Puerto Rico is ramping up its efforts to become a reinsurance capitol that it hopes will rival Bermuda and the Cayman Islands, according to a representative of the Puerto Rico department of insurance.
At press time, the first application of the International and Offshore Center is close to being approved and another company is in the process of submitting a formal application, according to Osvaldo Ramirez Bermudez, a director with the Center and a representative for the Puerto Rico insurance department.
A total of 9 companies are conducting due diligence examinations to determine whether to establish operations in Puerto Rico and 2-3 local companies are considering forming reinsurance operations, Bermudez says.
The idea was first raised over 30 years ago when Harold Shapiro, who headed up Puerto Rico’s department of economic development, raised the idea. It was resurrected in 2003 and on July 9, 2004, the Puerto Rico passed legislation to form an entity that could write insurance on foreign risks, reinsurance and Puerto Rico excess lines risks.
The laws, the International Insurers and Reinsurers Act, were added on Sept. 22, 2004 and went into effect in March 2005. In June 2005, regulations were put into place so that the law could be implemented. The law creates 5 classes of authority that includes pure and association captives, two property-casualty classes, and, an unrestricted life and disability class. The life insurance class permits companies with this authority to write disability, life and reinsurance disability and life business.
Among the companies expressing interest at this point, according to Bermudez, are two companies from Latin America who write life reinsurance with the remainder, property-casualty companies, he continues.
The goal is to reach a decision on applications within 30 days of submission, he adds. International companies that are granted authority are granted an exemption from all Puerto Rico taxation.
The goal of the department, headed up by Dorelisse Jurabe Jimenez, Puerto Rico insurance commissioner, and the Center, is to have 3-5 reinsurers at the end of the first year of operation, and 15-20 by the end of the 5th year, he says. A total of $104 million in direct revenues is anticipated by the end of the 5th year, Bermudez says.