How Irving's Bermuda insurance company piled up millions in offshore tax-free profits
CBC
New Brunswick's billionaire Irving family created an offshore insurance company that allowed them to move millions of dollars in profits out of Canada and into the tax haven of Bermuda, according to leaked documents reviewed by CBC News and Radio-Canada.
The Irving-owned Bermuda insurance company, F.M.A. Ltd., sold insurance premiums to Irving companies in Canada and Bermuda for their marine vessels.
F.M.A. then reinsured major risks to those vessels by paying lower premiums to a non-Irving reinsurance company based in Bermuda.
That allowed F.M.A. to accumulate almost $13.4 million in untaxed income between 1973, when it was incorporated, and 2001, the last year for which CBC News and Radio-Canada have financial statements.
The company's records provide a rare glimpse into a topic that has intrigued New Brunswickers for years: the complex multibillion-dollar financial apparatus — including a $3 billion tax-free trust — that corporate patriarch K.C. Irving created in Bermuda over several decades.
"Under current Bermuda law, the Company is not obligated to pay any taxes in Bermuda on either income or capital gains," says a note that appeared in F.M.A.'s annual financial statements between 1985 and 2001.
F.M.A. was what is known as a "captive insurance" company, an insurer with the same owner as the insured company or assets, allowing that owner to benefit from the insurance profits.
It had no office: its Bermuda address was that of Appleby, an offshore services law firm used by the Irvings. The leaked documents, which come from Appleby, identify no F.M.A. insurance customers other than Irving companies.
Anne McInerney, the J.D. Irving Ltd. vice-president of communications, said in an emailed statement that F.M.A. "has not been active for at least 10 years."
The company turned down an interview request and McInerney did not specify in her email whether a new company was set up to replace F.M.A., but suggested J.D. Irving Ltd. still considers captive insurance to be a useful strategy.
"A captive insurance company was then and continues to be a good business approach to reduce insurance costs and ensure the best possible insurance coverage," she said.
Geoffrey Loomer, a professor of tax law at the University of Victoria Law School in British Columbia, says it's not surprising the Irving family set up a captive insurance firm.
"It's an easy way for a Canadian-based multinational to save some Canadian tax," he said.
"The premiums that they're paying … that's a deductible expense [in Canada], usually. It's income to the Bermuda insurance company. But the tax there is zero."
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