Interest in captive formations in Puerto Rico in rising, particularly in South American countries battling extreme levels of inflation, Ruben Gely-Ortiz, president at Iron Shield II told Captive Intelligence.
Iron Shield II is an international reinsurer, domiciled in Puerto Rico, that operates as a segregated assets plan, similar to a protected cell company.
“As Puerto Rico develops as an insurance centre and gets more credibility, the interest in forming captives from bigger players is increasing,” he said.
“One of the biggest factors for new captive formations in Puerto Rico is inflation in Latin America. For example, the Argentinian currency is up 120% so we are providing a solution for economies that are not stable and helping insurers stabilise their reserves.”
Gely-Ortiz also highlighted the hardening of the commercial market as a main factor in captive growth in Puerto-Rico.
“We are seeing that reinsurance is deciding to not continue with some of these programmes, and the lack of reinsurance and commercial insurance is an opportunity for captives,” he said.
“Based on our target market, a big factor in increasing captive utilisation is inflation and devaluation of currencies.”
He said that there has been lots of captive interest from insurtech start-ups and technology companies.
“They’re expanding into new jurisdictions by using a segregated asset plan or a captive where they could then enter Colombia as a reinsurer, instead of having to raise capital to buy an insurance company in Colombia,” he said.
Gely-Ortiz noted that the domicile has historically been focused on US and Latin American businesses, “but we are trying to develop and get more captives from Asia and Australia”.
He noted that one of the main challenges the domicile is facing is the amount of time it is taking for captives to complete the application process.
“By Puerto Rican law, the Commissioner needs to respond within 60 days after the completion of a captive application,” he added. “But that’s definitely not the case, it’s taking almost a year.
“The Office of the Commissioner of Insurance (OCI) Puerto Rico is not dedicating the staff that the market deserves. Registration of captives as protected cells certainly should be within the 60-day timeframe.
“We hope that the reported increase in premium in the International Sector in 2022, well over 100%, will drive more attention from policymakers.”