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New PwC Industry Study Released as Bermuda Captive Conference Commences

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September 11, 2017

A new research study conducted by PricewaterhouseCoopers (PwC) for the Bermuda Insurance Management Association (BIMA) has found the captive insurance industry contributes an estimated $174 million every year to the island's economy.

The sector directly employs at least 557 people in Bermuda, the study indicated, and generates minimum fee income of some $139 million every year. An additional $35 million is contributed annually by captives to the Bermuda government, regulators, local suppliers, and commercial property owners, as well as hotels and other hospitality business vendors.

Results of the survey will be presented at this week's Bermuda Captive Conference during one of the program's "Bermuda Shorts" industry updates. The conference kicked off on Sunday, September 10, and runs through September 13 at Fairmont Southampton.

"We commissioned the survey because we felt it was important to understand our industry's economic impact on Bermuda as the island continues to maintain its position as the world's leading captive domicile," said BIMA President Grainne Richmond.

On a worldwide basis, Bermuda is the largest and longest-established captive domicile, the study confirmed, with a total of 776 active licensed captive insurers in 2016, generating $55.3 billion in annual gross written premiums. The study found that 2016 showed stability on 2015, with registration levels consistent with the overall captive market. New registrants came mainly from the traditional US market but also included setups from Latin America, a key emerging market.

"The survey underscores the value of our captive market in terms of the number of jobs it creates, as well as the substantial financial contribution it makes to the local economy every year via fees and other spending," said Ms. Richmond. "Our captive insurance managers and service providers may be less visible around Hamilton than Bermuda's globally recognized commercial reinsurers, but they work diligently behind the scenes to retain and grow this valuable sector."

Service revenue generated by captive companies totaled $139 million, in the form of management, legal and corporate secretarial, actuarial, audit, investment management, and banking fees. A further $35 million included $16.4 million in payroll tax and social insurance contribution; $315,000 in work-permit fee income; $5.3 million in annual business fees to the Bermuda Monetary Authority; $6.74 million in commercial rent; $3 million in hotel revenue; $1.8 million in restaurant and food spend; and an estimated $200,000 per year on local taxis.

Notably, the survey found every new captive formation on the island benefits numerous locally based stakeholders, including the Registrar of Companies, Bermuda Monetary Authority, insurance management companies, banks, and audit and law firms. Those benefits are derived during the entire life of the captive company, Ms. Richmond noted.

Ancillary revenue also fuels the island's tourism business. The study found corporate visitors brought in by the industry contributed 7,100 hotel nights per year; these included directors of companies, audit committee members, and overseas-based risk managers, as well as brokers and other onshore service providers. Visits were typically for the purpose of completing corporate governance activities such as annual general meetings, writing new or renewal business, meeting with service providers and the regulator, as well as meeting with reinsurance companies used by captive insurers.

The annual Captive Conference—Bermuda's largest industry event—is also a significant economic contributor, with 800-plus attendees accounting for close to 1,000 hotel nights this year. The 2016 conference spent approximately $860,000, paid to local support services, according to the study.

For further Captive.com reading on the 2017 Bermuda Captive Conference and the Bermuda Business Development Agency (BDA), see "Check the Bermuda Captive Conference Schedule and Watch BDA Webcasts," "Anthropologist To Speak at Bermuda Captive Conference," "Bermuda Captive Conference Chair David Gibbons Fills in the Blanks," and "Webcasts Highlight Bermuda's Expanding Global Healthcare Liability Sector."

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