Cook islands insurance companies

Cook Island Insurance Company

An offshore insurance company, usually referred to as a “captive” insurance company, is generally a subsidiary of a large company or group of companies. Its purpose is to provide insurance within the parent company or a group, thus saving external costs and generating profits in a low tax jurisdiction. The final benefits are not necessarily the driving force, but they can be significant. Direct access to reinsurance is another important advantage of a captive insurance company.

Some high tax countries have legislated to prevent excess shifting of income to captive insurance companies, but usually without seriously reducing fiscal benefits. Besides providing tax savings, it is usually true that an International Offshore Financial Centre offers a less regulated and bureaucratic supervisory insurance regime than the home country of the parent company. The captive insurance company may, for example, be able to employ its capital more effectively than a domestic insurance company.

The considerable advantages of captive insurance companies have led to the development of a major worldwide captive industry and International Offshore Financial Centres have vied with each other to establish attractive regimes for captive insurance companies.

The Insurance Act 2008 came into effect on January 1, 2009. Its purpose is to regulate domestic and offshore insurance under the Financial Services Commissions (FSC) regulatory umbrella. This includes insurers, both for life and general businesses, agents, brokers and insurance managers. It also updates the supervisory regime for offshore insurers. In August 2009, the FSC finalized an Insurance Code to underpin the new legislation.

From January 1, 2009, it is an offence to provide insurance unless the company is either licensed by the FSC or is approved as an external insurer under section 11 of the Act. Where there is insufficient market capacity in the Cook Islands to write a specific policy, an exemption may be obtained from the Commission under section 7 of the Act for the insurance to be provided by an unlicensed insurer. It is also an offence to act as an insurance agent or broker unless licensed by the FSC.

Transitional provisions apply for those companies, agents and brokers that were conducting business in the Cook Islands as of December 31, 2008.

An insurance license shall be issued in one of the following categories:

  • Category A: which may only be issued to a company incorporated under the Companies Act and entitles the holder to carry out insurance business, including domestic business.
  • Category B: which may only be issued to an external insurer that carries out insurance business in the Cook Islands from a branch office in the Cook Islands and entitles the holder to carry out domestic insurance business.
  • Category C: which may only be issued to a company incorporated under the International Companies Act and which entitles the holder to carry out international business only.

Prior to the Insurance Act 2008, the law concerning insurance and licensing of insurance companies was contained in the Offshore Insurance Act 1981 and in the Offshore Financial Services Act 1998.

Only an International Company or Foreign Company incorporated under the International Companies Act 1981-1982 could be authorized to carry out insurance business under the older legislation. A licensee could therefore, not deal with the local market and was restricted to offshore insurance business transactions such that all policy beneficiaries had to reside outside the Cook Islands.

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