Most captives formed offshore
There are about 5,000 captive insurance companies in the world, with most being sponsored by U.S. entities, according to information provided by Capstone Associated Services in Houston, TX, which assists organizations with setting up captives.
Although sponsored by U.S.-based companies, most captives are incorporated outside of the United States, according to Capstone. A captive insurance company may be formed only with the permission of regulatory authorities in the insurer's home territory (known as its domicile), and it is monitored by an insurance commissioner.
Capstone notes that many conventional insurance companies began their corporate existence as captive insurers and grew into large-scale insurance companies, including USAA, Highlands, and American General.
Captives can be domiciled and licensed in a wide number of domiciles in the United States and offshore. Captive insurance companies formed outside the United States or offshore can make an IRC section 953(d) election to be taxed as a domestic U.S. corporation. That designation allows a foreign-based captive to receive the same U.S. tax benefits and treatment as a captive formed in any of the 24 U.S. states with captive insurance legislation.
A foreign-based captive generally has a much lower cost of ownership and a far higher degree of flexibility for its U.S. owners, compared to a captive that is formed in the United States, Capstone says. For this reason, most small captive insurance companies with annual premiums below $1.2 million are formed offshore, according to Capstone.
Source
Capstone Associated Services, Houston, TX. Telephone: (800) 705-4014. E-mail: [email protected]. Web: www.capstoneassociated.com.
There are about 5,000 captive insurance companies in the world, with most being sponsored by U.S. entities, according to information provided by Capstone Associated Services in Houston, TX, which assists organizations with setting up captives.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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