How does a captive's domicile affect what it can invest in?
Insurance is regulated locally, so the rules follow the domicile.
According to Jack Meskunas, Managing Director at Oppenheimer, insurance in the United States is run at state level rather than federally, so there is no single federal capital requirement. Each domicile sets its own rules and applies them with a lighter or heavier hand. He draws particular attention to the distinction between an investment being allowable and being treated as relevant.
Because insurance is regulated at state level, Meskunas says a captive domiciled in one place operates under different rules and a different regulator than one domiciled elsewhere. He names Vermont, Connecticut, North Carolina and Bermuda among the larger domiciles by way of illustration.
The practical consequence is that the same portfolio can be treated differently depending on where the captive sits.
Key takeaways
Insurance is regulated at state level, so capital and investment rules follow the domicile.
An investment can be allowable while receiving no regulatory credit as a relevant asset.
Regulatory styles differ, but the shared concern is that the insurer survives to pay claims.
The distinction he keeps returning to is allowable versus relevant. Using Bermuda and Bitcoin as his example, he describes a regulator permitting the holding while giving no credit for it, so the asset counts as though it were not there.
He contrasts regulatory styles rather than ranking them. In his account some domiciles ask to see the investment plan and asset allocation model and may push back on an equity weighting they consider too high, while others want to know the plan makes sense without dictating allocation. What every regulator wants, he says, is confidence the insurer will still be there to pay claims.
From the conversation
Jack Meskunas
Managing Director, Oppenheimer
“you are allowed to do it, but it is not considered a relevant asset”
This answer begins at 17:00 of the full conversation. Watch or listen to the whole thing.
The views expressed are those of the featured guest, drawn from a recorded conversation, and reflect their own professional experience. Nothing on this page is insurance, tax, legal, or investment advice. Consult your own advisors about your specific situation.
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