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Domicile Wars: Mauritius positioning itself as reinsurance hub as captives rise


  • Most Mauritius captive owners have links to Africa
  • New legislation permits pure captives to write third party risk
  • Big focus on anti-money-laundering efforts

Despite being one of the biggest insurance centres in Africa, Mauritius is keen to enhance its reputation as a global financial hub and continue captive expansion in the domicile and recently allowed pure captives to write third party risk.

In order to do this, the jurisdiction is in discussions with the World Bank on a new reinsurance framework that Mauritius hopes will further develop its place on the international stage.

The popularity of captives in the jurisdiction continues to increase as companies look to negate rising costs in the hard commercial market, while recent changes regarding third party risk means pure captives can be used for a wider variety of business cases.



Mauritius is one of only a small number of captive domiciles within Africa, with South Africa being the other significant domicile on the continent.

“When we look at the African continent, Mauritius is the foremost captive domicile on the continent,” Blessing Chiguye, executive for Southern Africa and Lusophone Africa at Reinsurance Solutions Intermediary Services, told Captive Intelligence.

“We find that there’s a bit in South Africa, but largely, Mauritius is known on the continent as the domicile for captive business.

“For captive business, we need to be able to call upon captive managers, services, captive business agents, and legal services etc, and Mauritius has a robust system for someone setting up a captive.”

Mauritius’ captive legislation was modernised through the 2015 Captive Insurance Act.

“This provided a clear, simple and concise approach for setting up and ongoing administration of pure captives,” said Kaviraj Nuckchedee, director and head of captive insurance at Fortree Management Services.

The FSC Mauritius then issued the 2016 Captive Insurance Rules with the aim to strengthen the framework for captive insurance business introduced by the 2015 Captive Insurance Act.

“The Pure Captive Rules are exclusively in respect of pure captive insurance business and lay down requirements regarding capital, solvency, and reporting,” The Mauritius Financial Services Commission (FSC) said.

The domicile has also had cell legislation for around 25 years, with cells being the most popular captive structure in the jurisdiction.

“The advantages of opting for a PCC arrangement encompass the segregation of risks among various lines of business or clients, cost-effectiveness through shared administrative and operational expenses, and flexibility that enables each cell to have its unique ownership, business plan, and risk profile,” the FSC told Captive Intelligence.

Most companies that have formed captives in Mauritius have business interests within Africa.

“Most of them will have interest in South Africa with the country being one of the biggest economies in Africa and certainly the most developed economy on the continent,” Chiguye added.

Chiguye said there has been a large amount of interest from companies in South Africa and some entities around East Africa, mostly in Kenya, “so there’s a massive interest in Mauritius from African companies”.

Vikram Ramlochun, managing director at Guardrisk International Limited PCC, said most of the company’s business is sourced from Africa, including South Africa.

“But we do have policies that have been issued to Uruguayan and Australian companies as well, so it is not limited to Africa,” he said.

Captives in Mauritius are utilised by a range of industries, including financial institutions, communications, media and technology, automotive, transportation, mining, energy, power and property.

“Risks normally entrusted in a captive entity varies from traditional lines such as credit, properties and casualty, motor vehicle, political to non-traditional lines such as cyber, reputational, business continuity, environmental & climate change,” Nuckchedee said.

There are also a number of captives owned by banks, which are writing covers such as bankers blanket bond and other financial lines.

Graeme Henderson, executive director at Guardrisk International Limited PCC, said that after the pandemic, some clients in Mauritius that already had existing facilities were able to use the capacity built up in those facilities to retain a larger portion of their risk on their conventional covers, such as directors and officers.

“Cyber has become a topic of more regular conversation, and we have one new client that has cyber as part of their covers as well,” Henderson added.

“Certainly, the discussion around cyber is a lot more prevalent than it used to be.”

Like captives in most jurisdictions, property is also a popular line of business in Mauritius.

“For property we advise them to utilise a blended programme and not take the entire business into a captive but keep some of it in the traditional market,” Chiguye said.

“They could then take the entire deductible or the ground up risk into the captive.”

At the end of last month, Mauritius published a set of rules allowing for pure captives to write third-party risk.

“We have seen in the recent past several requests in terms of whether a pure captive is allowed to write third-party risk and these changes in the legislation have been commended because we believe this will enhance both existing and potential pure captive owners’ playing field in terms of risk bearing, raising their risk capacity, and bringing value add in their insurance business,” Nuckchedee said.

Advantages

Mauritius has a convenient time zone which means it shares working hours with other important financial hubs globally.

“It has a four-hour time difference with the UK, it has the same time zone as the Middle East, four hours difference with Hong Kong, and two-hour difference with Johannesburg,” Chiguye said.

Mauritius does not have foreign exchange controls, allowing businesses to hold multi-currency accounts, making cross-border transactions easier.

Henderson highlighted that the Ministry of Financial Services and the FSC are heavily focused on anti-money laundering procedures.

“I think this is something that is an after effect of the Financial Action Task Force (FATF) grey listing that Mauritius went through a few years ago,” he said.

“After successfully getting themselves removed from the grey list by addressing all the identified deficiencies, they have become extremely vigilant about licensees in Mauritius – and rightly so, ensuring that they have adequate anti-money laundering controls in place, making sure that all the policies are thereand the processes are followed to ensure that as far as possible, there is an avoidance of money laundering.”

Nuckchedee said compliance is “key” when it comes to regulating captives in Mauritius.

“Mauritius is engaged to combat money laundering and the financing of terrorism, positioning itself as a jurisdiction with a robust regulatory framework,” he said.

The FSC said that the jurisdiction has a well-defined and transparent regulatory framework that encourages captive formation without compromising on prudential standards.

The jurisdiction is currently working with the World Bank on a new framework for reinsurance in the jurisdiction, though it was already possible for cells to write third party risk in the jurisdiction.

“They want toposition Mauritius as a reinsurance hub, but this is a big project,” Ramlochun, told Captive Intelligence.

“They have approached the World Bank to assist the Financial Services Commission in Mauritius to work on to this framework with the view of aligning Mauritius with other sophisticated reinsurance hubs, especially in terms of solvency because Mauritius does not follow Solvency II.”

Captives on the rise

Chiguye said that as a region, Africa is behind in terms of developing captive business compared to other well-established financial markets.

“But I foresee a massive growth in the short to medium term, mainly because there is a lack of capacity in the international traditional markets, especially for African risks,” he said.

“We’ve got many companies that are in industries whereby the international market is no longer writing the risks.

“If we look at coal business or dirty energy, that is still the backbone of most African economies.”

Chiguye said there’s been a growing trend of companies looking for alternative solutions as a means of countering the hard insurance market.

“More financial advisors and traditional brokers are becoming aware that these alternative solutions can be offered to their clients,” he said.

“Even some insurance companies who are struggling to buy traditional reinsurance are looking also to set up protected cell captives on the reinsurance side for themselves.

“I would say there’s been an increase in the general acceptance that captives are a viable solution.”

Ramlochun said that over the past three or four years, there has been an increase in clients wanting to use Mauritius as a facilitator for cell captive business.

Henderson agreed that interest in cells was increasing and from a wider range of sectors and geographies.

“In terms of enquiries for new facilities, we are talking to a US company which finances projects into Africa to have a cell in Mauritius, although I think the US market for cell captives is quite internally focused,” he said.

“From time to time, we do have enquiries coming out of the UK and we do have a couple of owners of protected cells in our licences that are based in the UK but are not necessarily writing business in the UK.”