Nevis: An Ideal Jurisdiction for International Financial Services
Nevis was one of the first jurisdictions in the Eastern Caribbean to appreciate the benefits of diversifying its economy with the introduction of international financial services. In 1984, the Nevis Island Government initiated various measures aimed at establishing its financial services industry and providing investment and business opportunities to international investors. Today, Nevis is a successful international financial services center, which offers a full range of financial services including registration of IBC’s, LLC’s, Exempt Trusts, Offshore Banking, International Insurance and more recently, Multiform Foundations and Mutual Funds.
Nevis, the smaller of the twin-island state of St. Kitts and Nevis, is ideally located in the Eastern Caribbean to offer solutions to investors from around the world. The jurisdiction is one hour away from Puerto Rico, two and half hours away from Miami, four hours from New York, four and half hours from Canada, and eight hours from the U.K. Nevis boasts of an independent, politically stable and secure economy backed by a British-based legal system. Nevis also has state-of the art telecommunication facilities and a range of developed services to support its financial services sector.
Nevis’ competitiveness in the international financial services arena is not only in terms of the costs of services but also in terms of the quality of services and knowledge base available on the island to deliver those services. The international financial services sector is championed by a strong professional infrastructure. There are over 50 registered service providers specializing in company formation and management, trusts, international insurance, law, banking, wealth management and asset protection.
With recognition of the increased global competition and the need to diversify, Nevis has taken a careful, deliberate, and proactive approach to expand its legislative regime and ultimately to meet the needs of any discerning investor. In 2004, a new chapter in the development of the Nevis Financial Services Industry commenced with the enactment of The Nevis International Insurance Ordinance, the Nevis Multiform Foundations Ordinance and The Nevis International Mutual Fund Ordinance.
The Nevis International Insurance Ordinance 2004
Since its launch in November 2004, the Nevis International Insurance product has been constantly growing. As of October 31st 2005, the jurisdiction has registered 50 Captives, 2 Reinsurance, 1 general insurance business and 1 long term insurance business. This success comes as a result of the jurisdiction’s determination to ensure that there are flexible and progressive products while at the same time maintaining strong regulatory standards.
The Nevis International Insurance Ordinance provides for the carrying on of Long-term Insurance, General Insurance, Reinsurance and Captive Insurance Business from within Nevis. The minimum paid up share capital for the classes of insurance business are as follows:
US$185,000 - Long term and General Insurance Business
US$75,000 - Reinsurance Business
US$10,000 - Single-Owner Captive
US$20,000 - Less than 5 Owners Captive and
US$50,000 - 5 or more Owners Captive
The minimum margin of solvency for long term insurance business is US$185,000. For all other types of insurance business, the minimum margin of solvency shall be 20% of the net retained premium up to US$5,000,000. However, if the net premium exceeds US$5,000,000, the solvency margin is US$1,000,000 plus 10% of the amount by which the net retained premium exceeds US$5,000,000.
The key regulatory features of the Nevis International Insurance product are:
- Every registered insurer must have a registered agent or insurance manager resident in Nevis. An Insurance Manager may be non-resident subject to the approval of the Registrar of International Insurance and in this case, the insurance manager must also appoint a registered agent.
- Generally, cash, debt securities, precious metals, irrevocable letters of credit, equities, mutual funds, commercial loans, premiums receivables and reinsurance receivables are considered allowable assets. However, if an insurer wishes to hold assets other than those generally allowed, he must seek guidance from the Registrar of International Insurance.
- Every registered insurer must submit annual audited accounts.
- An insurer of long-term insurance business must file an actuarial valuation of its assets and liabilities, every three years at the end of its financial year.
The Nevis Multiform Foundations Ordinance 2004
The Nevis Multiform Foundation Product was launched in October 2005 subsequent to the passage of the Nevis Multiform Foundations Regulations. The Nevis Multiform Foundation is a very interesting, unique and cutting-edge product, which was designed to remedy some of the problems seen in other foundation products and to maximize the attractiveness of the jurisdiction.
The Nevis Multiform Foundations Ordinance provides that each Nevis Foundation will have a stated ‘multiform’. This means that the constitution of the foundation will state how it is to be treated whether as a trust, a company, a partnership or an ordinary foundation. Through the ‘multiform’ concept the stated identity of the Foundation can be changed during its lifetime, thus allowing for there to be greater flexibility in its use and application.
The Ordinance also provides for entities to be converted or transformed, continued or consolidated and merged into a Nevis Multiform Foundations. Therefore, an entity incorporated outside of Nevis can be transformed into a Nevis Foundation; an existing Nevis entity can be converted into a Nevis Foundation; and any two or more entities from outside or within Nevis can merge into a Nevis Multiform Foundation. These features definitely make the Nevis Multiform Foundations Ordinance, an attractive asset protection vehicle. However, the Ordinance anticipates that the Nevis Multiform Foundation can also be used for estate planning, charity, financing and special investment holding arrangements.
As of October 31st 2005, the jurisdiction has registered 5 Multiform Foundation. It is hoped that in 2006 the Nevis Foundation product will find much popularity with advisers, intermediaries and investors.
The Nevis International Mutual Funds Ordinance 2004
The Nevis International Mutual Funds Ordinance was designed to establish credibility to Nevis based mutual funds and reassure investors of the legitimacy and security of their existing funds (wherever they may be constituted) or to establish new funds under available convenient legal structures as international business companies, limited partnerships or unit trusts. The Ordinance allows for three classes of Mutual Funds:
- Public Fund which offers its shares or units to the general public and are required to be registered;
- Private Fund which offer its shares on a private basis, has no more than 50 investors and is required to be recognized by the Minister of Finance upon proof that it is lawfully constituted; and
- Professional Fund, which is available only to professional investors with an initial investment of not less than US$100,000 and is also required to be recognized by the Minister of Finance. However, the Professional Fund can be fully operational for a period of 14 days without being recognized under the Nevis International Mutual Funds Ordinance.
Under the Ordinance, a fund must have a licensed and independent fund custodian. There must also be a licensed manager or administrator of the fund. Managers or Administrators who are not resident or domicile in Nevis and who are authorized to provide services under the laws of a recognized jurisdiction may operate from within Nevis after receiving written permission from the Minister of Finance. A licensed or recognized mutual fund of a prescribed jurisdiction can easily be continued or redomiciled in Nevis, if it is in good standing. The same privilege would be given to the investment manager and administrator of that fund.
It is anticipated that the Nevis Mutual Funds Product will be launched in February 2006.
Conclusion
Over the years, Nevis has maintained a careful balance between efficient regulation and a proactive approach to meeting the needs of existing and potential investors. This policy has allowed the jurisdictions to position itself as a premier international financial centre. Nevis will continue to enhance its standards through the strengthening and expansion of all of its services and will continue to fulfill the needs of all investors.
Written by Jackie Hunkins LLB (Hons) LEC, Acting Director of the Nevis Financial Services Development and Marketing Department
Entry Filed under: SUPPLIER AND TECHNOFIN®, Alternative Investment, Asset Management, Emerging Markets, Legal & Regulatory Issues, Profile of IFCs