Insurance center shines bright amid Puerto Rico recession
The international insurance center (IIC) in Puerto Rico is a ray of sunshine for an economy that has been shrinking for years.
The Puerto Rican economy has been in recession since 2006 and the US territory's debt default last August only aggravated its economic and financial woes.
The IIC, however, has bucked the trend and seen a steady stream of foreign insurance companies setting up shop over the past several years.
Launched in 2004, IIC had 17 insurers at the end of 2015 and that number increased to 23 insurers at the end of last year, Rubén Gely, the director of the international insurers and reinsurers division, told BNamericas.
Of last year's total, nine were P&C companies, seven life and health insurers, and the rest captive insurance companies, said Gely.
International insurance companies are coming to IIC for a number of reasons, but the main attraction is a regulatory framework that allows for so-called protected cell companies (PCC), said Gely.
The PCC is a single legal entity where the assets and liabilities of the core cell and the other cells are separated and protected from each other.
Life insurers in the IIC use the PCC mechanism to offer life policies and annuities to high net worth individuals, while P&C insurers use PCC mainly for their captive insurance operations, Gely said.
Low taxes is another factor that makes Puerto Rico attractive to foreign insurers as is the fact that it is a jurisdiction that carries the US flag, uses the US dollar, and has a bilingual population.
Gely said he would "not be surprised" if the IIC would have 30 international insurance companies at the end of this year. The number of PCCs could also increase from 400 in 2016 to between 500 and 600 at the end of 2017, he added.
Business volume in IIC has also seen strong growth over the past several years, with written premiums increasing at an annual rate of 88% during 2012-2015. Written premiums amounted to US$444mn in 2015.
Gely said the strong growth in insurers and PCC has allowed the IIC to meet one of its key objectives: to increase demand for local professional services and, in turn, help buouy the troubled economy.
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