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Dubai International Financial Centre
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Dubai International Financial Centre

The world’s fastest-growing global financial centre, DIFC is an onshore financial hub that provides a supportive platform for financial institutions and service providers to develop their business. By providing internationally-benchmarked regulations, best-of-breed infrastructure and support services, DIFC fills the time-zone gap for a global financial centre between London and New York in the west and Hong Kong and Tokyo in the east.

Since its inception in 2004, DIFC has grown quickly to develop into an international hub for institutional finance and a gateway for capital and investment in a region stretching from Africa to the Indian subcontinent. Guided by its core values of integrity, transparency and efficiency, DIFC seeks to play a pivotal role in meeting the growing financial needs of the region.

DIFC is today a community of more than 750 companies, including the world's leading financial services companies. Global companies in DIFC include Standard Chartered, Credit Suisse, HSBC, Barclays Capital, JP Morgan, Morgan Stanley, Deutsche Bank, Citigroup, Goldman Sachs and Mellon Global Investments.

Supportive Platform for Captive Insurance

An increasing number of global companies are looking at DIFC as a domicile for captive management. Marsh was the first to establish in 2008, followed by Aon and Heritage in early 2009. Specialised laws for captive insurance, combined with a range of financial incentives and easy availability of key ancillary service providers like legal, audit and compliance firms, make DIFC an ideal platform for captive insurance.

DIFC has already established itself as a major hub for insurance companies. It is home to the subsidiaries of leading insurance players such as; AIG, Alico, Alliance Re, Aon, Generali, Gulf Re, Alliance Flagstone Re, International General Insurance, JLT, Lancashire, Liberty Mutual, Marsh, Malaysian Re, RFIB, United Insurance Brokers, Tokio Marine, Watkins Syndicate and Zurich.

Why Domicile in DIFC?

Tailor-Made Common-Law Framework

DIFC has an independent common-law framework that provides a secure and growth-oriented domicile for insurers, reinsurers, captives and protected cell companies (PCCs). Developed by incorporating best practices from leading financial jurisdictions around the world, this legal framework includes company regulations that allow the amalgamation and re-domiciliation of captive insurance companies.

Autonomous Regulator

DIFC’s regulatory body, the Dubai Financial Services Authority, has created a set of rules and regulations that ensure that everyone operating here does so to the highest standards. The DFSA has been created by statute and is entirely independent of DIFC.

Independent Courts System

DIFC also has an independent court system, the DIFC Courts, which ensures the highest international standards of legal procedure and the certainty, flexibility and efficiency expected by the world’s best financial institutions.

Alternative Dispute Resolution

The DIFC - LCIA Arbitration Centre, created through a strategic partnership between the London Court of International Arbitration (LCIA), and DIFC, provides an alternative dispute resolution mechanism of the highest global standards.

Vibrant Financial Community

DIFC is today a community of more than 800 companies that include the world's leading financial services companies. Global companies in DIFC include Standard Chartered, Credit Suisse, HSBC, Barclays Capital, JP Morgan, Morgan Stanley, Deutsche Bank, Citigroup, Goldman Sachs and Mellon Global Investments.

Professional Development Opportunities

DIFC provides world-class learning and development resources to help business professionals sharpen their competitive edge in a rapidly evolving economy. By bringing together programmes from the world's leading institutions, DIFC meets a wide range of educational and training needs – from one-day workshops to PhD programmes.

Knowledge Sharing and Learning Opportunities

DIFC is very active in facilitating new learning opportunities and promoting knowledge exchange in the captive insurance sector by organising workshops, seminars and conferences.

Strategic Geographical Location

The geographical location of Dubai, where DIFC is based, makes the administration and management of captive insurance companies far easier, both because of the time zone and easy accessibility. Dubai’s location between Europe and Asia places it in a time zone between the Atlantic and Asia. This makes DIFC a convenient platform to carry out business in many countries in Europe, Africa, the Middle East, the Caspian and the Indian Subcontinent. Travelling to Dubai is also very convenient as there are frequent daily flights to well over 200 destinations.

NASDAQ Dubai

NASDAQ Dubai was created to provide investors and issuers with a larger and more liquid securities market than currently exists in the region. This platform provides international investors with a gateway to opportunities in the region’s markets, and also offers potential issuers increased access to regional and global capital. Housed in DIFC, NASDAQ Dubai is a fully-fledged stock market which is firmly on track to becoming the global exchange of choice in the region between Western Europe and East Asia.

Benefits of Locating in DIFC

• 100 percent foreign ownership
  
• Zero percent tax rate on income and profits
  
• An extensive tax treaty network for UAE incorporated entities
  
• Freedom to repatriate capital and profits without restrictions
  
• Internationally accepted laws based on the Common Law of England and Wales
  
• Internationally accepted regulatory processes
  
• A world-class independent regulator
  
• A transparent operating environment, complying with global best practices
  
• A dollar-denominated environment
  
• An international stock exchange with primary and secondary listings of debt and equity instruments
  
• A regulatory framework that allows the creation of a variety of legal vehicles, including protected cell companies (PCCs)
  
• A pool of skilled, well-educated and multi-lingual professionals living in Dubai and the region
  
• A modern and efficient transport, communications and internet infrastructure
  
• A responsive service for visas, work permits and other related requirements

DIFC has set out to create a global hub to foster the development of a thriving captive insurance market. Its legislative framework, coupled with a favourable tax environment, offers a convenient platform for the establishment of a captive insurance company.

Captive Classes in DIFC

The Dubai Financial Services Authority (DFSA) provides for the authorization of three classes of captives:

Class 1 Captive Insurer

• Designed for the insurance of risks only from its parent or related companies
  
• Requires minimum capital of US$150,000
  
• Subject to a lighter prudential regime than a traditional insurer

Class 2 Captive Insurer

• Designed for the insurance of risks only from its parent or related firms but may also accept up to 20% of its business from unrelated sources
  
• Requires minimum capital of US$250,000
  
• Subject to a slightly stricter regulatory regime

Class 3 Captive Insurer

• A group captive insurer
  
• Requires a minimum capital of US$1,000,000 and is subject to a stricter regulatory regime

Protected Cell Companies (PCCs)

• A cell of a PCC requires minimum cellular assets of US$50,000
  
• The core of a PCC must have assets of at least US$50,000
  
• Cells of PCCs may also operate as Class 1, Class 2 or Class 3 captives

Captives and PCCs, like traditional insurers in DIFC, are subject to a risk-based capital requirement. If this leads to a higher figure than the minimum, then this figure will apply.

Captive Managers

A captive insurer is a stand-alone legal entity complete with its own board of directors. These are the individuals that will make strategic decisions that affect the operations of the captive. Before a captive is formed the party to perform the day-to-day management function has to be decided. A captive is usually managed under contract by an outside captive insurance management firm. The manager carries out the strategic decisions made by the board of directors of the captive and has as much authority as is granted to them by the directors of the captive through the execution of the management agreement.

How are Captives and Protected Cell Companies supervised?

The Dubai Financial Services Authority (DFSA) seeks to ensure that authorised captive insurers and Protected Cell Companies comply with legislation applicable in DIFC and it has established a risk based approach to the supervision of firms. In general, captives impose lower levels of risk to the DFSA’s objectives than traditional insurers. Captives will therefore be actively, but lightly, supervised. Protected Cell Companies which operate noncaptive cells are subject to the full supervision regime.

In supervising captives, the emphasis will normally be on the adequacy of their reinsurance programmes, and on their precautions against money laundering or other financial crime.

How do I form a Captive Insurance company in DIFC?

Insurance companies are required to be licensed by the DFSA and are subject to a risk-based capital requirement. Companies are registered as one of three classes, depending on the type of ownership and the business they write and the level of capitalisation. Different levels of regulation apply to each licence category. For example, the regulations become less onerous as the amount of third-party business written declines.

Are there any restrictions or rules about forming a Captive in DIFC?

In DIFC, a captive or PCC cannot cover risks in the UAE except by way of reinsurance. This means that specific reinsurance arrangements will be necessary in order to underwrite any UAE risks. Similar arrangements may be necessary for other territories, depending on a territory’s own laws.

What does a Captive need to have in order to operate in DIFC?

Unlike some offshore locations, DIFC is not a “brass-plate” jurisdiction. Captives and PCCs will be expected to carry out business from within DIFC. They must have a principal representative, financial officer, compliance officer and a money laundering reporting officer normally resident in the UAE. These do not need to be full-time employees of the entity, and where captives are managed these roles will normally be filled by employees of the captive manager.

Where do I go for help?

All firms seeking to establish a captive in DIFC should discuss their intention with the DIFC Authority‘s Business Development Department prior to making an application.

This will ensure you get as much help as possible before you make your application.

Contact us on +971 (0)4 362 2222 or email captives@difc.ae