What should you do before you form a captive?
Interview the providers, build the governance, take the tax advice, then apply
Fenhua Liu's advice is about what happens before an application exists. Start from the department's published list of captive service providers, managers, CPAs and actuaries, and interview them rather than taking the first name offered. Make sure the captive is being set up as a genuine risk management solution aimed at long term success, develop the corporate governance to support that, and negotiate with providers on both service quality and cost. She also suggests taking tax advice on whether a captive is right for the business at all.
Liu calls this pre work, and the word is doing something. None of it happens inside the application, and none of it is the regulator's job. It is the part an owner either does or skips, and skipping it is visible later.
The starting point she gives is concrete: the department publishes a list of approved service providers, including captive managers, CPAs and actuaries, and the advice is to interview them.
Key takeaways
Liu says to start from the department's published list of captive managers, CPAs and actuaries and interview them rather than appointing the first name offered.
Negotiate providers on service quality as well as cost, and set the captive up as a long term risk management solution with governance built to support it.
She also advises consulting tax advisers on whether a captive is right for the business before applying.
Interviewing rather than appointing is the actual advice. She frames it as finding the services you actually need, which presumes knowing what those are, and then negotiating with providers on who can deliver the best service at a sensible cost.
Both halves matter. Comparing only on price selects for the thinnest scope of work, which is the trap Utah's director described when he said management fees vary because firms sell very different jobs.
From the conversation
Fenhua Liu
Assistant Deputy Commissioner and Director of Captive Insurance, Connecticut Insurance Department
“they're going to negotiate with the service provider to see who can provide the best services with very high cost efficiency”
This answer begins at 24:03 of the full conversation. Watch or listen to the whole thing.
Citations
Sources
- Captive Insurance Regulation, Connecticut Insurance Departmenthttps://portal.ct.gov/cid/mission-and-divisions/captive-insurance
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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