New captive owners continued to gravitate towards onshore domiciles in the US and EU in 2012, according to Marsh’s annual captive benchmarking report—Discovering Opportunity in the Shifting Captive Landscape.
The report, released at the 2013 annual RIMS conference, was based on 886 captive insurance companies managed by Marsh. It found that at the end of 2012, 55 percent of companies had onshore captives versus 45 percent domiciled in offshore locations.
According to Marsh the onshore movement could be attributed to a number of factors including, travel cost savings, changing insurance regulations and potential premium tax savings.
The report also highlighted that the market is witnessing a decline in existing offshore captives redomesticating to onshore jurisdictions. Of approximately 1,220 captives under management at Marsh, only 16 redomesticated to a new jurisdiction in 2012.
“With the proliferation of new captive jurisdictions in the US, the economic downturn, and the passage of the Nonadmitted and Reinsurance Reform Act (NRRA), which provides potential tax savings for companies that stay in their home state, we anticipated that more US-based captive owners would redomesticate their offshore captives to the US. That has not happened,” said Arthur Koritzinsky, Marsh’s North American captive advisory leader.
The report also found that the majority new captive owners locating onshore are more likely to be smaller companies.
“We are seeing a huge uptick in interest among smaller companies interested in forming captives, especially section 831(b) captives. There is no ‘one-size-fits-all’ today when it comes to captive formations. The premium spend required to support a captive is attainable by small, midsize, and large organisations,” added Koritzinsky.
