Considered as the first SPANISH speaking domicile in the captive insurance business, PANAMA enacted legislation in 1996 to allow the formation of captive insurance/reinsurance companies in its territory.

It comes at a time where many think it to be just right for what is happening elsewhere in the Latin American region, through the ongoing privatisation process of large government operated concerns in the telecommunications, energy and transportation areas, as well as in the insurance field where only Brasil, in the reinsurance arena, and Costa Rica and Nicaragua in direct insurance, have state owned monopolies.

Panama, with an international banking system that hosts over one hundred banks including US, European, Asian and from Latin American origin, holds the US dollar as legar tender, thus making it one of its strongest advantages not only for the formation of captives, but also for the enormous trade and economic activity that has been going on for decades at the Colon Free Zone Trade Area, one of the largest of its kind in the world.

With a privileged and strategic geographical location for world commerce, witnessed by the PANAMA CANAL since the early part of the century, Panama has many more advantages to attract regional and international parent companies to look into Panama as its domicile of choice. Visitors are surprised to find that many of the Spanish speaking residents not only . . . "SPEAK ESPAŅOL", but also do . . . "HABLA ENGLISH".

The international and business community is a bilingual one and in particular those involved in the financial areas of Panamanian and regional development, are not only multilingual but also professionally talented in their particular fields of insurance, banking and finance.

With the international business community eyeing Latin America as the untapped market for new opportunities, corporations that have and will be establishing branches and/or regional operational hubs in the area will most surely look into alternative risk transfer/retention options, undoubtfully making captive formation a possible choice of action.

A one time application fee of US $1,000.00 must be presented to the Insurance & Reinsurance Superintendency, as the local regulating authority, with a $2,000.00 annual license fee.

Capital requirements have been established as follows:

• US $ 150,000.00 for General Lines
• US $ 250,000.00 for Long Term Business/Both

With no taxes on premiums, capital gains or profits, captives incoporated in Panama will also enjoy the non existence of double taxation treaties with other countries. A minimium of thirty five percent of reserves must be invested in locally authorized instruments.

A solvency requirement of a five to one ratio between net premiums and capital must be met when presenting audited financials every year. An insurance/reinsurance risk report of operations must also be presented.

There are three authorized and licensed captive management companies in Panama at the moment, with another four seeking authorization. At this moment, the first application of a captive company incorporation has been presented to the Insurance Superintendent, most probably receiving its license by the time this article goes to press.

PANAMA has been jointly promoting this new law between the government and APARYS, the local risk management association, as well as through the efforts of several individuals who have been guest speakers at different forums, and others who have digilently and with utmost professionalism been traveling the region.

The Panamanian government hosted a booth with the cooperation of APARYS, at the recent RIMS conference in Atlanta, generating much traffic amongst attendees that not only were curious of the new law and the different videos and handouts of information given out on Panama, but also of the Panamanian hand rolled cigars that were an attraction, and much commended by many at RIMS.

Previous to that, APARYS had had speakers at the LatinAmerican Risk & Insurance Managers Association Congress in Buenos Aires, Argentina, and also at the World Captive Forum at Turnberry Isle Resort, Florida.

Panama, known to many as "The Land Bridge of the Americas" at "The Crossroads of the World" expects to become the "Natural Choice" of those in the region and elsewhere that are selecting the proper domicile for captive company incorporation.

Stavros Costarangos P.
Regional Director
Qstion Managers Corporation
Argentina-Brasil-Costa Rica-Panama-Puerto Rico-Venezuela
E-mail: qmanagers@pananet.com