What do first time captive owners get wrong about being regulated?
You now own a regulated entity, and some decisions need permission first
Travis Wegkamp volunteers the thing he watches new owners struggle with, unprompted. The people and companies that own captives are usually not used to operating inside a regulated industry. In their own business an opportunity appears and they take it, change course, move. A captive does not work that way, and he says making owners aware of that is one of the biggest issues regulators face. His advice to prospective owners is to hold the distinction between the company they run daily and the regulated entity they now also own.
Wegkamp offers this without being asked, in the middle of a conversation about something else, which is usually a sign that it is the thing genuinely on a person's mind. He frames it as one of the key difficulties of regulating captives, and as part of why the captive manager exists as a role at all.
The root cause he identifies is not carelessness. It is habit. The entities that own captives are typically not used to a regulated industry, so the reflexes they built running an unregulated business carry over.
Key takeaways
Wegkamp says captive owners typically come from unregulated businesses and carry those reflexes into an entity that does not allow them.
He names owner awareness of the regulated posture, not any technical issue, as one of the biggest problems regulators face.
His advice is to hold the distinction between the business you run daily and the regulated captive you also own, where some decisions need prior approval.
He describes those reflexes concretely: an investment opportunity comes along, and the answer is sure, let's invest in that, let's do this, let's change course here. In an operating company that speed is a virtue.
Inside a captive, some of those same decisions need approval, and often approval before the fact rather than disclosure after it. Wegkamp says getting owners to understand that is one of the biggest issues the department faces, which is a striking thing to name ahead of any technical problem.
From the conversation
Travis Wegkamp
Director, Captive Insurance Division, Utah Insurance Department
“You may not be selling to the public, but you're still”
Transcript
Read the full transcript 6 turns
Travis Wegkampthat's, one of the key difficulties of, regulating captives. And one of the reasons we have the captive manager is the, individuals or the entities that own these captives are, aren't typically used to the regulated industry. And so they, they're used to, you know, an investment opportunity comes along. Sure. Let's, invest in that. Let's do this. Let's change course here, what
Travis Wegkampnot. And the thing that's kind of toughest to kind of sometimes wrap their heads around and, one of the biggest issues that we face as regulators is making them aware and understanding the fact that this is a regulated entity. You've got to get approval for certain things and oftentimes it's got to be that prior approval. So, if I could offer advice to any potential owners out there, it would be to, understand that difference between your,
Travis Wegkampcompany that, you run daily versus your captive. That's, regulated entities. You know, you know
Host, yeah, insurance is, I guess, one of the more regulated industries in the country and captive, you're basically owning your
Travis Wegkampinsurance companies, it
Travis Wegkampmakes sense. Yeah, and, that applies to captives as well. You may not be selling to the public, but you're still
Citations
Sources
- Captive, Utah Insurance Departmenthttps://insurance.utah.gov/captive
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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