No matter that captive growth has slowed to a trickle outside the largest domiciles. The appetite of new and existing domiciles for captive business remains unquenched, comment Lee Coppack and Valerie Denney in this domicile overview. New members of the captive enthusiasts' club include the states of New York and Maine, Panama and, in Europe, Gibraltar.


The Bahamas has not been particularly active in promoting itself as a domicile, though this may be changing. Legislation governing external insurance is currently being revised with the goal of significantly increasing its attractions as an offshore insurance centre. The most recent official figures indicate that total premiums written with respect to all foreign risks amounted to $121 million in 1985. The majority of the captives have a US origin and the others are from Europe.

The country has two insurance laws, the Insurance Act 1969 as amended and the External Insurance Act 1983. The Ministry of Finance, through the office of the registrar of insurance, acts as the insurance regulator. All information handled by the registrar is treated in confidence, although but the share register held by the registrar general may be inspected by the public.

The 1983 act reinforces the confidentiality aspect by incorporating a special provision in that regard. However, the government advises that as the Bahamas develops into an insurance centre in its own right, confidentiality will become less and less significant to market participants, who may well find it advantageous to release certain information, such as ownership and/or financial standing.

British Colombia

Captive formation on-shore in Canada remains quiet. Captives are limited to business in the province where they are licensed, although reciprocal arrangements with other provinces are possible. However, only two provinces have captive enabling legislation, British Colombia (BC) and New Brunswick, and there is no federal legislation that would allow captive owners to write nationwide business.

As a result, Canadian owned captives are almost entirely offshore, concentrated in Barbados thanks to a tax treaty. Concern over the future of those tax advantages has encouraged some companies to look closer to home, and the BC authorities report an increasing number of inquiries from organisations about the possibility of redomiciliation onshore. BC now has 16 captives, having licensed one new company during 1997.


Medical malpractice, workers' compensation and product liability remain the principal lines of business written by captives in this domicile, the total number of which is 18.

The 1994 enabling legislation - dubbed "consumer friendly" - contains a provision permitting captives to write or fund employee benefit coverages, setting Colorado apart from many other states.

The Colorado Association of Captive Entities is ever active, with regular monthly meetings. Six captive managers are resident in the state, including Aon/Alexander, RISKCAP and Sedgwick.


Established as a captive domicile in 1988, Georgia can best be described as a slow, but sure developer. Thirteen captives were present at the last count, the most recent of which include APAG Mutual Captive Insurance Company, parented by the US Ambulance Providers Association, and Homebuilders' Mutual Insurance Company, parented by a US construction group.

Georgia captives are primarily association, since the modest initial fees, uniform capitalisation requirements and fairly non-restrictive regulatory environment have a particular appeal to this type of captive. Casualty lines are allowed, except accident and sickness, marine and transportation, property and surety. Personal lines are not.

Three management companies currently operate in Georgia.


Hawaii has continued its gradual development as a domicile with six new captives licensed last year and three deleted, bringing the total to 52. All the sponsors of the new captives are US companies in sectors such as petroleum power, computer and consumer products manufacturing, and healthcare.

State captives are permitted to write property/casualty risks including workers' compensation, auto and general liability, surety, credit life and credit disability and some personal lines. Minimum capital requirements are the same as Vermont.

A great attraction of Hawaii, of course, is the climate, particularly to organisations based in northern parts of the US, which no doubt played some part in the high attendance at the 1998 Hawaii captive insurance forum held in January.

Four bills affecting captive insurance passed into law in Hawaii during 1997. The most important of these allows the state's insurance department to build up a separate administrative fund for captives out of the premium taxes paid by the captives.


Illinois captives can write a full range of property/casualty lines (with the exception of workers' compensation, although this can be reinsured), but cannot write life, personal auto, homeowners or personal risk. Three types of captives are permitted: pure, association and industrial insured.

Despite being regarded as one of the most open markets in the US, Illinois has never taken off as a captive centre. The domicile still has only 10 captives to its credit, although established in 1987.


Although best known for its lobsters and summer homes, including that of former US President George Bush, this most north-easterly of states also serves as headquarters for the major disability insurer, UNUM, and is home to other insurers. The state brought captive legislation into effect in September 1997.

The chief regulator of captive business at Maine's Bureau of Insurance is Joel Thomsen, director of the bureau's financial analysis and self-insurance division. He believes that Maine has a positive reputation for its regulation of self-insured and risk retention groups and hopes to develop a similar working relationship in the captive sector.

Captives licensed in the state will be able to write all property/casualty lines except personal auto and homeowners. Also permitted are credit life and health, marine, surety and title insurance, as well as third party business for organisations within whom the captive parent or affiliate has a contractual relationship.

Maine's capital and surplus requirements for captives are the same as Vermont's: $250,000 for pure captives; $750,000 associations; $500,000 for industrial insureds or risk retention groups. The state is also offering low start up costs, a streamlined application process, low annual fees and a concessionary tax rate on the first $20 million of direct premiums as part of its package to attract new companies and redomiciliations.

New York

New York state is targeting larger enterprises as captive sponsors. Amendments to the state insurance law signed into law last year by Governor George E. Pataki permit organisations with a net worth of at least $100 million to form and operate as captive insurance companies in the state for the first time.

The new law is intended to facilitate the formation of wholly owned pure and group captive insurance companies in New York. It creates a separate regulatory structure in recognition of the distinctions between captive and conventional insurers, including providing a streamlined licensing process for captives.

Almost all types of commercial property/casualty insurance are permitted. Excluded lines are title, mortgage guarantee and financial guarantee insurance. Financial responsibility cover can be written via assumed reinsurance; excess or direct indemnity programmes for these lines may be done on a direct basis. Third party business via assumed reinsurance may be written with the approval of superintendent of insurance.

Capitalisation requirements of $250,000 for pure captives and $500,000 for group captives are the same as other onshore domiciles.


Panama last year enacted legislation to allow the formation of captive insurance/reinsurance companies in its territory. Not surprisingly Panama, as the only Spanish speaking domicile, hopes to take advantage of the increasing liberalisation and economic growth in Latin American markets.

The insurance and reinsurance superintendency is the local regulating authority. Capital requirements are US$150,000 for general lines and $250,000 for long term business. Panama has no taxes on premiums, capital gains or profits, and no double taxation treaties.

Stavros Costarangos, regional director, Qstion Managers Corporation, says there are three authorised and licensed captive management companies in Panama at the moment, with another four seeking authorisation. He says that no captives have been registered to date but that many opportunities are being pursued.

Sn. Costarangos believes the key to developing Panama is educating individuals on risk management and the value of captives. The government is actively promoting the new law together with APARYS, the local risk management association, and the fledgling captive managers.


Professional liability, commercial general liability, errors and omissions, workers' compensation, casualty lines and reinsurance are all permitted, but Tennessee's captives continue to focus on serving the medical professions. Personal lines and employee benefits are not permitted.

Tennessee has been in the captive business for 20 years, but has failed to make a significant mark, losing out to more aggressive competitors such as Vermont. Thirteen captives are currently registered.

Turks and Caicos Islands

In the insurance world, TCI has a particular niche as a centre for credit life insurance. By the end of 1997, there were 1,994 credit life companies licensed, an increase of 139 over the year or 7%. There were also eight new captive licences issued, bringing the total number of TCI captives to 72 from 64. Of these, 68 were active at 31 December 1997.

Superintendent of insurance for the TCI, Colin Holder, comments that captives licensed during 1997 showed a higher level of capitalisation. Seven of the sponsors of new captives are North American based and one from the United Kingdom. He says warranty type cover, life related and higher layer excess liability covers are the classes of business most frequently written by TCI international companies.

No changes are planned in TCI legislation or regulation affecting captives during the year, except for legislation to impose penalties for the late submission of financials and other statutorily required documents, according to Mr Holder.

United States Virgin Islands

The only onshore captive jurisdiction with offshore advantages, the USVI currently hosts eight captives, one of which was admitted last year.

Three types of captive can be formed: single parent, industrial insured and association. These may be used to write all lines except motor vehicle and homeowners insurance. In particular, as USVI officials are always keen to stress, captives can provide employee benefits coverage, including life insurance, health insurance and annuities, since the USVI is a "state" under the Employee Retirement Income Security Act of 1984 (ERISA).

USVI captives are exempt from local insurance laws, including pooling and insolvency funds. There are no statutory ratio or solvency margin requirements and no restrictions on investments. In addition, captives are exempt from all USVI income and premium taxes. It is possible to obtain a 20 year contract with the USVI government guaranteeing these tax benefits, which can be renewed for another 20 year period.

The USVI offers an efficient regulatory environment, with a user-friendly application process, a quick turnaround and accessible and experienced individuals in the public and private sectors.

Among the "onshore" benefits are: US currency and no exchange controls; US courts to resolve disputes; no immigration or travel restrictions on US citizens and legal residents; US trained and licensed attorneys, accountants, and other professionals; and sophisticated communications and banking systems for lower transaction costs.

Lee Coppack and Valerie Denney are co-editors of Global Reinsurance.