1. The Canadian Market Explored

2. Business Development Director
Paul Arbo, CPA, CA, ACI
BDO Cayman Islands
Partner
Stephen B. White, CPA, CA
Kane Group
Business Development Director

3. Canadian Captive Historical Overview
Starting in late 1980’s the Canada-Barbados drove significant business to Barbados including captives, IBC’s and offshore banks. There have been several changes over the past 25 years but the benefits of using Barbados as a domicile have largely remained unchanged brought changes to third party unrelated business such as extended warranty business and creditor life. During the early 2000’s there was great debate on if a zero tax rate was indeed a true tax rate.

4. Canadian Captive Historical Overview
Most Canadian owned captives ended up in Barbados from large multinationals to smaller ones
In rare circumstances did a Canadian-owned captive locate in any other domicile
Only around 20 captives domiciled in British Columbia (BC)
today – mainly BC risks
BC has had captive legislation in place since 1988
Bermuda currently the second largest domicile for Canadian
captives
There have been several captives leaving Barbados for other locations in more recent years

5. Canadian Captive Historical Overview
Use of captive insurance vehicles by Canadian companies historically the domain of large multi-national oil & gas and mining companies, etc.
Mid-sized and even smaller entities now exploring captive insurance options
Now over 250 Canadian-owned captives globally. New captive formations include:
Resources / commodities sectors
Oil & gas, mining, agriculture
Group / association captives
Reciprocals / pools

6. Canadian Market Compared to US
Very different market vs. the United States
Litigation environment
Health care legislation
Sheer number of multi-nationals
Traditional insurance market
Workers’ compensation regime
Cost/benefit case a tougher one to make in Canada, generally, and
Smaller population of larger companies/entities
... Group captive structures may be more suitable/feasible

7. Canadian Activity in Cayman
There are now approximately Canadian owned captives in Cayman
Most are either group or owned by owner-managed companies
Retail and investment banking arms of RBC, Scotia and CIBC
Various mid-tier investment management business have a presence
Holdco structures for non-Canadian investments
Private wealth management structures such as trusts
Tourism
“Transplanted” Canadians hold senior roles in many financial services firms
Provides a certain comfort level in terms of professional approach and relationships

8. Recent Developments In Canada
There are relatively few large risk managed companies that either do not have a captive or have decided that they do not need one
Today there is greater activity in the:
“Middle” market
Privately owned company space
Group captive space
Mid-tier brokerage firms are offering more risk management
advice
TIEA between Cayman and Canada has increased opportunities

9. TIEA – An Opportunity
On June 1, 2011 Cayman entered into a TIEA with Canada which changed the competitive landscape
Cayman domiciled captives now subject to effectively the same tax benefits that Barbados has enjoyed
A Tax Information Exchange Agreement is:
designed to fight tax evasion,
a bilateral agreement,
designed to aid in the exchanging of tax information.

10. TIEA – An Opportunity
The OECD introduced them in the late 1990’s to promote international co-operation in tax matters by exchanging relevant information to combat the lack of transparency and co-operation between countries. Cayman currently has 30 TIEA’s in force. There are discussion on what is better, a TIEA or a tax treaty.

11. TIEA – Its Impact
The TIEA effectively generates income in a captive free from Canadian tax when earned and when paid.
Exempt income is earned as opposed to FAPI (Foreign Accrual Property Income)
Qualifying income must be generated from an affiliate outside of Canada and resident in a treaty or TIEA country.
There are approximately 90 countries with tax treaties with Canada.
There are 16 countries with TIEA’s with Canada and 14 more are pending.

12. How to attract Canadian Business
Educate, Educate, Educate
Promoting the quality of the regulations, service providers and regulators
Put our people front and center
Profile-building
Promote the long history of the Cayman insurance industry
Market Cayman to the brokers, lawyers, bankers and insurance companies who can influence the decision makers
“Grass roots” initiative
Get our people in front of the right people

13. How to attract Canadian Business
Remain persistent in our marketing efforts
Show more of a concerted effort:
“IMAC/private” partnership approach to Canadian conferences
More marketing collateral and thought leadership specific to
the Canadian market
Better knowledge sharing amongst Cayman service providers
in terms of Canadian producers/referral sources
Cayman not just “open for business”... must do a proper sell job (i.e. when & why are we the better choice).

14. Expected Activity In 2015
Cayman will be considered as a leading domicile choice by new Canadian captive owners
Cayman will be considered as a potential new domicile for existing Barbados-domiciled captives
New business will be slow to come as Cayman has to continue to market itself – “long play”
Cayman must innovate to find ways to fund marketing budget / “stretch” what dollars are available

15. Questions?