Captive Alternatives has experience working in many domiciles, both US based and foreign. Having discovered Puerto Rico and moved all our existing Private Insurance Companies there in 2015, we can say authoritatively that it is the best domicile today to establish a “Protected Cell” structure.
Puerto Rico is a territory of the United States, and has been since 1898, when it was acquired from Spain after the Spanish-American War. With its approximately 3.5 million residents, Puerto Rico is the most highly populated of all United States territories. People who are born in Puerto Rico are U.S. citizens.
As a Private Insurance domicile, Puerto Rico offers several advantages, some of them quite unique. The bilingual culture makes it an attractive domicile to many parts of Latin America, particularly businesses which also have U.S. operations. This makes Puerto Rico an ideal bridge between Latin America and the U.S. The domicile is also a regulated and accredited member of the National Association of Insurance Commissioners (NAIC), and the U.S. Federal Reserve, and in some cases the Federal Deposit Insurance Corporation (FDIC), protect Puerto Rican banks.
Puerto Rico’s territorial self-governance with the U.S. creates a “dual sovereignty” where some matters are governed by U.S. law while Puerto Rico law takes precedence in others, such as corporate and insurance laws. In particular, there is a separate and distinct Puerto Rico Internal Revenue Service.
Private Insurance Company Growth
It should be noted that Puerto Rico is already a well-established domicile with more than 150 private insurance companies. It is also already the third largest insurance domicile in all of Latin America. Its annual premiums in excess of $11 billion annually trail only Mexico and Brazil. This existing regulatory infrastructure suggests Puerto Rico has the capacity and experience to manage a growing captive insurance sector.
Perhaps the most encouraging sign for the domicile is the number of Private Insurance managers making significant investments of time and personnel in Puerto Rico. Similarly, Captive Alternatives has formed both Madison International Insurance Company and Madison RE, I.I. to spearhead its operations in Puerto Rico. Other organizations are also increasing their presence in Puerto Rico.
U.S. domiciled captives face uncertainty from a number of sources. These include unresolved issues related to the PATH Act and its changes to 831(b), ongoing activity in the U.S. Tax Court, evolving definitions of risk distribution, and self-procurement and retaliatory premium taxes between states, to name a few. With the level of legislative, judicial and regulatory uncertainty captives are currently facing in the U.S., many find Puerto Rico an increasingly attractive option.