Barbados is attracting greater interest by developing its financial services sector, says David Pilla.

As the global insurance market continues to harden and alternative risk management strategies get more attention, Barbados is moving to position itself as a leader, not only as a captive domicile, but also of integrated financial services of all kinds.

Among the world's captive domiciles, Barbados is consistently in the top ten, with nearly 400 registered captives. The island consistently places third or fourth behind the world's two largest captive domiciles, Bermuda, with 1,309 captives, and the Cayman Islands, with 549 captives, based on AM Best Co data. Rounding out the world's top three domiciles is the state of Vermont, with 420 captives registered.

Financial services officials and business leaders on the island say they are moving aggressively to master the complex tax issues that colour the relationship of offshore domiciles with the world's biggest economic powers, and to position Barbados as more than just a home for captives.

"We have what we believe is the broadest range of financial services of any domicile," said Richard Ince, a consultant with Bridgetown, Barbados-based Risk Management & Insurance United. "We are looking at the further development potential of our financial services infrastructure. As a world-known tourist domicile, we have all the accommodations for the business traveller. We have a highly educated, highly skilled workforce."

To press its case as an integrated financial services domicile, Barbados is hosting a conference in March 2003, targeting international insurance, banking, trusts, business companies and regulatory issues. It's an ambitious agenda, commented Henderson Holmes, director of international business for the Barbados Investment & Development Corporation, but Barbados is equally ambitious. "We're looking to cover a broad range of financial services applications, including captives and international reinsurance," said Mr Holmes. "We want to cover a number of relevant issues, such as cross-border transactions, implications of the US Homeland Security legislation and OECD rules."

The Organisation for Economic Co-operation and Development (OECD) has been of particular importance to captive domiciles over the past several years. Among the OECD's efforts to govern international insurance and reinsurance business is its Financial Action Task Force (FATF) on Money Laundering, which in the past two years has been pushing for offshore financial centres, including insurance centres such as Bermuda and the Cayman Islands, to provide more detailed information on the financial transactions they host.

That, plus persistent complaints from US and European Union officials that too many offshore centres act as mere tax havens, suggests to some who do business across international borders that globalisation might be on a collision course with governments' regulatory impulses.

OECD members include all major developed countries: the US, the UK, Japan, the European Union member countries, Australia, New Zealand, Canada, Mexico, Switzerland, Turkey and Korea, among others. Notable non-members include China, Russia, Israel and the countries of the Middle East and South America.

Chris Evans, president of Barbados-based Towner Management, said Barbados was putting a lot of effort into heading off possible tax disputes with the OECD, the European Union, the US and other big governments. "We've developed a network of international tax treaties" with other countries, he said. Barbados is unique among offshore domiciles in that it works to establish `dual treaties' with one country at a time, in order to address the tax laws peculiar to that country, he explained.

Because of that, Barbados has a "full-fledged" treaty with the US, which makes transactions conducted by the island's captives - two-thirds of which have US-based parents - more transparent, and therefore less risky. The Cayman Islands had no tax treaty with the US, and Bermuda had only a "limited" treaty, said Mr Evans.

Barbados also had an effective tax treaty with Canada, he added, which had allowed it to capture 60% of the total captive business originating in Canada.

Those tax treaties - and others involving countries in Latin America and elsewhere - have gained for Barbados a reputation as a sophisticated domicile that can offer crucial guidance through the complex web of international tax law. It also allows companies based in those countries with Barbados tax treaties to be confident that their business operations on Barbados are not going to run up against unforeseen tax problems, explained Mr Evans.

Reputation is everything among financial services domiciles - and it helped Barbados get removed from the FATF's `blacklist' of domiciles with questionable financial practices, said Mr Evans. "We had resolved all of that," he said. "We're the only domicile deleted from the list without having to make major changes in our infrastructure or regulations."

By David Pilla David Pilla is senior associate editor, BestWeek.