This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. Find out more here.  
 

Onshore Domiciles Attract Captive Formation

Friday, May 6, 2011

Companies are increasingly looking to onshore US domiciles when choosing to form captive insurance firms, the aggregate premium levels of which have increased substantially, according to a new report by the insurance broker and risk adviser Marsh.

Published on May 2, the report, titled "Trends and Performance – 2011 Captive Benchmarking" states that, despite unprecedented economic challenges, captives have performed well. Conducted annually, this year's report takes the angle of a retrospective, reviewing the performance of captives during a decade that contained the September 11 terrorist attacks and what Marsh calls the "Great Recession of 2008 and 2009". It focuses on the activities of over 750 of Marsh's captive clients - primarily of the single-parent variety - and is based on figures as of December, 2010.

In particular, trends from 2007 to 2010 were examined, with the report identifying a relative consistency in the number of captives being offset by an increase in aggregate premium levels across all geographies and most industry sectors. The combined force of the US and Canada ensured these jurisdictions retained their place at the head of Marsh's geographical break down, although the UK and Ireland did see a larger proportional increase in the size of their captives' premiums. The retail and consumer products sector provides the largest annual average gross written premiums, recording a large leap in these levels, a jump almost matched by that in the financial institutions sector, which comes second in the list.

This trend, the report states, is indicative of the desire to determine how a captive's maximum creativity, efficiency and effectiveness may be established as companies implement risk management and financing strategies. Moreover, according to Michael Cormier, Global Captive Solutions Practice Leader, captives have performed exceedingly well, while the reinsurance and insurance markets have not necessarily followed suit. Despite lower investment returns, captive owners' equity is seen to have increased, which Marsh takes as an indication that owners did not deplete capital during the economic downturn.

Cormier added that: “Moreover, the financial stability and claims-paying ability of captives generally improved during the four-year period. This indicates that rather than using captives as a money-saving vehicle when traditional insurance costs rise, owners are viewing their captives as efficient and effective long-term risk management and risk financing solutions”.

The report also found that financial institutions account for approximately one-fifth of all captives surveyed, with property and general/third party liability representing the two most popular insurance classes for captives.

Perhaps the most important finding is the identification of a trend towards a preference for onshore US domiciles and a move away from the British Virgin Islands in particular. Bermuda remains the largest captive domicile, in terms of sheer numbers, yet it did experience a slight fall in numbers. Hot on its heels is the Cayman Islands, but it too suffered a similar dip in its volume of captives. The British Virgin Islands recorded the most dramatic losses, its captive numbers reducing from 285 to 219 in 2010.

It is notable, however, that Marsh observes that, of its 20 largest domiciles, 11 are now located onshore, with almost all of those in the US experiencing growth. Vermont sits top of the list, nearing 600 in total. Vermont's nearest competitor, Utah, lags a considerable distance behind, not quite reaching the 200 mark. Hawaii, South Carolina, and the District of Colombia round out the top five US domiciles.

Mailing List

Click here to manage your mailing list preferences, or view our privacy statement.


The Report

Offshore Trusts Guide: Introduction

The History of Offshore Trusts
Development of Professional Competence in the Jurisdictions
What Future for the Trust?
The New Age of Transparency
The Swiss Association of Trust Companies
The Society of Trusts and Estates Practitioners

Offshore Trusts Guide: Jurisdictions

Bahamas

Bahamas: Legal Framework and Formation Rules and Fees
Bahamas: 2006 Private Trust Companies Legislation

Barbados

Barbados: Legal Framework and Formation Rules and Fees
Barbados: Supervisory and Licensing Regime and Fees

Bermuda

Bermuda: Legal Framework and Formation Rules and Fees
Bermuda: Supervisory and Licensing Regime and Fees

British Virgin Islands

British Virgin Islands: Legal Framework and Formation Rules and Fees
British Virgin Islands: Special Trusts Act 2003
British Virgin Islands: The Trustee Act 2003
British Virgin Islands: :Supervisory and Licensing Regime and Fees
British Virgin Islands: New Laws on Private Trust Companies
British Virgin Islands: New Private Trust Company Regulations

Cayman Islands

Cayman Islands: Legal Framework and Formation Rules and Fees
Cayman Islands: Supervisory and Licensing Regime and Fees

Cook Islands

Cook Islands: Legal Framework and Formation Rules and Fees
Cook Islands: Supervisory and Licensing Regime and Fees

Cyprus

Cyprus: Legal Framework and Formation Rules and Fees
Cyprus: Supervision, Licensing and Tax

Gibraltar

Gibraltar: Legal Framework and Formation Rules and Fees
Gibraltar: Legislation, Regulation and Supervision

Guernsey

Guernsey: Legal Framework and Formation Rules and Fees
Guernsey: Trusts Law 2007

Isle of Man

Isle of Man: Legal Framework and Formation Rules and Fees
Isle of Man: Supervisory and Licensing Regime
Isle of Man: Uses Clients and Tax Treatment

Jersey

Jersey: Legal Framework and Formation Rules and Fees
Jersey: Supervisory and Licensing Regime
Jersey: Trusts Amendment Act 2006
Jersey: Foundations

Liechtenstein

Liechtenstein: Legal Framework and Formation Rules and Fees
Liechtenstein: Regulation Supervision and Transparency
Liechtenstein: Characteristics of Liechtenstein Trusts
Liechtenstein: Foundations

Madeira

Madeira: Legal Framework and Formation Rules and Fees

Malta

Malta: Legal Framework and Formation Rules and Fees
Malta: The Trust and Trustees Act 2004

Mauritius

Mauritius: Legal Framework and Formation Rules and Fees
Mauritius: Characteristics of the 2001 Trusts Act
Mauritius: Additional Provisions of the 2001 Trusts Act
Mauritius: Tax Treatment

Monaco

Monaco: Legal Framework and Formation Rules and Fees

Nevis

Nevis: Legal Framework and Formation Rules and Fees

Panama

Panama: Legal Framework and Formation Rules and Fees
Panama: Requirements for Acting as Trust Company in Panama

Seychelles

Seychelles: Legal Framework and Formation Rules and Fees

Turks & Caicos

Turks & Caicos: Legal Framework and Formation Rules and Fees
Turks & Caicos: The Voidable Dispositions Ordinance

Vanuatu

Vanuatu Legal Framework and Formation Rules and Fees




Latest News

South Africa Legislates For Budget Tax Changes
20/7/2017
The South African Revenue Services and the National Treasury on July 19 released for public comment draft legislation that would give effect to the tax proposals announced in the February Budget.

Australia Improves Financial Services Tax Regime
19/7/2017
The Australian Government has moved to clarify the tax treatment of foreign investors, following concerns over the practical operation of the Investment Manager Regime and the new tax system for managed investment trusts.

Jersey Proposes Infrastructure Levy
23/6/2017
Jersey is consulting on the introduction of a land development charge, to be called the Jersey Infrastructure Levy.

ADGM Establishes REIT Regime
20/6/2017
Abu Dhabi Global Market, the low-tax international financial center, has introduced a private real estate investment trusts regime.

Jersey Research Highlights China HNW Succession Issues
15/6/2017
Jersey's financial services promotion agency, Jersey Finance, has published new research on the key challenges facing wealth management practitioners working with China's wealthiest individuals.

NZ Foreign Trust Numbers Expected To Fall
27/6/2017
Fewer than 70 out of 11,645 New Zealand foreign trusts have reregistered following the introduction of tougher disclosure and eligibility requirements, with only three weeks left to go before the final deadline.

Abu Dhabi Tax-Free Zone To Launch Foundations
2/6/2017
Abu Dhabi Global Market, the low-tax international financial center, is seeking feedback on its proposal to allow the formation of "foundations," a trust-like entity widely used in civil law jurisdictions.

IoM Consults On Funds Sector Rules
22/5/2017
The Isle of Man Financial Services Authority, which supervises the island's financial services sector, is seeking feedback on draft guidance dealing with the governance of collective investment schemes.

Dubai Tax-Free Zone Seeing New Business From India
19/5/2017
The Dubai International Financial Centre, the leading financial hub in the United Arab Emirates, has become an increasingly popular destination for Indian banks, financial institutions, and fund managers, the zone has said.

Guernsey Issues Warning On 'Sark Company Registry'
18/5/2017
The Guernsey Financial Services Commission has issued a warning concerning an entity named "Sark Company Registry," while investigations are ongoing.

Abu Dhabi Free Zone Hopes To Attract Venture Capital Firms
15/5/2017
Abu Dhabi Global Market, the low-tax international financial center, has unveiled a regulatory framework for managers of venture capital funds.

Australian Budget Targets Housing, Tax Compliance
10/5/2017
Australian Treasurer Scott Morrison's 2017 Budget focused on measures to cool the housing market and crack down on tax avoidance.

Australia Delays Action On Stapled Structures
2/5/2017
The Australian Government has decided to extend a review into the taxation of stapled structures. It will not tackle the issue at the upcoming Budget.

BVI Financial Firms Need To Develop New Niches
13/4/2017
BVI Finance, the financial services industry promotional agency, has said the industry must actively adapt to target new opportunities and promote new offerings internationally.

ADGM Revises Pooled Fund Capital Req's
11/4/2017
Abu Dhabi Global Market, the low-tax international financial center, has revised the capital requirements applicable to managers of collective investment funds, with effect from April 10, 2017.