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