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Puerto Rico looks to boost status as insurance hub

Puerto Rico has ramped up efforts to expand its international insurance centre and pitch itself as a Latin American platform for the (re)insurance and captive industry.

The state differentiates itself from other low-tax jurisdictions by offering a favourable tax regime to (re)insurers as well as to related service companies such as law firms, tax consultants and investment advisers, according to a Puerto Rican delegation to the London market.

Insurers and service providers with net income of less than $1.2mn are tax exempt, with earnings over and above that taxed at a flat rate of 4 percent. The tax rate is guaranteed for 15 years and is renewable for an additional 30 years.

These firms are also exempt from municipal franchise and real or personal property tax and are not required to pay withholding tax on dividends.

Given the recent growth in Latin America, the London market has been looking to increase its footprint in the region.

Puerto Rico's Department of Economic Development and Commerce (DEDC) said it planned to attract international specialty insurers to write both foreign risks and domestic Puerto Rican excess lines business, adding that it hoped to rival territories including Bermuda, Barbados and the Cayman Islands.

Ten companies signed up to be based in the country in the first nine months of the year - including captives - and it has 17 more in the pipeline, five of which are set to close by year-end.

Puerto Rico also provides a stable legal and regulatory environment that is favourable to insurers, the delegation argued. Although fiscally autonomous from the US, it is subject to US federal law. The DEDC officials added that average operating costs in the country are lower than in the US.

Willis Re said in a report last year that Puerto Rico "is uniquely poised to take the crown as the centre for Latin America. There are alternative platforms out there but none compare with what Puerto Rico can offer."

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