1. Bermuda as a Domicile for Latin American Captives
Title Slide
Second Header

2. Introductions Speakers:
Federico Candiolo, Counsel at Attride-Stirling & Woloniecki
Eduardo Fox, Appleby
Tommaso Mascarucci, President Black Gold Re Limited
Moderator:
Steve Arrowsmith, JLT Insurance Management

3. Captive Insurance Companies: the LatAm market
Federico Candiolo
Counsel
Attride-Stirling & Woloniecki
Title Slide
Second Header

4. Captive formation process
Why should LatAm multinationals consider forming a captive in Bermuda?
Prudent and flexible regulation
Speed to market
Pre-eminent captive domicile
Access to the Bermuda reinsurance market
World class infrastructure
Compliant with OECD recommendations
Intellectual capital

5. Captive formation process
The path to Licensing
Commission feasibility report
Consider onshore law issues and fronting arrangements
Select service provider team
Apply to incorporate the company
Apply to license the company
Incorporate, organise and capitalise
Registration as an insurer/reinsurer
Legislative Developments: Companies Amendment (No 2) Act 2011 et al.

6. Captive formation process
Choosing the team
Insurance manager to manage the captive and principal representative
Auditors
Lawyers and corporate administrators
Actuary if required

7. Captive formation process
Captive formation involves incorporation of a company under the Companies Act 1981 and registration under the Insurance Act 1978
Quite distinct processes – possible to run both simultaneously or apply to incorporate ahead of licensing application

8. Captive formation process
Incorporation
Application to incorporate company made on specific application form to Registrar of Companies and Bermuda Monetary Authority (“BMA”) Controller of Foreign Exchange – online application
Details of proposed ownership structure in captive must be disclosed right through to ultimate beneficial owners. Special considerations concerning family owned groups of companies.

9. Captive formation process
BMA vets shareholders to make sure they are “fit and proper” persons - must also be approved as ‘shareholder controllers’ of insurance company
Individuals owning more than 5% of voting equity of captive must also complete a personal declaration form
Incorporation process is very streamlined and can have ‘same day’ approval
Special considerations for family owned Groups

10. Captive formation process
Insurance application
Application to register as an insurer must be made to the BMA Insurance Division
Application made on a Monday of each week and considered at the weekly Friday meeting of the Assessment and Licensing Committee (“ALC”) of the BMA
ALC may approve the application with or without conditions, approve it conditional upon production of certain information, defer it or decline it if business case cannot be substantiated

11. Captive formation process
Mechanics of insurance application
Application will have cover letter from the captive’s attorneys together with the business plan for the captive setting out the business case for the captive
Proforma financials should be included preferably over 5 year period and ideally actuarially evaluated to test adequacy of reserves, solvency margins and liquidity ratios
Details of service providers should also be included (insurance manager, auditor, loss reserve specialist and principal representative)

12. Captive formation process
Business Plan
Details of Shareholder
Proposed insurance program
Capitalisation of the company
Directors
Service Providers
Reinsurance arrangements

13. Captive formation process
Steps to insurance registration
Incorporation
Organisation of company
Hold board and shareholder meetings to:
issue shares
adopt bye-laws
appoint auditors and insurance manager
Capitalise captive
Amount of capital will depend on class of insurer

14. Title Slide Bermuda as a Domicile for Latin American Captives
Bermuda Tax Information Exchange Agreements (TIEAs) with Ibero America
Eduardo Fox
Title Slide
Second Header

15. TIEAs Purpose
To Promote international co-operation in tax matters through the exchange of information

16. Bermuda TIEAs How many TIEAs has Bermuda signed?
Bermuda has signed 35 TIEAs as of May 2012.
Within that number, 3 have been signed with Ibero American countries, namely, Mexico, Argentina and Portugal.
Bermuda has also signed treaties with other Euro-Latin countries like France and Italy

17. Bermuda TIEAs Are there any other Ibero American countries considered?
Brazil and Spain amongst the most advanced in negotiations, but also all other major economies in the region, if required and/or necessary

18. Mexico / Bermuda TIEA Full benefits of the TIEA
Brazil and Spain amongst the most advanced in negotiations, but also all other major economies in the region, if required and/or necessary Bermuda will no longer be considered a “Preferential Tax Regime for the purposes of applicable withholding tax under the Mexican Income Tax laws
Revenue from transactions and other payments made from persons or entities, deemed resident in Mexico, to related entities based in or carrying on business from Bermuda, shall no longer be subject to a withholding tax rate of 40%, and shall instead be subject to standard rates set our in the applicable sections of the Mexican Income Tax Laws; and

19. Mexico / Bermuda TIEA
Mexican taxpayers who generate income of ANY KIND derived from interests in Bermuda, will no longer be required to file an Annual Informative Declaration in relation to such income generated or to be generated during applicable tax periods

20. Bermuda as a Domicile for Latin American Captives
Ecopetrol S.A. / Black Gold Re Limited
A case study by Tommaso Mascarucci
Title Slide
Second Header

21. Black Gold Re – History
Since 2003 we identified that risk financing strategy should be optimized, finding that the constitution of captive was a tool widely used by companies in the sector world-wide.
At that time, benchmark with several companies that had captives (PDVSA, PEMEX, BP, and Carvajal) were made to learn of their experience.
An internal pre-feasibility study was made, results were presented to the Board of Directors of Ecopetrol S.A. in September 2005.
Following additional internal Legal, Treasury and Accounting considerations, it was determined that it was viable to constitute a captive.
Ecopetrol S.A. Board of Directors considered it advisable to engage an expert consultant to perform a detailed captive feasibility study
Registered Office:
Cannon’s Court – 22 Victoria Street
Hamilton HM 12, Bermuda

22. Why was the Captive convenient for Ecopetrol S.A
Provide direct access to the reinsurance market
Mitigate impact of market cycles
Promote the control and prevention of losses
Ability to stabilize the cash flows of the company (increase retentions in periods of market hardening and to reduce them in periods of softening)
Cover un-insurable risks and or design products that are not available in commercial markets
Allow the design of individual strategies of deductible covers, terms and conditions in line with the requirements of each unit of Ecopetrol S.A.
Reduce costs and generate income
Registered Office:
Cannon’s Court – 22 Victoria Street
Hamilton HM 12, Bermuda

23. Black Gold Re – Development Stages
Benchmarking process
Legal, Treasury and Accounting support
Internal pre-feasibility study
Stage 2
Buy In process with CEO and BD
RFP for Feasibility Study
RFP results to Board of Directors
Stage 3
Approval of incorporation process
Selection of advisors to implement incorporation
Proceed with incorporation process for the captive in Bermuda
Stage 4
Operational consolidation process
Registered Office:
Cannon’s Court – 22 Victoria Street
Hamilton HM 12, Bermuda

24. How to run a Captive successfully …
Feasibility Study
Strong business model
Legal
Financial
Operational
estructure
Domicile benchmark
Registered Office:
Cannon’s Court – 22 Victoria Street
Hamilton HM 12, Bermuda

25. Management control system
How to run a Captive successfully …
Design your strategy
“strong busines Plan”
Right Domicile
World Class
Service providers
Management control system
Management
visits to domicile
Registered Office:
Cannon’s Court – 22 Victoria Street
Hamilton HM 12, Bermuda

26. How to run a Captive successfully …
Right Domicile
Reputation
Regulatory framework
Financial services
Insurance/reinsurance services
Tax regulation
Peru
Brazil
U.S.
Colombia
Bermuda
Design your strategy
“strong busines Plan”
Risk profile
Operation scheme
Premium Drivers
Profit Center vs Cost center
Forecast model
Strategir review process
Captive Managers
Legal Council/Secretarial services
Auditors
Reinsurers
Actuaries
Brokers
World Class
Service provider
Registered Office:
Cannon’s Court – 22 Victoria Street
Hamilton HM 12, Bermuda

27. Management control system
How to run a Captive successfully …
INSURANCE
COMPANY
REINSURER
RISK
GROUP
Loss Payments
Premiums
Reinsurance contract
Master Slip and cover notes
Master
slip
Accept and cede % of risk from Company and premium payment to Broker
Insured Risks
REINSURANCE
BROKER
Insurance
Policy
Premium
CAPTIVE
Local / International Insurance programs
Placement cover notes
CAPTIVE
MANAGER
BOARD OF DIRECTORS
COMMITTEES
SERVICE
PROVIDERS
Management control system
TRANSPARENCY
CONTROL
PERFORMANCE
Registered Office:
Cannon’s Court – 22 Victoria Street
Hamilton HM 12, Bermuda

28. Black Gold Re – Why Bermuda
High reputation within insurance and reinsurance market
Considered favourably by the OECD
Transparency and regulatory stability
largest captive domicile in the world (17% of the total number of captives 5.524)
Facility for the intergovernmental exchange of information
Oil& Gas Captives(PEMEX, PDVSA, PETROBRA'S CHEVRON TEXACO, TOTALFINA, CONOCO-PHILLIPS, SHELL, REPSOL-YPF,)
Presence of multiple companies that offer products and services of insurances and reinsurance
Registered Office:
Cannon’s Court – 22 Victoria Street
Hamilton HM 12, Bermuda

29. Black Gold Re – What´s Next?
Retaining more risk now with greater capital base
Maintain international rating rate levels given by Fitch and Moody’s
Redesigned entire Ecopetrol placement utilizing Black Gold Re
Strengthen rigorous and comprehensive governance structure in line with Ecopetrol standards and Code of Conduct
Synchronize budget with annual strategic review process business plan
Registered Office:
Cannon’s Court – 22 Victoria Street
Hamilton HM 12, Bermuda