Advantages of the TCI
Incorporation and Licensing
Business Plan
Capital and Solvency Requirements
Business Restrictions
Books, Records and Reporting Requirements
Restricted Licence Reinsurers


The offshore insurance industry started in Bermuda in the 1960s, where the captive insurance company was first developed as a recognized commercial vehicle by major US corporations seeking alternative ways of financing their risks. This simple risk transfer mechanism not only potentially lowered the cost of insurance for the parent corporation but also enabled it to retain control of the investment income and reserves while allowing the premiums paid to be deducted onshore as a legitimate business expense. The taxation aspects of captive insurance in the United States and elsewhere have since become more sophisticated. Now risk management is as much a motivation for captive establishment as tax planning.

Since its first use in Bermuda, the industry has expanded and matured, and a number of offshore insurance jurisdictions have proliferated. Cayman, the Channel Islands, the Bahamas and Barbados, among others, have developed offshore insurance as well as a number of US jurisdictions such as the states of Vermont, Hawaii, Colorado and Illinois. As the industry has grown, so has the need for regulation. Such regulation is concerned primarily with solvency and the need for each jurisdiction to ensure that it does not earn a bad reputation by allowing its users to engage in abuse in other jurisdictions.

The Turks & Caicos Islands (TCI) joined the party in 1989 when it gave its then-nascent insurance industry a sound legal and regulatory basis with the introduction of the Insurance Ordinance and subsidiary regulations. Since then the offshore and captive insurance industry in the TCI has expanded and matured. The jurisdiction is now home to 95 pure captives and over 2,700 restricted licence reinsurers, a niche area in which the TCI is the offshore market leader.

The terrorist attacks of September 11 2001 have led to a significant hardening of the global insurance market generally and a concomitant increase in demand for captives and other offshore insurance products, and the TCI is well placed to take advantage of this expanding market.

Advantages of the TCI

Apart from its attractive legislation the TCI offers risk managers, brokers, fronting companies and insurers a number of advantages:

  • the stable physical environment of a British overseas territory;

  • a one-stop, user-friendly regulatory regime;

  • low establishment and operating costs;

  • easy access to the principal markets of North America;

  • a sound and well-developed legal and judicial system;

  • a community of professionals capable of servicing the needs of captives;

  • no taxation;

  • no exchange control; and

  • US dollars as the local currency.

Incorporation and Licensing

Most applicants for TCI insurance licences will be companies incorporated in the TCI. Incorporation can be achieved within two days. The costs will vary depending on the amount of capitalization. Overall establishment and licensing costs are significantly more competitive than prevailing rates in Bermuda or Cayman.

No business may be carried on from or within the TCI that uses the word 'insurance', or any of its derivatives which connotes insurance business, unless the entity concerned is licensed to carry on insurance business. Applications are made to the Financial Services Commission and must be accompanied by:

  • a business plan;

  • a copy of the memorandum and articles of association of the application (or other constitutional documents);

  • a list of the shareholders including where appropriate details of the ultimate beneficial owners;

  • evidence of the good character and standing of the shareholders, and the ability integrity and experience of the directors, managers and officers; and

  • consent of an approved auditor to act as auditor of the applicant.

The time required for licensing will depend on the comprehensiveness of the business plan and other information submitted to the commission. Usually, a licence can be obtained within 30 days if properly prepared and documented.

An application fee of US$500 is payable on submission of an application for an insurers licence. The licence fee (non-domestic business) is currently US$2,000 payable at the date of the grant of the licence and annually thereafter. The licensing period runs from April 1 to March 31. Restricted licence reinsurers dealing with one direct writer are exempted from paying fees and from a number of other requirements under the ordinance (see below).

Business Plan

The business plan is the fundamental document determining whether the licence is granted and under what conditions. The business plan must include, where appropriate:

  • a five-year projection including anticipated risk exposure and asset base at the end of each year during the period;

  • the type and source of business contemplated, specifically categorized;

  • anticipated premium income, properly categorized;

  • the reasons for choosing the TCI as a base for operations;

  • an overall assessment of the risk factors and, if appropriate, an analysis of proposed reinsurances; and

  • an assessment of the expected ratio of claims to premiums for each category of business written with a statement explaining the rationale applied.

Capital and Solvency Requirements

No specific level of capitalization or surplus is required. The amount will be determined after consultation with the superintendent of insurance, having regard to the business plan. The superintendent's policy, however is that applicants writing general business will be expected to have an initial minimum capital of US$100,000 and those writing long-term business, an initial minimum capital of US$180,000. Capital may take the form of an irrevocable letter of credit issued by an acceptable financial institution.

No surplus or solvency ratios are mandated but the superintendent's policy is that the net worth of an insurance company should be 20% of premium where net premium income is up to US$5 million and 10% of premium plus $100,000 ($180,000 for long-term business) where the net premium is over $5m.

Yachts, airplanes, motor vehicles, livestock and loans to group or connected companies, options and future or forward contracts are not accepted for purposes of establishing net worth. All other assets are, in principle, acceptable but realizable assets with an easily establishable market value are strongly preferred. Investment policy should be conservative and appropriate to the type of business being undertaken.

Business Restrictions

There are no specific business restrictions. All lines of property, casualty, life, personal risk, workmen's compensation, liability and other lines are permitted. The type of business must be included in the business plan. The superintendent must be satisfied that the proposed business is viable and that the management of the company has the necessary expertise and experience to operate and administer the type of business to be underwritten.

There is no requirement that a captive insurer should have a physical presence in the TCI, although the preferred choice of the superintendent is that each captive, other than a restricted licence reinsurer, should have a local manager. The same applies to auditors. All insurers must appoint an authorized representative in the TCI.

Books, Records and Reporting Requirements

A licensed insurer is required to keep annual accounts audited by an approved auditor and if it is engaged in long-term business it must prepare an actuarial valuation of its assets and liabilities certified by an approved actuary. Separate accounts in respect of general business and long-term business must be kept. There is no requirement that books and records such as financial statements, minutes of shareholders and directors meetings, ledgers and journals, or loss and claims records be kept in the TCI but the superintendent has the power to require access to such records and to demand additional information.

In addition to filing annual audited accounts, an insurer must file an auditors' certificate of solvency and an auditors' certificate that its business has been conducted in accordance with its business plan. In the case of long-term business, an annual actuarial valuation by an approved actuary is also required.

Restricted Licence Reinsurers

Under Section 7(11) of the Insurance Ordinance, if an insurer gives an undertaking that it will not engage in any business other than the reinsurance of risks covered by a single named insurer, it may potentially obtain exemption from practically all the requirements of the ordinance apart from the need for a licence. At the time of the passage of the Insurance Ordinance, the exemption was tailored to encourage the incorporation in the TCI of producer owned reinsurance companies (PORCs).

Approximately 2,700 PORCs are licensed and incorporated in the TCI. A PORC is a reinsurance company that is beneficially owned or controlled by the producers of business ultimately reinsured by the PORC. The typical uses include:

  • service contract/extended warranty business;

  • mortgage guarantee insurance;

  • provision of life, accident and health reinsurance coverage to the US car dealership industry; and

  • involuntary unemployment reinsurance coverage.

PORCs are exempt from a variety of the regulations that apply to ordinary TCI insurance or captive insurance companies. There are no audit requirements, no requirement for a TCI insurance manager, no capitalization requirements and no requirement that liquid assets be maintained in the TCI. Further, government fees are reduced. The TCI is the leading offshore PORC jurisdiction.

For further information on this topic please contact Owen Foley or Kevin Coupland at Misick & Stanbrook by telephone (+1 649 946 4732) or by fax (+1 649 946 4734) or by email ([email protected] or [email protected]).