Delaware’s rise as a key player in captive space is no accident, with its robust regulatory framework, strategic location, and commitment to responsive service making it a top choice for businesses
In the fall of 2023, Delaware — one of the smallest states in the US — reached a significant milestone: over two million business entities now call it their corporate home. From Fortune 500 companies to newly formed captives, Delaware has become a preferred location for companies looking to integrate their businesses and optimise operational efficiencies.
Known for its business-friendly policies, including low-cost tax and simplified corporate laws, “the First State is a great first choice for captives through the intentional building of a first-class regulatory structure,” says Delaware insurance commissioner Trinidad Navarro.
Delaware’s corporate laws, often referred to as the “gold standard,” play a major role in attracting captives. Building upon this legal foundation, Delaware offers predictability, stability, and respected courts, creating an environment where businesses feel secure. Stephen Taylor, director of Delaware’s Bureau of Captive Insurance, states: “International companies can take advantage of Delaware’s excellent corporate and captive laws.”
Additionally, the state's proximity to financial centres like New York, Philadelphia, and Washington DC, also provides captives with easy access to expert legal, actuarial, and financial services.
Why Delaware?
As the global financial market continues to harden, more companies are turning to captives as a viable alternative to traditional commercial insurance. Among the fastest-flourishing captive domiciles in the US, Delaware has experienced a significant increase in its captive insurance industry, growing from just five licensed entities in 2005, to 670 by the end of 2023.
A notable trend in Delaware’s captive formations is the rising demand for specialised coverage and difference in conditions policies. In response to tightening traditional markets, companies are looking for more tailored solutions that provide broader protection. Rather than simply adjusting to these conditions, Delaware is taking steps to position itself at the forefront of innovation in the captive space, setting the pace for future developments. "We have kept a keen eye on increasing needs for cyber-related coverages and business interruption insurance, particularly in response to global business challenges like supply chain disruptions,” says Navarro.
This forward-thinking approach has led to the development of Delaware’s Side A Directors and Officers (D&O) captive coverage, which is becoming increasingly important as companies face new risks related to ESG; diversity, equity, and inclusion; privacy and other fiduciary and technological responsibilities. As businesses grapple with emerging challenges in these areas, the commissioner anticipates a growth in demand for such specialised D&O coverage.
Delaware’s innovative approach extends to newer areas such as multifamily real estate and property coverage, and the state is exploring parametric reputation risk coverage as another option for captives. “Insurance is meant to be like a wall protecting companies from risk, but all too often we see cracks in coverage form,” Navarro adds. “So, we are constantly looking for those gaps so we can expand into them and ensure full protection for businesses. Our captive team is especially poised to do so because of our unique regulatory structure and expertise as a leading domicile.”
Central to Delaware's success is its Bureau of Captive and Financial Insurance Products (BCFI), a specialised division that offers personalised service and expert guidance to captive owners and managers. Navarro notes: “Our mission across all divisions is to protect, educate, and advocate for the insurance consumer. When a resident, or business, or captive, or carrier calls, we answer and we assist.”
This hands-on approach, backed by a financial analyst assigned to each captive, ensures that Delaware remains responsive to the unique needs of its captive clients. While other domiciles may divide regulatory staff based on premium volume or lines of coverage, which can dilute the focus on captives, Delaware’s dedicated focus allows the team to stay deeply knowledgeable in captive-specific regulations. “We are always here to help, paying attention to the big picture and to the small details. That’s what I like to call the Delaware Department of Insurance difference,” the commissioner emphasises.
The First State’s proactive strategy has contributed to the rising number of captives. The jurisdiction offers a wide array of formation structures, including cell captives, series LLCs, and conditional licensing programmes. Taylor points out a recent example: “We have licensed a mixed series special purpose captive structure, with both incorporated cells and series captives, offering additional flexibility to owners.”
This adaptability has positioned Delaware as a prime destination for businesses seeking solutions to evolving risks, such as cyber threats and climate-related exposures. ”We also are looking at proposals for parametric insurance, as well as the financing of legacy environmental liabilities,” says Taylor.
Kerrie Riker-Keller, chief compliance officer at Intuitive Captive Solutions, highlights Delaware’s conditional licensing process as a key factor that sets its regulatory framework apart from other popular domiciles. "The day a company submits all required materials for an insurance licence, it can begin writing insurance," she explains. "While still subject to state approval, the process is well-defined and allows companies to meet captive coverage deadlines, often aligned with traditional market placements."
Delaware offers additional advantages, such as not requiring captive managers to have a physical office in the state and allowing telephonic meetings with the resident director. These flexible policies, Riker-Keller notes, "help both the captive manager and the client minimise costs, travel time, and expenses, all in the best interest of the captive owner."
She adds: "The Delaware team understands that captives are both the insurer and the consumer, so ensuring long-term financial sustainability is in everyone's best interest."
Delaware 2.0
The past few years have seen a surge in captive formations, driven largely by tightening insurance markets and the need for specialised coverage. Delaware has been proactive in adapting to these trends. The Delaware 2.0 Initiative, launched in 2023, reflects a concerted effort to streamline processes, modernise regulations, and improve services for captive owners. The initiative provides clear guidelines for new applications and routine requests, which has significantly increased the state’s capacity to handle growing demand.
One key improvement includes revised guidance to streamline the formation process for captives, particularly for companies seeking Side A D&O coverage. This move aligns Delaware with the growing demand for corporate governance protections in response to evolving risks like ESG compliance and data privacy concerns.
Delaware has also introduced more flexible capitalisation requirements. New policies now permit the use of brokerage accounts in certain circumstances, expanding the range of capital locations through legislative updates. The state has recalibrated its capital and surplus levels, placing greater emphasis on adverse case projections provided by consulting actuaries, which gives smaller captives more leeway in meeting financial requirements.
Furthermore, the Delaware 2.0 initiative has streamlined the approval process for new licences, business plan changes, and dividend distributions, reducing the time it takes for captives to get up and running. This speed-to-market focus is crucial for businesses operating in the current volatile insurance market, where timing can make a significant difference in managing risk effectively.
Taylor highlights another major change aimed at smaller captives: “We recently modified and streamlined our procedures for conversions, making it easier for smaller captives to transition into independent pure captives.”
These changes reflect Delaware’s commitment to making its domicile accessible to a wider range of businesses, from large corporations to emerging ventures.
From the perspective of a captive manager, Riker-Keller emphasises the importance of the initiative, noting: "This provided captive managers and clients with standardised expectations for materials being reviewed and guaranteed responsiveness from the department."
“Delaware also offers a stable team of analysts that are knowledgeable and responsive to captive manager requests, which pales in comparison to many other domiciles that have been experiencing staff turnover.”
Economic impact
The captive insurance industry in Delaware has proven to be a vital contributor to the state's economy, offering critical financial and risk management solutions for businesses. Captives provide companies with a cost-effective means to mitigate their risks, often delivering superior financial terms compared to traditional insurance markets.
In addition to providing these crucial services to businesses, the sector also generates significant revenue for the jurisdiction. Through its operations, the BCFI, which regulates captive insurance, self-funds, thereby reducing the overall taxpayer burden. The industry’s contributions extend beyond direct financial support, with captives driving job creation and boosting the state’s GDP.
A study conducted by the University of Delaware’s Center for Applied Business and Economic Research underscores the importance of the captive sector. The research revealed that captives contributed US$359 million to Delaware’s economy and supported 2,537 jobs. Much of this impact is concentrated in finance, banking, investment activities, and professional services — fields where Delaware has long maintained a competitive edge.
Delaware reciprocates this economic benefit with consistent support and promotion of its captive industry. The Delaware Captive Insurance Association (DCIA) plays an important role in this, working closely with the bureau to advocate for the industry at both the national and international levels. Through participation in trade conferences and the development of industry legislation, the DCIA ensures that Delaware maintains its position as a top domicile for captives.
The global reach of Delaware's captive industry continues to expand as more international businesses look to re-domicile their captives onshore. Delaware's strong legal foundation, business-friendly environment, and proximity to major financial centres make it an attractive choice for foreign captives. Taylor says: “2023 was a great year for expanding the Delaware captive programme. We licensed 43 new captives during the year. Some of those new captives came from new market participants, which is exciting to see.”
Going forward, Delaware’s captive programme is driven by a clear mission: to keep “evolving to meet the new risk management needs of the future for business,” as Taylor states. The goal is simple — to provide companies and captives with the tools they need to not just manage risks but thrive in an unpredictable world.
“We believe the captive industry will see stability as quality captives prove effective in addressing gaps in coverage, providing more reasonable and predictable pricing, and in their owner’s enterprise risk management programme and providing risk mitigation financing,” he notes. “In short, Delaware’s captive bureau will continue to innovate and attract many complex and innovative captive insurance programs to meet the needs of businesses today and tomorrow.”
Supported by a responsive regulatory framework, the state continues to offer a stable, flexible environment for captives to thrive. Delaware’s ability to evolve ensures it will remain a key player in the captive industry, ready to meet the challenges of a changing risk landscape while maintaining its status as a preferred home for companies of all sizes.
