There are several important factors to consider when setting up a captive, including the domicile and structure. Currently there are 29 domiciles in the United States, which includes the District of Colombia. In evaluating the appropriate captive site for your client, be sure to give careful consideration to the following:
- Receptiveness and commitment to captives: The domicile should be committed to captives supported by a dedicated experienced staff. Look at whether there a process is in place to provide funding for captive regulation and how quickly the domicile handles new captive applications. Also, the domicile should have appropriated funds to market the domicile.
- Captive laws with the agility to update these laws. You want a state that modern laws, as the type of captive you have or hope to set up will impact the domicile you choose.
- Capitalization requirements. U.S. domiciles vary greatly, for example, for a cell captive the amount is anywhere from $250,000 to $1 million or more.
- Taxation requirements. Tax rates vary by U.S. domiciles from the rate itself to the premium cap to which tax applies. Examine closely those with low tax rates but high fees.
- Regulation receptiveness and efficiency. When looking at a domicile’s regulations, consider whether there has been a consistent, positive attitude towards captives. Does the regulatory environment shift when the domicile’s chief regulatory changes? Have captive laws been consistently interpreted and applied? Is there a commitment to be among the top captive destinations? Is there an active association that serves the interests of captive owners?
Also, review the rate of growth for captives in the domicile. This is an indication that the resources and commitment are there for increasingly more companies to establish captives in the state.
Caitlin Morgan specializes in providing Captive solutions, and is co-founder of Constitution Insurance Company, a Protected Cell Company (PCC) located in Tennessee. The Volunteer State, although a fairly new entrant to the captive world, is committed to becoming a leading captive domicile with legislation passed each year that updates its regulation and makes the state increasingly more attractive to businesses. In fact, today it is a top captive domicile and has had tremendous growth in the number of captives licensed since 2011. For more information about our Captive Solutions, please contact us at 877.226.1027.