The State of Delaware recently trumpeted the news that it has become the sixth largest captive insurance company (CIC) domicile in the world and the third largest captive domicile in the U.S. Delaware’s announcement is significant because it highlights the “domicile war” currently underway. The “domicile war” is great news for small and medium size business owners who are considering owning their own insurance company. The “domicile wars” of the past have driven down the costs, capital requirements and regulatory paperwork necessary to stand-up and operate a captive insurance company. This has served to level the playing field between small companies and large corporations.
The press release by the State of Delaware is titled “Insurance Commissioner Karen Weldin Stewart Announces Continued Growth In Delaware’s Captive Program.” The article notes “Despite facing increased competition due to the growing number of captive insurance domiciles, Delaware grew its number of captive insurers in 2013. The year-end 2013 numbers are 298 licensed captives with 266 being active. As of year-end 2012, Delaware had licensed 212 captive insurers with 192 being active. Delaware experienced a 40 percent increase in licensed captives in 2013.”
Commissioner Stewart also noted, “Delaware service providers, such as attorneys and accountants, are providing services to the captive industry at a greater rate than at any other time in the department’s history. This shows that the captive bureau is meeting, and even exceeding, its statutory mission of expanding economic development.”
A captive insurance company is a full insurance company, primarily formed to insure the risks of one or more related companies. As such, captives are typically owned by the entities that they insure or by the business owners of the entities they insure. They are usually formed by businesses that wish to better manage the cost and administration of their insurance coverage. The article noted that,
“In 2005, the Delaware General Assembly passed House Bill 218, modernizing Delaware law regarding the formation of captives and positioning Delaware to become a home to the growing number of captive insurance companies being created by companies worldwide. Delaware’s sophisticated corporate laws, judiciary and financial infrastructure make it the preeminent jurisdiction for business. These benefits are extended to captive insurance companies through the Delaware Captive Insurance Program.”
To read the entire press release by the State of Delaware, click here.
The first “domicile war” began in the 1990s when Vermont Governor Howard Dean decided to undercut the State of New York to become the premier captive domicile. Vermont offered lower start-up costs and lower capital requirements. Hundreds of mid-size businesses flocked to Vermont to set up their own CICs. Vermont is the number one captive domicile in the world to this day.
CIC Services, LLC is a small business champion. We have been helping small and mid-size business owners take advantage of the “domicile wars” since 2005. Contact us to discuss the possibility of owning your own insurance company.