Compliance target in view

Local authorities now have a draft of specific guidelines for the insurance sector, as Barbados presses ahead to become fully-compliant with the Organisation for Economic Cooperation and Development (OECD) standards relating to Economic Substance Guidelines.

Providing an update on Tuesday, Kevin Hunte, Director of International Business in the Ministry of Energy and Business Development, said authorities were now awaiting a final input from the Financial Services Commission (FSC) so that the guidelines for the insurance sector could be finalised.

“Specific to the insurance sector . . . right now we have a draft and we are awaiting final input from the FSC in relation to one particular requirement coming up in the Insurance Act, and that is relative to the insurer establishing a principal office in Barbados [and] appointing an officer or director of the company to be resident in Barbados as its principal representative,” said Hunte.

He said following the final comments from the regulator there will be “specific engagement, dialogue and questions” in relation to the entire range of the sector’s specific guidance.

“What I can tell you this morning is that included in that sector-specific guidance will be further details on Core Income Generated Activity (CIGA); specific exclusion of insurance brokers, managers and other intermediaries providing services to insurers but not carrying out other relevant activity. Included will be what the insurance company must demonstrate when utilising professional services, whether it be actuarial or brokerage services outside of Barbados; guidance on outsourcing; specific guidance on the role of the actuary; guidance on tax residence outside of Barbados and then specific guidance relative to segregated cell companies and integrated cell companies,” Hunte explained.

He was speaking during day two of the Barbados Risk and Insurance Management conference at the Hilton Barbados Resort on Tuesday.

At the end of November 2019, Government passed the Companies (Economic Substance) Act in response to the OECD requirements as part of the Base Erosion and Profit Shifting (BEPS) Action 5 and the European Union (EU) criterion 2.2 initiatives.

According to the International Business Unit, those standards require geographically mobile activities to have economic substance regardless of whether the activities are conducted in a no or normal tax jurisdiction, in a preferential tax regime or a jurisdiction that has corporate income tax.

Under the new standard, a resident company shall, after January 1, 2020, file an Economic Substance Declaration with the Director of the International Business Unit annually within 12 months after the last day of the end of each fiscal period commencing on the dates prescribed in the regulations, providing certain details.

As it relates to other non-insurance international businesses, Hunte said “From the Ministry of Energy and Business Development, particularly the international business unit perspective, we have begun your assessments and therefore you will begin to receive notifications as to whether you have passed or failed the substance test or we require further information because what you submitted is inconclusive and not sufficiently supportive of us being able to come to a decision as to whether you passed or failed.” (MM)