Are all state captive insurance domiciles the same?
The codes are similar in outline and different in the details each state chose
Travis Wegkamp describes friendly competition between the states rather than uniformity. He contrasts captives with the traditional side of insurance, where the National Association of Insurance Commissioners sets accreditation standards that make domiciles look alike. Captive codes have no equivalent, so each jurisdiction keeps a few features of its own. He then names what Utah chose: no premium tax, a flat annual license fee, and a division that answers quickly.
The comparison Wegkamp reaches for is the traditional insurance market, where accreditation standards produce real uniformity across almost every domicile. Captive divisions have nothing like that. He describes the codes as broadly similar in some areas and slightly different across essentially all the jurisdictions, with each one keeping a handful of distinctive features.
That is the useful frame for anyone choosing where to sit. The question is not whether a state has a captive law, since more than thirty do. It is which of the details that state chose to compete on, and whether those details matter to the captive you are building.
Key takeaways
Wegkamp says captive codes have no accreditation standard equivalent to the one that makes traditional insurance domiciles uniform, so each state keeps its own features.
Utah's choice is a flat annual license fee with no state premium tax, which he calls one of the more unique features of the domicile.
He frames regulator turnaround on business plan changes, loans, investments and dividends as the thing that actually differentiates a division.
For Utah, Wegkamp names cost and responsiveness. There is no state premium tax on captives, only a flat annual license fee, which he presents as one of the more unusual features of the domicile. Cell programmes carry their own flat per cell fee.
He is candid that most other domiciles do charge a premium tax of some percentage, and he does not claim the flat fee makes Utah better for every captive. It makes the cost of the state predictable, which is a different claim.
From the conversation
Travis Wegkamp
Director, Captive Insurance Division, Utah Insurance Department
“There's a lot of similarity in some areas, but each one kind of has a few unique things to kind of make them special and hopefully increase their competitiveness in the market.”
Transcript
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Hostthere are over 30 states with captive laws, and they're all the same, are they all going after the same types of captives, or what makes the states unique and they're the goals to friend
Travis Wegkamp. >> Yeah, I would say friendly competition between the states to grow their captive insurance programs. Unlike the traditional side of things where you have the NEIC, the National Association of Insurance Commissioners, and a accreditation standards for just about every insurance domicile, at least in the U.S., and there's uniformity there, the captive insurance divisions and the insurance code for
Travis Wegkampcaptives is slightly different between essentially all the jurisdictions. There's a lot of similarity in some areas, but each one kind of has a few unique things to kind of make them special and hopefully increase their competitiveness in the market. Utah, in particular, just in general
Travis Wegkamp, has always been a strong business-friendly state that does well with companies, and we've seen that in our captives as well in our captive program. Very cost-effective, trying to be cognizant of the cost of running the captive insurance company. There's no state premium tax charge for captives here in Utah. It's just a flat license fee for a standalone
Travis Wegkampcaptive of technically $7,250 as well as a $250 e-commerce fee. In total, annually, the amount you pay the state $7,500 to have a captive here. That's one of the more unique features of a captive here in Utah. Most will have a premium tax of some percentage there. We do have cell programs as well, and each individual cell would be a $1,000 flat fee as well for those that
Travis Wegkampexist. We've got a very responsive and supportive government here. The governor and our insurance commissioner are very supportive of captives. The legislators in the state are very responsive to changing landscapes and updates and edits to our captive insurance code to help us remain competitive and have that business-friendly approach. In general, I've made it my mission as director for us to be very responsive
Travis Wegkampand quick to respond to captives' needs and their requests for business plan changes, which would be lines and limits, things of that nature, also doing certain related party loans, investments, dividends. Our goal is to be responsive and not have it be the sort of thing where a company puts in a request and they really don't know when they're going to hear back from us
Travis Wegkamp. That is, unfortunately, something that happens with a lot of jurisdictions from what I've heard. But today, I feel we've developed a pretty good reputation of being available and responsive. I think that's one thing that really sets
Citations
Sources
- Captive, Utah Insurance Departmenthttps://insurance.utah.gov/captive
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