Bermuda is being ruled out as a potential base by many firms forming new captive insurance companies because of high costs associated with the Island.

That is the view of industry consultant Andrew Barile, who said he had noticed a trend of new captives looking elsewhere in the past six months.

However, he added that Bermuda's track record as the world's leading captive domicile meant the Island could still count on attracting the biggest new captives.

Captives are companies set up to insure the risks of their parent corporations — effectively they provide a form of self-insurance.

Mr. Barile, who runs California-based Andrew Barile Consulting Corporation, has worked in the industry for four decades and has been helping captive insurers to set up in Bermuda since the 1970s.

He said he had noticed a trend within the past six months of Bermuda being ruled out early as potential home for new captives.

"Clients are eliminating Bermuda because the costs are much too high for what they want to do with the captive," Mr. Barile said. "The cost of a management company is very high compared to other domiciles.

"Captives setting up with smaller amounts of capital believe they are not going to have enough money to pay the up-front costs in Bermuda."

Such clients were instead looking at alternative locations including Barbados and the Turks & Caicos Islands, Mr. Barile said.

Bermuda has more captive insurance companies than any other jurisdiction, but Mr. Barile believes that growth in future will come in the shape of a smaller number of newcomers with a larger average size.

"Bermuda is still attracting the billion-dollar players," Mr. Barile said. "That's going to be its forte. But you're not going to get hundreds of those per year.

"Nobody's going to put a captive in Bermuda with less than $1 million in capital, because of the high first-year costs.

"That's not necessarily a negative for Bermuda, because it has enough existing business to continue what it's doing."

The Island's captive market had reached maturity stage, Mr. Barile argued, and was now struggling to find enough qualified people to manage more captives.