Magazine article Risk Management

Domicile Choice Is Key to Captive Success

Magazine article Risk Management

Domicile Choice Is Key to Captive Success

Article excerpt

Domicile Choice is Key To Captive Success

To ensure that your proposed captive is successful, it is best to begin by putting together a comprehensive three- to five-year plan. The most important decision to be made when examining the feasibility of your proposed captive is where it will be established.

Malcolm Butterfield, managing director of Betterley Risk Consultants (Bermuda) Ltd., explained, "Since it is already an established fact that a captive is expected to lose money during its first one to three years," Mr. Butterfield said, "your most important concern is to project in which domicile your captive will lose the least amount of capital."

Once you have narrowed the field down to two or three prospects, the next step is to chart their captive legislation for the past three to five years. While three domiciles may now offer fairly equal benefits to your prospective captive, their record of legislation may show that they are actually all moving in different directions with regard to the type of captives they would prefer.

With regard to offshore domiciles, Mr. Butterfield discussed legislative directions in Bermuda, the Cayman Islands, Barbados, Vermont and Colorado. Bermuda, the world's largest domicile with more than 1,300 captive insurance companies, is currently amending legislation to require captives to report more information on classes of business being written, premiums and principal reinsurers. "These amendments are primarily aimed at captives writing third-party business," added Mr. Butterfield.

The near future holds little promise for any significant changes for captives in the Cayman Islands. Overall, the Cayman Islands government is continuing to promote itself as a viable captive insurance center. According to Mr. Butterfield, as its regulatory environment becomes more solidified, the Cayman Islands would seem to be more suited for mature, rather than new, captives. …

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