 captives at the end of 2022, compared to the 318 housed in eight other Caribbean island domiciles.

Each of the three BCB domiciles had a net gain in captives with 48 captive approvals between them and a net gain of +18. By contrast there were only 12 new captives formed in the eight other Caribbean domiciles, and a net loss of -48.

2022 premium data isn’t available for Bermuda, but using the 2021 premium figure, we calculate premium for the BCB domiciles at about $41.7 billion. While Cayman suffered a surprising dip in premium between year-end 2021 and year-end 2022 of just under $300 million (considering its captive numbers rose by 11), its latest figures show a substantial increase in premium in the first three months of this year of around $1.4 billion, suggesting the market is still in good health.

That health is underlined by Marsh’s recent Captive Benchmarking report, which found that in the last two years captive premium among its clients in the BCB domiciles grew by 11%.

Premium data is limited for the eight other Caribbean islands, but using the 2021 data for Turks & Caicos, Anguilla, and the British Virgin Islands, (covering 179 of the 318 captives) we estimate each captive wrote an average of around $2.30 million each. Comparatively, BCB domiciled captives averaged $30.27 million each in 2022.

Paul Macey, president of Cayman-based captive manager USA Risk Group, says there is no shortage of opportunities for new captive formations, with several attractive aspects about the region.

“Realistic capital levels and the ability to engage with the regulator continues to be an important consideration,” he says. “Clients want appropriate regulation with flexibility to cater for non-standard programmes. There is still certainty in the major offshore domiciles which is important.”

With a majority of captives in the region being North American-owned, the islands have had to deal with competition from a growing number of US onshore domiciles, and Macey says that the speed of having a captive incorporated is key.

“Risk based regulation is key,” he adds. “Regulators need to understand the difference and apply a common-sense approach.”

Barbados is a domicile where Macey says the time to incorporate a captive has reduced significantly over the past few years.

The island has traditionally been a haven for Canadian-owned captives, which in 2022 wrote over half of all captive premium, at B$2.1 billion (US$1.1 billion).

A possible threat to this valued status with Canadian companies is the emergence of Alberta as a new captive domicile last year, and whether it could take new and existing Canadian-parented captives away from Barbados in the next few years.

Macey admits with any new competitor on the block there will be a concern, and that is a if a possible risk solution for Canadian corporates exists within Canada, then it will get consideration.

However, while he says it’s still early days and a lot can happen, he is confident that as a proven domicile for nearly 40 years Barbados will always be a safe option.

“A year has passed since the legislation was passed, and there may be two re-domiciled captives that have moved to Alberta, which is not a lot,” he says. “Barbados has had multiple new incorporations of Canadian parented captives already in 2023, and we expect this to continue.”

Other challenges facing the region include combatting pressures placed on Caribbean islands by the EU and Organisation for Economic Co-operation and Development (OECD) that classify them as tax havens – unjustly Macey says.

“Barbados has succeeded to have itself removed from any blacklist or grey list every time, but the ever-changing way that the world does business forces these smaller island domiciles to be constantly proving ourselves,” he adds. “Thankfully, we succeed!”