“The TCI has the necessary
infrastructure and service
providers from the
world including legal,
insurance and accounting
professionals, among others,
to provide a first-class,
Direct writers are subject to strict regulation as insurers in the
jurisdictions in which they operate.
The direct writers must have an AM Best Rating of B+ (or equivalent/
or be otherwise licensed and/or approved by the FSC.)
Administrators who insure the products and services under the
insurance programme are delivered to consumers pursuant to valid
claims are also very highly regulated in their home domiciles
The trustee/custodian may only release funds, held under the terms
of a trust/custodial agreement, authorised and/or directed by the
There is a smaller but thriving captive insurance market in the TCI.
Matthew Queen of Tradewinds Insurance Management Group,
another licensed TCI insurance manager, notes that as of May 31,
2017 there were 66 captive insurance licences issued to companies
in the TCI.
“The American captive insurance market is expanding rapidly,”
As middle market companies adopt 831(b) captives into their
business models, firms are increasingly required to self-insure a
portion of their risk profile to compete. Captives insuring general
liability, professional liability, and other standard lines frequently
return a 40 percent underwriting profit to the stakeholders.
These kinds of profits often result in significant capital accounts
within 36 to 60 months of operation. As captives continue to flourish,
the TCI should also expect to see a growth in this particular sector of
the financial services industry.
With the forthcoming changes to the PARC legislation, those interested
in setting up these entities should rest assured that the TCI has the
necessary infrastructure and service providers from the international
insurance world including legal, insurance and accounting professionals,
among others, to provide a first-class, bespoke service. The TCI will
continue to grow as the pre-eminent jurisdiction for PARCs.
Adrian Corr is a partner at law firm Miller Simons O’Sullivan,
Providenciales, Turks & Caicos Islands. He can be contacted
auto protection, prepaid maintenance and identity-theft protection,
among other classes of insurance business. These types of coverage
were not in existence when the legislation was first introduced.
Greg Petrowski, a director of Global Insurance Managers & Actuaries,
a TCI-licensed insurance manager, adds that the demand for PARCs
is driven by the desire of the owners of the entities which produce
the insurance business to participate in the potential underwriting
profit and net investment income earned on the products they sell
At the November 2017 F&I Reinsurance and Product conference
in Tempe, Arizona, Petrowski noted that as of May 31, 2017, 6,856
licensed PARCs had been registered with the Financial Services
Commission in the TCI. This number has been increasing at the rate
of approximately 1,000 per annum.
This, Petrowski said, confirms that PARCs are a major area of
growth at the moment.
He adds that at the forthcoming 2018 F&I Reinsurance & Products
Conference, to be held from November 14 to 16, 2018 at the Tempe
Mission Palms Hotel and Conference Centre, Tempe, Arizona, a
diverse range of topics will be discussed.
These will include the Tax Cuts and Jobs Act’s impact on insurance
companies and risk participation programmes; and Protecting
Americans from Tax Hikes (PATH) Act changes to 831(b) premium
threshold and qualifications; plus recent developments in TCI legislation.
Lowering the risk
The Financial Services Commission (FSC), the TCI supervisory
authority, has taken steps to prevent PARCs being used for money
laundering and terrorist financing or to facilitate their abuse by
Within the last 12 months a ‘fit and proper’ test of shareholders,
directors and key officers has been introduced with a view to ensuring
that only persons of good character are permitted to act as directors,
shareholders and managers of PARCs.
In addition, and as part of the application process, PARCs are
required to produce and adopt a satisfactory anti-money laundering
and prevention of terrorist financing strategy policy document.
Furthermore, this highly specialised and tightly regulated TCI niche
market PARC business is supervised by a large, regulated insurer
(the direct writer) and is therefore subject to a very low risk of money
laundering and terrorist financing.
Additional factors which support this low risk profile ensure that:
The value of insurance premiums related to a single underlying
contract/customer reinsured by PARCs is typically quite small.
Any refund of premium via a direct writer, for any reason, can be
made only to the insured. The likelihood of the company being used
by a third party as a vehicle for money laundering/terrorist financing
is accordingly extremely low.
Unearned insurance premium payments received by the direct
writer are held by a licensed financial institution, under the terms of
a custodial or trust agreement on behalf of the company.
50 US Captive 2018 www.captiveinternational.com