Thanks to the presence of offshore insurance companies, individuals, families and companies are able to transfer risks incurred by business and personal activities. In essence, offshore insurance business is about risks being absorbed by international insurance companies, in exchange for an obligation by the customer. In most offshore jurisdiction with offshore insurance legislation, general and long-term offshore insurance business are the two principle types of insurance businesses for which offshore insurance companies are licensed. With this being the case, the concepts of general and long-term insurance business is standard throughout, and it is common to find similar international or offshore insurance legislations, especially as international insurance standards are to be adhered to, with the exception of certain regulations and different provisions that may exist for insurers, based on the regulatory requirements established by jurisdictions respectively.
Under the heading of general offshore insurance business, one would find:
Property insurance against loss or destruction of property (usually not including marine craft, vehicles or aircraft), loss resulting from the interruption of business and reducing the amount and scope of business that is offered as a result of that loss or damage and loss caused by theft or natural disasters.
Financial loss insurance to insure against financial loss that may be caused by debtors who fail to meet their debt obligation, performing performance bonds, administration bonds, suretyship and fidelity bonds, kidnap, ransom and unforeseen expenses.
Marine and Aviation insurance to insure against the risk of damage to marine and or aircraft, equipment, fittings, carrier liability, third party risk, medical coverage and injury caused to passengers at the time of an accident.
Motor insurance for insurance against loss or damage to motor vehicles, third party risks, damage to motor vehicles resulting from use, medical coverage for passengers injured during an accident and carrier’s liability.
Health and accident insurance to insure the against the risk of infirm, sickness incapacitation, infirmity, death and injury caused by an accident
Insurance for in transit goods for loss or damaged that may be caused to baggage, goods and commodities.
Liability insurance for policyholders who incur liability to third parties
On the other hands, long-term offshore insurance business would normally include:
Annuities providing variable for fixed payment to annuants at a given point in time
Life insurance to insure human life, establish payment mechanism for beneficiaries of the life insurance,
Permanent health insurance to insure against the risk of incapacitation, infirmity or injury
Most long-term insurance contracts are without time limit, until the retirement age or are effective for at least five years.
General offshore insurance is explained as offshore insurance that is not referred to as long-term offshore insurance in the respective offshore insurance act. Once acceptable as a class of offshore insurance that can be included under the category of general offshore insurance business, general offshore insurance may cover a board scope of insurance contracts to protect against a variety of risks.
Other forms of offshore insurance include assurance, reinsurance and captive insurance which are treated as categories by themselves in addition to general offshore insurance business and long-term offshore insurance business.
Offshore insurance companies provide the very same benefits that are available locally, including the possibility of obtaining advice on safety, legal matters and loss prevention and settlement. A significant advantage is also available to offshore insurance companies, which are able to capitalize on favorable tax laws, legislation and investment friendliness and the absence of exchange controls in order to run the business profitably, resulting from a reduced tax burden through tax exemptions and the avoidance of costs that could be incurred from foreign exchange and currency fluctuations. In short, an offshore environment creates numerous possibilities and potential for accumulating wealth, especially through offshore banking mechanisms and other offshore entities that help with protecting and managing assets, wealth and facilitate investments in foreign markets.
Opportunities to reach a larger clientele are far greater as an international insurance company, and through development and sophistication as the insurance company grows, the chances of diversifying the company’s portfolio, offerings and better catering to customers’ considerations are enhanced. In turn, a thriving onshore or offshore insurance industry is capable of fortifying economic activity, encouraging entrepreneurship and investment.
Offshore insurance companies that would have expanded tremendously would normally be involved in reinsurance and tend to establish their own offshore captive insurance companies to cover their own risks, as it could be very costly to have the company insured by another private, unaffiliated insurance company. In this sense, offshore captive companies are beneficial and help resolve many of the challenges that international insurance companies may confront. Given the uncertain nature of insurance in itself, in terms of the occurrence of an insure risk, being able to cooperate with other offshore insurers within the market or internally by forming a group of insurers helps to increase expertise in the sector and strengthen insurance companies by spreading risks, especially with the use of captives.
