Formation and Licensing of an International Insurance Company
The licensing of an International Insurance Company (or “IIC”) is a relatively straightforward procedure whether it be for a Class A, B or C license. In all cases a considerable amount of information about the principals, their business affairs and their plans for the new institution is required and how the application is prepared and presented is quite important. However, with the assistance of ADCO’s network of auditors, risk managers and actuaries assisting, a license should, if all documentation is in order, be obtained in 5 to 7 weeks from the time of application. It is important however to be aware that the decision to grant the license rests with the Director of Financial Services (“the Director”) so we cannot guarantee either the time frame or the eventual outcome of the application. That said we have never had an insurance application rejected.
St. Lucia also permits Incorporated Cell Companies to be formed to do insurance business. Such cells must be contractually “attached” to another core entity. The specifics can get rather involved but briefly it allows you to gain many of the benefits of having a stand-alone insurance company but with less cost and capital requirements.
The “Class A” license allows the company to conduct (underwrite and/or cede and accept re-insurance) what is commonly referred to as General business. This is customarily defined as anything other than life or health insurance. The great majority of St. Lucian international insurance companies are Class A
The “Class B” license allows the licensee to conduct those classes of business referred to as Long-term., again generally considered life or health insurance.
The “Class C” license is for those companies who wish to conduct both types of insurance business.
Class A and Class C licensees (in respect of the Class C applicant’s general business) are further split into Subclass 1 and Subclass 2.
- A Subclass 1 license is for companies that intend to function as what is commonly called self-insurance or captive companies. In this instance the company is restricted to insuring risks arising solely from its parent company or other related parties which must be stipulated at the time of formation.
- A Subclass 2 license is for those companies wishing to operate an unrestricted insurance business. In practice many captives need to in fact be Subclass 2 due to the fact that US IRS rulings require captives who parent companies claim the 831(B) deduction in respect of payments made to said captives to insure the risks of several other non-related parties.
Required Documentation for all Applications:
- Details of the proposed company which will hold the license (Name, Authorized and Issued Capital, Registered Office and Agent, Financial Year-end.)
- Listing of the shareholders (and their % holding), directors and officers and their addresses.
- In-depth resumes on the principals detailing the qualifications and past experience that make them suitable applicants to run an insurance company.
- Certified copies of passports, police certificates of character and references (three, one of which must be from a recognized banking institution) for each shareholder, director and officer of the company.
- A detailed business plan including a three-year revenue and expense projection.
- Evidence of Liability Insurance at a level set determined by the Minister may , at the discretion of the Minister, be required ( very rarely)
- Engagement letter from an acceptable auditing firm.
- Engagement letter from an acceptable actuarial firm.
- Engagement letter from an acceptable local law firm.
- A pro-forma balance sheet, certified by the auditors demonstrating compliance with the capital requirements.
The Application Process
Once all of the items listed above are gathered, the licensing process involves the following steps:
- The application forms are filled out and submitted in duplicate along with all the required information above and a non-refundable US$500 application processing fee.
- The Director of Financial Services reviews the application and replies to ADCO either with a request for additional information or confirming that a conditional license has been granted (or denied).
- Assuming the conditional license has been granted, ADCO then proceeds to form the International Business Company (IBC) with the name that was previously submitted. Once the company is formed, a local bank must be selected to hold the new institution’s statutory deposit of USD$ 50,000 (note that this amount does count toward the new IIC’s capital requirement)
- The auditors certify that the deposit is in place ( or other acceptable evidence is presented)
- ADCO submits a copy of the auditor’s certification, the company’s incorporation documents and the certificate of good standing to the Director.
- The Director then issues the license upon payment of the relevant fees. The annual license fee for any of the three classes of IIC is US$2,500. A US$300 per annum IBC registration fee is also required.
Other Relevant Facts
- The IIC must have at least two directors. Both must be natural persons (as opposed to corporate directors) and one must be a resident of St. Lucia. Adco can help find a suitable candidate for this position.
- The capital for all types of IIC’s is US$100,000 with the exception of a Class A-subclass1 company which only requires capital of US$50,000.
- ADCO operates a thriving re-insurance pool to assist those American capitves that need ot re-insure the risks of third parties to allow their parents ot qulify under IRS code 831(b)
- The IIC may be subject to review by the Director’s office at any time, however the only required filing is submission of a semi-annual return which is based on management account information and the annual audited financial statements, due within three months of the insurer’s year-end.
- St. Lucia recognizes the need for confidentiality in business affairs. To this end, the country’s IBC Registrar only maintains a copy of the IIC’s license and a copy of its Memorandum and Articles of Association. The shareholders and directors are known only to ADCO and to the Director. Both ADCO and the Director are required by law, under threat of severe fines and penalties, to keep confidential all information obtained whether it be during the incorporation process, ongoing IIC management or a Director’s examination.
Professional fees are a mixture of set charges for certain functions and time-based billings for other situations. Please contact us to discuss your requirements and allow us to prepare a fee quote for your unique needs.
We hope that you have found this information to be helpful in providing the basics of International Insurance Company formation. Please do not hesitate to contact us if we can be of further assistance. We look forward to working with you.