Barbados international insurance companies offer income tax exemptions and flexible capital requirements within a strong tax treaty network. These factors have made the island one of the most popular domiciles for offshore insurance companies worldwide. With a longstanding reputation for quality and a strong regulatory environment, the island hosts hundreds of insurance companies.
Tax exemptions and freedom from exchange controls are some of the main draws to the Barbados offshore insurance sector. As well, flexible capital requirements make the jurisdiction an appealing choice. Tax treaties with other countries mean that insurance companies can operate within a recognized legal and regulatory environment.
What is an International Insurance Company?
International Insurance Companies in Barbados are generally divided into two types: Captive Insurance Companies and International Reinsurance Companies.
Captives are established with the goal of insuring the specific risks of their parent company, as well as the parent’s customers and partners. Captives offer companies a way to insure themselves and manage their risk effectively. The parent company owns the insurance company with which it holds its insurance policy and therefore the insurance company is held “captive”.
International reinsurance companies offer insurance policies to other insurance companies as a way for these insurance companies to manage and minimize risk. Reinsurance companies do not offer insurance policies to the general public.
Barbados Offshore Insurance Company Formations
Offshore insurance companies can take two registered forms:
Exempt Insurance Companies
Exempt Insurance Companies (EICs) are completely exempt from taxes, with a tax rate of 0% for the first 15 years of operation. After this, the tax rate is only 2% on taxable profits of US $125,000 with all additional profits remaining exempt.
An EIC can only insure risks outside of the island and all premiums must be received from foreign sources.
View the Barbados Exempt Insurance Act
Qualifying Insurance Companies
Qualifying Insurance Companies (QICs) are very similar to EICs but they are allowed to offer insurance within the CARICOM region up to 10% of their risks insured and premiums. However, for this privilege they do not receive the tax exempt status that EICs benefit from. They are taxed at the local rate while benefitting from a foreign currency rebate that effectively reduces the income tax rate to around 1.75%.
The major benefits of registering an international insurance company include:
• Tax exempt for the first 15 years of operation, thereafter a 2% rate on taxable profits of US $125,000 with additional profits above this amount being tax exempt
• Capital gains are exempt from tax
• No withholding tax on dividends, interest and management fees
• No exchange controls on foreign currency transactions
• Low minimum capital requirement of US $125,000
• Segregated cell and segregated accounts facilitate “rent-a-captive”
• No restrictions on business from non-shareholder sources
• Incorporation is easy and fast
• Solvency rules are flexible and attractive
• Capital can include an irrevocable letter of credit from a qualified bank
The qualification requirements are flexible and appealing compared to other jurisdictions. They include:
• Minimum Capital Requirements:
o First year: US $125,000 required as capital
o After the first year:
– If premiums are less than US $750,000: US $125,000 required as capital
– If premiums are between US $750,000 and US $5 million: 20% of net premium required as capital
– If premiums are above US $5 million: US $1 million plus 10% of net premium over US $5 million required as capital
• Audited financial statements (under GAAP) must be filed annually with the Ministry of Finance
• Shareholders must be foreigners
The annual costs are very affordable:
• Government license fee: US $10,000
• Audit fees: US $15,000 to US $50,000
Offshore Insurance: Strong Regulation and Low Taxation
Registering an international insurance company in Barbados is a very attractive prospect. Strong regulation and taxation treaties with Canada and the United States mean that captives can benefit greatly by being located on the island while meeting all legal requirements in the home country.
Offshore insurance companies are able to benefit from the tax exemptions offered, reducing their international tax burden through smart tax planning. Furthermore, the capital requirements are very flexible and vary depending on the net premiums of the company rather than an arbitrary number.
Strong regulation, low taxation and flexible requirements have led to Barbados becoming one of the top offshore insurance domiciles worldwide with hundreds of insurance companies located on the island.