The International Insurance Center: Can Puerto Rico Become the New Vector in the Insurance Industry Triangle?
| Autor | Juan Nadal Ferrería |
| Cargo | University of Puerto Rico School of Law, J.D. 2011 |
| Páginas | 1-28 |
T
HE
I
NTERNATIONAL
I
NSURANCE
C
ENTER
:
C
AN
P
UERTO
R
ICO
B
ECOMETHE
N
EW
V
ECTORINTHE
I
NSURANCE
I
NDUSTRY
T
RIANGLE
?
J
UAN
N
ADAL
F
ERRERÍA
*
I. Introduction .................................. ........................................... ............................................ .. 1
II. Puerto Rico’s Insurance Industry and the Captive Insurance Business ......... 3
III. The Birth of the International Insurance Center: The Framework ................ 4
IV. Tale of the Tape: Puerto Rico vs. the Offshores and Vermont .......................... 7
V. Puerto Rico’s Natural and Not-So-Natural Advantages .................................. .. 11
VI. The Latin American Market and the IIC: Puerto Rico’s Niche ........................ 14
VII. The Benefits Of a Competitive IIC Scheme: Strengths and Challenges ..... 16
VIII. The Case for Increased Promotional Efforts with the D.E.D.C. ................... 21
IX. The IIC and Positive Externalities .............................................. ............................... 22
X. Charting a Course for the IIC: Goals, Expectations and a Warning ............... 24
XI. Conclusion ......................... ........................................... ...................................................... 27
I.
I
NTRODUCTION
With increased government support, Puerto Rico is poised to position
itself as a leader in the international insurance industry in Latin America and
elsewhere. There is, however, no easy path to the top. In this Article, I
purport to evaluate the Commonwealth of Puerto Rico’s International
Insurance Center (henceforth “IIC”) initiative. The Center is a concept that
was brought forth in 2004 with Act No. 399,
1
which provides the legislative
framework towards creating a bustling insurance and reinsurance trade
center by providing advantageous fiscal incentives to the industry. Herein, I
address the question of whether Puerto Rico, considering the
competitiveness of its IIC law and corresponding regulations, can become a
key vector in a market dominated by the State of Vermont, the Cayman
Islands and Bermuda; three industry leaders which t ogether constitute an
industry-leading “Insurance Triangle.” Furthermore, I examine the feasibility
of positioning the Island as a major industry bridge between insurance
* University of Puerto Ri co School of Law, J.D. 2011; University of Pennsylvania, M.P.A. 2008;
University of Puerto Rico, B.A. 2006. The author would like to acknowledge the insightful
comments by Dean Emeritus Antonio García Padilla to various drafts of this work.
Additionally, the author thanks fellow editor Tzeitel Andino for her valuable comments and
punctilious corrections.
1
P.R. Laws. Ann. tit. 26, § 4301 (2007).
2 U.P.R. Business Law Journal Vol. 3
centers in the United States and Europe and the blossoming Latin American
market.
Undeniably, pushing Puerto Rico as a major industry player will not
be a painless task and will pose substantial yet surmountable challenges. In
Section III of this work, I compare these jurisdictions with Puerto Rico in an
attempt to establish a comprehensive blueprint for expediting the
development of the international insurance industry in the Island. I attempt
to succinctly address current and prospective market conditions and local
efforts required towards reshaping said Triangle. The Island’s goal of
becoming the jurisdiction of choice for specialty insurers and reinsurers of
US and non-US risks, as well as for Latin American offshore operations, is
carefully examined in Section V, establishing a sensible outlook for said
venture.
2
Initiatives such as the IIC fit into the vision of positioning P uerto Rico
as a thriving financial center, providing a multiplicity of services to
international entities. Within said vision, both the International Banking
Center
3
and the IIC are bound to achieve common objectives and face
common obstacles as well. Herein, I propose that the IIC is challenged not
particularly by a bureaucratic mesh, but rather by promotional deficiencies
that seem to encumber its development. C urrently, a small office within the
Office of the Commissioner of Insurance (henceforth “Insurance
Commissioner”), an agency of the Commonwealth, runs the IIC with limited
resources, as I discuss below.
4
The strengthening of this initiative, and ultimately the International
Banking Center, should not c ompete with, but rather supplement,
government strategies embracing the life sciences industry. For instance,
several pieces of legislation have been recently approved to support said goal
of turning the Island into a biotechnology research and development center.
5
2
See PowerPoint: Ruben Ge ly and Ralph Rexach, Puerto Rico Offshore Insurance Center
(October 2007), available at http://www.rexachpico.com, under “Ne ws”.
3
See generally, Emiliano Trigo Fritz, If You Build It, They Will Come: Creating a Latin
American Financial Center in a n American Overseas Territory (July 2010) (unpublished
manuscript, on file wi th author). Under Puerto Rico law, interna tional banking enti ties can
underwrite insurance. P.R. Laws. Ann. tit. 7 § 232j(a)(11) (2008).
4
O
FICINA DE
G
ERENCIA Y
P
RESUPUESTO
,
P
RESUPUESTO
R
ECOMENDADO
2010-2011,
O
FICINA DEL
C
OMISIONADO DE
S
EGUROS
, available at http://www.presupuesto.gobierno.pr/Tomo_II/
comisionadoSeguros.htm (Last accessed Nov. 19, 2011). The Office of the Commissioner of
Insurance was created by Act No. 263 of Aug. 13, 2008; P.R. Law s Ann. tit. 26 §§ 233-257.
5
See Act No. 73 (providing economic incentives for major manufactur ers); Act No. 62
(promoting the development of agricultural biotech enterprise s); Act No. 101 (providing tax
exemption for r esearch scientists within the context of academia); Act No. 214 (creating the
Puerto Rico Science, Technology & Research Trust; Act No. 230 (creating and funding the
University of Puerto Rico’s Comprehensive Cancer Research Center) and se veral other
initiatives promoting bioscience researc h such as the Mole cular Science Complex and the
Bioprocess Development & Training Complex.
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