Dozens of new shareholder-owned insurance companies set up shop in the British Virgin Islands last year, joining a growing list of U.S. insurers seeking to avoid taxes and regulation in their homeland, officials said Thursday.
The British territory's offshore industry expanded with nearly 60 such companies, known as "captives," in 2006, strengthening its position as the third-largest regional insurance center behind Bermuda and the Cayman Islands, said Humphry A. Leue, CEO of the BVI International Finance Center.
Last year's expansion, representing a 15 percent growth, brought the British Caribbean territory's total number of captive licenses to more than 400, Leue said. More than half of these companies were formed in the past four years, he said.
A captive insurance company, which shareholders own and operate, lets members stabilize the cost of insurance, invest their premiums and retain profits.
U.S. insurance companies have increasingly moved offshore in recent years to take advantage of the corporate and banking secrecy and tax benefits of places such as the British Virgin Islands.
In the British territory, the initial capital requirements for a single-parent captive - an insurance company owned by one company - that has little or no third-party exposure can be as low as $100,000, said Simon Owen, chairman of the BVI Association of Insurance Managers. He said the cost can be 10 times higher in some U.S. states.
"We are unburdened by the restrictive requirements of other jurisdictions. For example, in the BVI, we do not insist upon the appointment of local directors (and) annual general meetings do not need to be held in the BVI," Owen said