How to Choose a Domicile
 

A captive domicile is a jurisdiction that has specific regulations applying to captive insurance companies. There are over 30 captive domiciles worldwide including many US states that have passed a captive insurance company law. The leading domiciles for captives with US parents are Bermuda, Vermont, Cayman Islands, Hawaii, and South Carolina.

The selection of a captive domicile is not just a question of comparing the captive laws for each domicile. The applicable regulations are just one of a number of factors that go into domicile selection.

Regulations

Differences in capitalization requirements, premium taxes, investment restrictions, discounting of reserves, reporting and meeting requirements will all play a role in choosing the appropriate domicile. Regulations affecting the parent organization can also be a factor. For example, employee benefits under ERISA may only be written through a domestic captive or US branch of a foreign captive.

Tax

Premium tax rates vary by domicile/State, although captive premiums are typically taxed at a much lower level than premium paid to traditional insurers.  The impact of Federal taxes will be a factor in deciding between onshore and offshore domiciles.

Infrastructure

It is important that there is an established infrastructure to support the captive. This applies to both the availability of specialist service providers and a regulatory body that has  sufficient resources dedicated to captives in that domicile.

Logistics

Many captive domiciles are in "out-of-the-way" locations. The ease of travel to the domicile and the communications infrastructure of the domicile are important considerations. Often a captive can gain more visibility and senior management involvement if it is physically domiciled closer to its parent.

Perception

Some domiciles have built a reputation for a particular type of captive or industry. Being in this specialist environment can help in the operation of the captive. Conversely an insured would want to avoid certain domiciles that could create additional scrutiny on the legitimacy of the business and reasons for its formation.

 

The SRS Guide to Captives contains historical information that may no longer be accurate. It is for informational purposes only and does not constitute advice. No reliance should be placed on the information contained within this portion of the site and guidance should be sought from SRS regarding captives and alternative risk solutions. No information contained in the SRS Guide to Captives may be reproduced or copied in any format without the express permission of SRS.

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