Offshore corporations explained

Offshore corporations under attack

Incorporation strategies for today

Alternative corporate tax havens

Offshore corporations in a changing offshore world. Alternative tax havens and offshore strategies. Offshore corporations in a changing offshore world. Alternative tax havens and offshore strategies.

Special incorporations:
Bank, insurance, cell companies

Offshore insurance and
reinsurance licences

Offshore bank licences
Offshore insurance licences
Protected cell companies
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(Part 3 of 4)

with Peter Widder

The ownership of an offshore captive insurance company enables many businesses to substantially reduce their insurance spend, improve their cash-flow and even generate additional income.

But there are other, perhaps less obvious applications of an offshore insurer. Even though they are clearly not for everyone, offshore insurance companies are sometimes formed by individuals whose goals are asset protection, financial privacy or even effective transfer of funds to offshore havens.

By its very nature, the insurance business is a very flexible area.

Advantages for

Compared to onshore (domestic) insureres, offshore insurance companies are relatively affordable and easy to form. This brings them within the reach of smaller enterprises, and even groups of private professionals (legal, medical) seeking cost-effective liability cover.

Could your own offshore insurance company benefit your business? Judge for yourself:

Lower insurance spend. Insurance premiums brokered by a local intermediary often include up to 20 per cent in brokerage fees; by using an in-house offshore insurer, a business can approach the markets directly.

Cash-flow benefits. Premiums paid to reinsurers are normally subject to very generous payment terms by international markets; this presents cash-flow advantages and/or the possibility to generate additional investment income.

Offshore investment income. Profits arising from the investment of underwriting income are essential to the proper functioning of the world's insurance market. Through an offshore insurance company, income is acummulated and invested offshore -- free from taxation and free from any domestic investment restrictions and red tape.

Domestically-uninsurable risks. Certain types of businesses rely on their in-house offshore insurance companies to insure domestically-uninsurable risks.

An asset-protection alternative
to a private offshore bank

Offshore insurance and reinsurance companies are also sought after by those who would in the past wish to incorporate their private offshore bank solely for the purpose of asset protection and financial confidentiality.

In contrast to offshore banks, offshore insurance companies are easier and cheaper to form. Depending on the proposed purpose of the insurance company, its paid-up capital and regulatory obstacles can be kept to a minimum. In addition, offshore insurance companies do not suffer from the same tainted reputation that offshore shelf banks have established in recent years.

At the same time, privately-owned insurance vehicles can and do provide the same rock-solid basis for asset protection. The capitalisation of an insurer is intended in the first instance to pay claims arising from underwriting liabilities; the assets are attached and other claimants are subordinate. If the insurer has underwritten so-called "long tail" risks, the chance of lawsuits succeeding is diminished substantially.

Naturally, offshore insurers provide a clear-cut method of transferring funds offshore.

As the traditional barriers between financial services are broken down, the insurance industry has also become more involved in financial activities that were previously the bankers' domain. A private offshore insurer can provide many banking-like services to the members of the general public when holding the necessary licence.

Do you need an offshore insurance
company? Maybe not.

However, be aware that obtaining an offshore insurance licence -- for whatever reason -- is still a far more complex business than a straighforward purchase of a typical offshore company. Proper references and a professional business plan are always needed.

As with any offshore strategy, you have to judge objectively whether or not the advantages gained justify the cost and effort involved. Professional guidance in this regard is recommended.


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