Several members of Edwards Angell Palmer & Dodge’s Insurance and Reinsurance Department recently attended an interesting meeting with representatives of the Office of the Commissioner of Insurance of the Commonwealth of Puerto Rico. At the meeting, the Commissioner’s representatives discussed Puerto Rico’s efforts to advance the Commonwealth as an International Insurance Center, which they described as providing “a competitive environment within which insurance companies and reinsurers could cover risks out of Puerto Rico, under a secure and flexible regulatory scheme and attractive tax benefits.”
The Commissioner’s representatives first presented the statutory and regulatory framework for the International Insurance Center of Puerto Rico (“IICPR”): (1) Public Law 399, known as the International Insurers and Reinsurers Act of Puerto Rico and approved on September 22, 2004, established the statutory basis for permitting international insurers to operate in Puerto Rico with favorable tax treatment and sets forth the requirements for organization, authorization and minimum capital; (2) Public Law 400, also approved n September 22, 2004, sets forth the tax treatment and regulatory requirements for international insurers authorized by the IICPR; (3) Public Laws 399 and 400 became effective in March 2005, and are supplemented by Rules 80 (applicable to insurers and reinsurers) and 81 (applicable to Protected Cell companies), which govern the authorization, operation and supervision of such companies operating through the IICPR.
The Commissioner’s staff then discussed the tax incentives created by the International Insurers and Reinsurers Act of Puerto Rico, including the following:
a. Exemption from all Puerto Rico taxation for international insurers and their shareholders;
b. Exemption from income taxation for income obtained by international insurers and by qualifying international insurer holding companies;
c. Exemption from taxation on dividends and other profit distributions made by international insurers and qualifying international insurer holding companies;
d. Exemption from municipal franchise and real and personal property taxes; and
e. Exemption for international insurer qualifying international insurer holding companies from withholding taxes on payments of dividends and other distributions made to third parties, and from filing tax returns with the Puerto Rican Internal Revenue Service.
Finally, the Commissioner’s representatives discussed other reasons why they consider Puerto Rico an ideal location for international insurers and reinsurers:
• Puerto Rico is an international finance destination, with internationally-recognized banking and financial services industries.
• The island has a vibrant and growing professional workforce: the service industry is one of Puerto Rico’s fastest growing sectors, with people employed in banking, accounting and insurance representing 26.5% of its workforce in 2005.
• Puerto Rico is a member of the National Association of Insurance Commissioners (the “NAIC”) and the Puerto Rico Insurance Commissioner’s Office has a long history of regulatory expertise.
• The island has an experienced domestic insurance industry and state-of-the-art insurance practices.
• Puerto Rico has a privileged geographic location with open access to the mainland United States and Latin America.
• The island enjoys many benefits given its privileged status vis-a-vis the United States, such as a secure investment and credit environment, but also benefits from fiscal and tax autonomy.
If you would be interested in learning more about the potential benefits of establishing an international insurer or reinsurer in Puerto Rico, please click on “Email the Editor” and provide your contact information for follow-up by an EAPD attorney.
