Our team has helped over 500 privately held businesses in the US select domiciles for captives created to insure their business operations. Our domicile experience is second to none. Our Managing Director was the only non-domicile regulator speaking on the “New Wave Domicile” session panel at the first US based international captive insurance conference several years ago in Chicago.
Domicile Selection is Mission Critical
Most people, including most captive managers, have great prejudice when it comes to domicile selection. Preference should be given to the home state of the main operating businesses to be insured if that home state licenses captives and has a full-time cost effective regulatory team and structure. Many considerations are involved and most captives are not formed in the home state of main insured businesses for a variety of reasons.
Captives can be formed in any state (or country); they do not have to be formed and licensed where the owners reside or where the main insured businesses are headquartered.
Despite over 30 US states now licensing captives, and even more foreign domiciles to chose from, we steer new captive business to a handful of select domiciles in the US and offshore on a case by case basis.
Our Experience to Guide Your Domicile Decision
As mentioned, our Managing Director was the only non-domicile regulator sitting on the New Wave Domicile Panel at the 1st international captive conference held in the US a few years ago (conducted by London based Captive Review), and he is the author of the book “Navigating Captive Insurance Companies – Storm Proof Your Risk Vessel,” which dedicates a long chapter to domicile selection considerations.
Domicile Landscape Background
A few short decades ago, all captives were formed outside the US. Since then, over 30 US states enacted captive legislation and now license and regulate captives. Each year new states authorize captives. A handful of states have done a remarkable job of growing their base of licensed captives despite regulation hurdles in the US trending upward, and a continued push by government and quasi-government bodies in the US and in international circles towards a one size fits all model.
Core Factors to Consider
When evaluating domicile options, here are the main factors we generally consider, beyond the general reputation of the domicile, before making a domicile recommendation to clients:
- particular business plan of your captive and the lines of coverage it wants to offer
- application and renewal fees and any taxes imposed by a domicile
- requirement and costs of application examination, and frequency, scope and costs associated with periodic regulatory examinations
- speed of licensing process at the domicile and whether they issue conditional certificates of authorization/registration as of the filing date or some future unknown date
- service level and response time of domicile staff on issues that arise
- technology competency and related procedural practices of domicile
- requirement for physical meetings within the domicile
- pre-application procedural requirements
- investment and distribution limitations and procedures
- captive loan allowance and restrictions policies
- application packaging documentation requirements
- policy language and terms (restrictions and requirements)
- authorized and required service providers
- flexibility of ownership structure and implication on licensing types
- captive structures authorized
- capital and surplus requirements and alternative capital finance methods allowed
- reporting requirements
- independent assurance requirements
- other nuances of domicile laws, regulations, and rules bearing on the captive design and business plan options
- domicile staff depth, experience and personalities
- domicile history and reputation
- insurance department staff discretionary authority range and practices
- quality and number of local service providers
- depth of other types of insurance industry players and resources familiar with the domicile
- risk and level of penalty exposure for noncompliance
- implications on tax reporting and elections
- exposure to other taxing bodies capacity to levy and enforce excise, self procurement or other taxes
- redomestication, end of life and captive wind-down considerations
For more information on captive domiciles, including charts of leading domiciles, minimum capital requirements, interviews with domicile regulators and other proprietary information of Captive Experts LLC, click here.