The Bahamas has always had market friendly insurance legislation in place. The new draft External Insurance Bill represents a major initiative by the Government of The Bahamas to stay on the cutting edge of legislative requirements. Some of the proposed changes are: –
1. The expansion of the definition of external insurance business to include for the first time the explicit mention of captive insurance;
2. The abolition of the complicated calculation of capital requirements by reference to the company’s net worth in favour of a straightforward fixed capital requirement, depending on the nature of the business the company proposes to carry on;
3. The introduction of two classes of license: restricted external insurers, (i.e. single parent captives and group captives) and unrestricted external insurers (i.e. rent-a-captives);
4. The requirement that a management company providing management services to a licensee be registered with the Insurance Commission. The company need not be incorporated in The Bahamas
but its main object and activity must be the provision of management services to licensees under the Act. The foregoing will not preclude the company from offering underwriting or management services to persons carrying on business elsewhere;
5. A licensee carrying on long-term business would be able to establish separate accounts in respect of premiums paid to it and will not be chargeable with any liability arising from any other business of the licensee. This will represent an enlargement of the provisions contained in the current External Insurance Act concerning separate accounts;
6. The rights and interests of policy holders in the assets of a separate account maintained under a variable life insurance or annuity policy will not be liable to be applied or made available to creditors of the policy holders, except where the purchase of the policy was made with the intent to willfully defeat the creditors or where bankruptcy proceedings were commenced against the policy holder at the date of purchase of the policy or within three months thereof;
7. Finally, and perhaps the most important provision for attracting external insurers to Bahamian shores, will be the introduction of the “Guaranteed Tax Holiday”, i.e., external insurers will be exempt from the payment of any tax, fee, duty or impost other than those in force at the commencement of or payable in respect of registration under the Act for a period of fifteen years from the date of the first registration of the insurer.
The proposed External Insurance Act, taken with the establishment of the Insurance Commission by the Insurance Act 2005 (when in force), will significantly streamline the process for external insurers to be registered in and conduct business from The Bahamas.