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International
Insurance License - International Insurance Act of 1999
According to Belize’s International
Insurance Act of 1999, the categories of business included under
the International Insurance Act are long-term insurance business,
general insurance business, reinsurance business or captive insurance
business. The Act further classifies international insurance as
“the business of a company whose risks and premiums originate
outside Belize and whose liquidation monies payable to shareholders
are payable to or for the benefit of persons resident outside
of Belize.”
As the government of Belize continues to demonstrate its commitment
to advancing the development of its offshore insurance industry,
the passage of the International Insurance Act of 1999 has facilitated
international investors who are seeking a reputable tax neutral
jurisdiction to establish self insurance ventures that will provide
insurance for risks which may not otherwise be normally insurable.
Furthermore, the International Insurance Act is there to facilitate
those investors who are seeking to ultimately lower their insurance
premium costs through self-insurance ventures that will allow
them to establish a realistic spread between risks and control.
This knowledge will assist investors to further leverage their
company’s key risks against company performance and financial
results.
Self insurance is the concept of insuring risks internally rather
than through the commercial market. In making the decision for
the viability of self-insurance, an analysis of the company’s
insurable risks as between normal or expected losses and catastrophic
losses must be made. The decision is often made to self insure
the normal or expected losses and to cover the potential catastrophic
losses in the commercial insurance market by means of reinsurance.
Self insurance can be effected in several ways. For example, funds
can be appropriated from a company’s annual net profits
to create capital reserve provisions against losses which are
not covered by commercial insurance underwriters. The most common
and perhaps the most effective method of self insurance, however,
is through the establishment of a captive insurance company. In
commercial terms, a captive insurance company can be defined as
a subsidiary company which is wholly owned by a non-insurance
company and which carries on business exclusively to underwrite
the insurable risks of its parent company or of its related or
associated companies. Usually, a captive insurance company is
located in an offshore jurisdiction for potential tax savings.
The captive insurance company may take various forms:-
The “pure” captive i.e. a company wholly owned by
its parent and insuring the risks of that specific corporate group
The “mutual” captive, i.e. a company set up to insure
the collective risks of members of mutual organizations such as
trade or industry associations
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The “reciprocal” captive,
i.e. an association of separate entities who undertakes
self insurance on a collective basis under a general management
structure
The “pure” captive turned commercial underwriter
or reinsurer i.e. a pure captive which enters into the
competitive commercial insurance market by seeking business
from external sources in addition to the insurance risks
underwritten from within the group.
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The desire to reduce the costs of insurance is one of the principal
reasons for considering the use of self insurance. Corporate groups
with large insurable risks i.e. pharmaceuticals, power industry
firms and even the financial services industry have been among
the hardest hit in recent years by soaring insurance excess that
is a significant proportion of the group’s overhead. This
has been largely due to increased premium costs which have arisen
from inflationary factors affecting the value of insurable risks,
the administrative costs of insurers and the level of “real”
investment income derived by the underwriters.
The increased costs to the insurer of administering and marketing
insurance policies also lead to inflexibility in policy terms
and conditions. Furthermore, most insurance policies are standardized
products that are seldom drawn to suit the particular needs of
the insured.
Similarly, the fundamental rating system used to assess premium
levels is standardized on the record of losses experienced on
an industry or group classification basis. Again the insured,
who has a better than average claim record, is penalized through
its contribution to industry wide losses. Further, a corporate
group may find that with the growth of its operations, a large
number of individual risks are being insured unnecessarily i.e.
the possibility of a significant percentage of such risks materializing
in any one year would be remote.
The rationalization of insurance cover to meet the specific requirements
of a corporate group would therefore result in an immediate reduction
of insurance costs. At present, the commercial underwriters are
only able to offer these reductions to the insured through the
medium of deductibles. The alternative of a captive insurance
company coupled with a reinsurance program will provide greater
cost reductions than the adequate premium credits attaching to
deductibles under conventional insurance.
The more specific cost advantages provided by reinsurance take
the form of premium credits and commissions. These credits and
commissions are of course immediate reductions in premium cost
to the corporate group but are retained in the captive insurance
company.
The use
of reinsurance in conjunction with a captive can also provide
cash flow benefits to the corporate group. The corporate
group, through its captive insurance company, retains the
gross premium until the reinsurance premium falls due and
is able to generate investment income during the retention
period. The ability of the captive insurance company to
determine when the annual premiums should be paid by group
members can also assist the group cash flow program, provided
such payments meet the reinsurance premium requirements.
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Cash flow benefits can also be derived from the taxation advantages
which accrue from using a captive insurance company. The funds
accumulated in the captive insurance company are retained under
the control of the corporate group. A flexible policy of investment
is therefore possible and prudent investment of such funds should
further enhance group profitability. The offshore-based captive
provides greater benefits and flexibility for investment of accumulated
funds.
The use of a captive insurance company also expedites the settlement
of insurance claims. However, the settlement of a loss claim between
the captive and the group member must be affected in the proper
commercial manner.
The captive insurance company therefore offers the most expedient
and beneficial means of obtaining self insurance backed by reinsurance
coverage. It follows that a captive insurance company should be
used to complement the activities of the commercial insurance
underwriters and not as an alternative to them. The self insurance
of risks which are outside the scope of commercial insurers must
also be considered in conjunction with an assessment of your group’s
overall risk position. The coverage for this form of self insurance
will be funded entirely from within your group. Consequently,
structural and taxation problems are factors of prime importance
and inevitably result in the utilization of a captive insurance
company to insure the designated risk. The payment of premiums
for insurance coverage is, in most countries, tax deductible irrespective
of the nature of the recipient entity. However, self-insurance
effected through the creation of internally funded provisions
of reserves does not normally generate tax deductions until losses
are substantiated. The use of a captive insurance company is therefore
a means of crystallizing self insurance into a distinct corporate
entity.
Georgetown Trust, Ltd.
has extensive experience in the establishment of all types of
offshore insurance arrangements and can provide you with consultation
on the formation and management of insurance companies as well
as arrange for access to professional risk managers and consultants
to handle the day-to-day administration. We also provide international
investment management.
When you are ready to precede with an international insurance
company registration, please download and complete the application
form. Ensure that all forms are completed in full, signed where
requested and are accompanied by the necessary supporting documents.
Send by fax to +501 223-2497.
The Georgetown Trust, Ltd.
fee structure for the establishment of an insurance company in
Belize is as follows:
| Processing of any insurance application
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US$6,500.00
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| Act as Principal Insurance Representative
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Variable
» 0.15% of all insurance amounts underwritten, the
minimum fee amount is US$10,000»
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| Registered Office |
US$2,000.00 |
| Opening of US and Belize Bank Account |
US$ 250.00
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| Nominee Director |
US$ 250.00
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| Service of Process by resident attorney-at-law |
US$ 400.00
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| Keeping of business records and accounts |
US$ 300.00
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| Actuary or Auditor
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Independent Agent
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| Transfer of Insurance Business
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US$ 300.00
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| Compliance with regulations
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US$ 400.00
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| Mail Forwarding
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US$ 100.00
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| Courier Fees |
US$ 50.00
(within USA) |
| Courier Fees |
US$ 75.00
(outside USA) |
Government/Registration Fees:
| Application for long-term Insurer |
US$ 500.00 |
| License for long-term Insurer
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US$ 2,000.00 |
| Application for general Insurer |
US$ 500.00
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| License for general Insurer |
US$2,000.00
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| Application for exempt Reinsurer or captive Insurer |
US$ 250.00 |
| License exempt Reinsurer or Captive Insurer |
US$ 250.00 |
| Application for other Reinsurers |
US$ 500.00
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| License for other Reinsurers |
US$1,000.00
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| Application for captive Insurers |
US$ 500.00
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| License for captive Insurers |
US$1,500.00
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Order
an Insurance License
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