The president of the foundation responsible for insuring Harvard-affiliated doctors this week said he is considering moving an off-shore subsidiary of the University back to the United States.
Daniel Creasey, president of the Risk Management Foundation, said the Controlled Risk Insurance Company (CRICO), which is based on the island of Barbados, might be moved to a state with a law permitting captive insurance companies. Such companies, which allow hospitals and universities to write insurance policies for their own doctors, do not have legal standing in Massachusetts.
"We're exploring options to domesticate the group," Creasey said.
The CRICO on Barbados is one of two such companies maintained by Risk Management off-shore. There is also a Controlled Risk Insurance Company with headquarters on Grand Cayman in the Cayman Islands. Both companies are Harvard subsidiaries.
Harvard established the Cayman CRICO in 1976 and added the Barbados CRICO in 1986 in order to take advantage of a favorable tax treaty between the U.S. and the island. But the Barbados company has been dormant since the treaty expired in March 1989, and Creasey says he is looking to move it.
Creasey said he might attempt to have the Barbados CRICO designated a "surplus lines carrier," which means it could gain legal standing in the U.S. to write policies.
"The mechanism of how we package it--where we put the money--is relatively unimportant," Creasey said. "Whatever happens with Barbados, I think we would still continue to use the off-shore company in the Caymans."
Creasey said the primary reason for having the companies off-shore is that they are then exempted from federal income tax. He said both CRICOs do pay federal taxes on their premiums.
Creasey criticized the Massachusetts government for failing to pass a law that would make captive insurance companies legal in the commonwealth.
"It's not legal to have a captive insurance company [in this state]," said Creasey. "Massachusetts hasn't seen fit to pass a law."
"It'd be much easier to organize in Vermont, which has a good captive insurance law," he added.
Hamish McClurg, an attorney in Bridgetown Barbados with responsibility for the CRICO there, declined to comment on the company last week.
Dwight Merren, an administrator for the Midland Bank Trust, which administers the Cayman Island CRICO, said he did not believe a
"This is a great way of obtaining taxadvantages," Merren said.
Indeed, a review of the tax records of bothcompanies shows that each are in good financialhealth. The Cayman CRICO, the more prosperous ofthe two, had more than $50 million inundistributed earnings and nearly $155 million inreserve for outstanding claims.
Still, Harvard's maintenance of two off-shorecompanies has prompted criticism from a smallgroup of activists in the Mission Hill area nearthe Medical School.
Kathryn Brookins, a Mission Hill resident andeditor of the Mission Hill News, suggested in aninterview last month that the companies might beset up off-shore in an effort to escape scrutiny.
Creasey rebuffed that suggestion.
"We're not doing anything that would warrantscrutiny," he said