Domiciles

Once you have made a decision to incorporate your own captive the next important step is to make the right choice of jurisdiction which will best suit your general business strategy. This will help determine the requirements your company will have to meet during incorporation and operation; the relationships that will be set up with the Regulator and how successful and profitable your business will be.

There are over 30 various jurisdictions that have developed and enacted such legislation offering favorable conditions for the incorporation and successful operation of captive business. Among them are Singapore, Malaysia (Labuan), Bermuda, Dubai, Guernsey, Cypress, Isle of Man, Ireland, the USA (South Carolina, Vermont, Utah, Arizona). The issue for you is to make right choice which best suits your business.

To ensure that the chosen jurisdiction suits your own captive program in the the best way, our experts will analyze your strategic goals, and match them with the most essential factors, including:

1. Any special legislation stimulating the development of captive business and offering favorable conditions for its operation;
2. The most favorable tax regime for your captive program;
3. Adequate requirements to the authorized capital and solvency margin;
4. Minimum restrictions in relation to underwriting and reinsurance protection;
5. Investment opportunities matching your general financial strategy;
6. A progressive and professionally functioning Regulator;
7. Availability of professional and reasonably priced auxiliary services (accountants, auditors, secretaries etc.); and
8. A well developed infrastructure and favorable business environment.      

Any of these factors can be more or less important in your case, which is why we believe that choosing the right jurisdiction should be based on individual approach, taking into account your own requirements.

Our experts, using their experience in the development and management of captive programs in various domiciles, have analyzed the legislation and practice of most jurisdictions and formed a list of countries offering very favorable conditions in respect of captive business.

Among them there are Malaysia (Labuan), Singapore and Dubai. All three of these jurisdictions have been growing rapidly in line with the rapid growth of the Asian economies and, as consequence, expansion into this market of world leaders in different financial segments, including global reinsurers.

All of the advantages mentioned in the sections below are of a very general nature. We can’t emphasis enough that each individual program needs separate estimation and analysis of many factors which can essentially affect your particular choice of domicile.

If you have any questions or a need in professional advice in respect of choice of jurisdiction for your captive program our experts will be glad to provide you with qualified and reasonable advice.

Captive business in Labuan is regulated by the Insurance Act 1990 (№444). The Labuan Offshore Financial Service Authority (LOFSA) actively promotes the jurisdiction as an international insurance/financial centre and endeavors to introduce progressive innovations in this respect. In 2001 special regulations were issued to allow Rent-a-Captive facilitieswhereas many jurisdictions do not have such structures. 

Labuan captives are legally authorized to insure/reinsure directly risks of the parent company/group or other companies approved by LOFSA. The only exclusion is in respect of insurance of direct Malaysian risks.

The Insurance Act does not provide any restrictions for captives in respect of further reinsurance/retrocession of risks and entitles captives to accept risks not only from a parent company/group but, under certain conditions, risks of other companies.

Another advantage of Labuan captive law is the absence of restrictions in respect of investment activity, i.e. unlike many other jurisdictions, such as countries of the European Union which apply rather difficult rules of allowable assets estimation, a Labuan captive can invest its assets in any liquid financial instruments.  

The financial requirements established by the law with regard to captives (the authorized capital, the minimum solvency margin, etc.), in comparison with other jurisdictions, are very competitive.   

The Labuan advantages:

• Being a Federal Territory of Malaysia, Labuan benefits from double tax treaties and trade agreements concluded by Malaysia with more than 70 countries, including Russia.
• The tax rate is one of the lowest among all captive jurisdictions - 3 % or fixed amount of 20 000 MR (~6 700 USD).
• The favorable location provides access to rapidly developing Asian market with huge business potential.
• The encouraging and progressive attitude of the Regulator provides stability of the business and reduces bureaucratic procedures.
• Easy access to professional auxiliary services (accountants, auditors, secretaries etc.) at reasonable price.
• Being a politically stable country with rapid growth of commercial activity and well-developed infrastructure, Malaysia offers favorable investment opportunities.
• A Judicial system based on English common law coupled with widely spoken English language adds to the advantages of doing business in Malaysia. 

Singapore is known as one of the best captive domiciles in Asia and in the world, a mix of many positive factors – stable political situation, excellent business infrastructure, professionally designed legislation providing incentives for development of captive business, and highly skilled and educated workforce in various financial segments.    

20 of the top 25 global reinsurers are currently represented in Singapore, among them - Odyssey America Reinsurance Corporation, Swiss Re, Sirius International Insurance, Sun Alliance and London Insurance, R&V, Axa Re, Mitsui Sumitomo Re.

Advantages of Singapore as an International Financial Center are acknowledged worldwide by financial institutions and analysts.  

The Monetary Authority of Singapore (MAS) promotes Singapore as one of the best jurisdictions in the region for insurance/captive business. Special regulations were enacted by the Government which allow captives full tax exemption on profits derived from non-Singapore business for 10 years.

Singapore captive operation is regulated by the Insurance Act (№ 142) and the law also provides no restriction in respect of reinsurance policy of the company that gives wider opportunities to obtain necessary reinsurance cover at a very competitive price.

For insurance/reinsurance companies intending to expand their existing risk portfolio and to access the international market and for commercial companies wishing to generate profits from their captive our experts suggest considering the opportunities afforded by a relative new entrant to the captive market, Dubai.

The existing insurance legislation provides the opportunity to obtain a captive license which also allows your captive to insure/reinsure up to 20 % of risks from any commercial/manufacture/insurance companies, including any local enterprises and firms.

The dynamic economic and industrial development; the region's huge energy, construction, water, transportation & logistics projects; rapid growth of international trade; international mergers and acquisitions; the privatisation of state assets and other favorable factors mean that your captive would easily find its niche in the local UAE insurance market and, with highly professional management and underwriting, will bring your company excellent profits.

The international Financial Center of Dubai (DIFC) has set out to create a global hub to foster the development of a thriving regional captive insurance industry by attracting global insurers, reinsurers, brokers, insurance managers, actuaries. DIFC promotes the jurisdiction by setting up a highly attractive operating environment, including: professionally developed captive legislation, zero per cent tax rate on income and profits, no restrictions on foreign exchange or capital/profit repatriation, a wide network of double taxation treaties, and of course ultra modern office accommodations well-known in the world for their uniqueness.

Thus, Dubai has a huge potential in respect of both captive business and opportunities for your captive to earn profit by insurance of risks of local enterprises and firms on rapidly developing market of the United Arab Emirates.