Bermuda Eases 'Rent-A-Captive' Formation Rules

Tax-news.com

18 January 2000

Bermuda is preparing new legislation to make it quicker, easier, and cheaper for Bermuda reinsurers to segregate their accounts through protective cell captives or 'rent-a-captives'. Currently this process can take up to six weeks and cost up to $15,000 because a private member's bill must be passed by the Bermuda parliament each time in order to set up these rent-a-captives. This sort of delay can be particularly frustrating for reinsurers, especially in the summer when parliament does not sit for a long period.

Bermuda has been at the forefront of global insurance and reinsurance markets for many years, but recent new laws passed by rivals Guernsey and the Cayman Islands that make it easier to form captives have made it necessary for Bermuda to update its laws in order to protect its existing business and its place in the market. If the laws are passed it is hoped that they will also attract even more reinsurance businesses to the island.

Under the draft 'Segregation of Accounts Act 2000', rent-a-captives companies will be able to be formed without a private member's bill and the process will take a maximum of 30 days at greatly reduced cost.

The proposed new legislation will be presented to the Ministry of Finance next week following consultation with the Bermuda legal and insurance sectors as well as the Bermuda International Business Association. It should before the House of Parliament either in Spring or Summer sittings this year.

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