12 October 2022ArticleAnalysis

Utah aims to lead US captive market

“Utah believes that not only larger organisations should have access to the alternative captive market.”

Travis Wegkamp, Utah Insurance Department

Utah’s captive insurance story started when captives legislation in the State of Utah was originally passed in 2003, with legislation for sponsored captive programmes following suit in 2011. The goal in entering this industry was to bring well-paying white collar jobs to the state. That is the key reason for many of the competitive features of our legislation, such as a flat licence fee instead of premium taxes.The passage also included the idea to increase tourist dollars and other economic spending with the requirement of at least one board meeting to be held here annually.Looking at where we now stand in the US’s list of captive insurance domiciles, Utah has undergone tremendous growth in the captives space, quickly becoming the second-largest captive domicile in the US in terms of licensed risk-bearing entities. We were, and to an extent continue to be, a popular domicile for microcaptives due to our competitive captive legislation. In 2017, prior to the implementation of the Protecting Americans From Tax Hikes (PATH) Act we reached our highest total of active risk-bearing entities, at 535.Since the PATH Act many of those microcaptives have cycled out and been replaced with larger more sustainable captives running more extensive risk programmes with higher premium volume. So while we were down to a total of 373 active risk-bearing entities at the end of 2021 our reported gross written premium reached a new record high of just over $2 billion; besting 2020’s previous record high of $1.7 billion.Why should captive insurance owners consider Utah as a place to domicile their captive? Utah has a staff of 11 individuals dedicated solely to the Captive Division of the Insurance Department, with strong support from both the insurance commissioner and the governor. This allows us to be very responsive to requests from our captives and reviewing new applications. We delight in seeing new and innovative uses for our captives, and we are willing to entertain and attempt to work through any new and unique coverage proposals.For the upcoming 2023 Utah Legislative Session we’ll be looking at making it more cost-effective for mid to small companies to enter the captive insurance market by decreasing the required minimum capitalisation. The proposal will likely be for a minimum capitalisation of 20 percent of total risk. For example, a captive application with a business plan that shows total risk of $500,000 would be required to capitalise at only $100,000 compared to the standard $250,000 minimum.During these difficult economic times and the continued hard insurance market, Utah believes that not only larger organisations should have access to the alternative captive market, but smaller ones as well. This change will give them another more financially feasible pathway to a captive insurance programme than just potentially a cell captive. And by not going the cell captive route they’ll maintain even more control over their programme—particularly in terms of costs, claims management, and investments/loans with related parties.

Looking ahead

In terms of particularly innovative areas in which Utah is leading the US captives market, we have no promises, or specifics, at this time but with support from our commissioner we are working with the governor’s office to potentially open up to cannabis-related captives.In addition to such policy-related areas, as a domicile we try to be forward-thinking when it comes to implementing and utilising new technologies. Our application and annual statement forms can be accessed and completed entirely online. We continued to work on developments for our website at

to make as many procedures and processes as possible related to having a captive in Utah available online. Additionally, we accept digital signatures for basically all required submissions.

“Our application and annual statement forms can be accessed and completed entirely online.”

The biggest challenges and hurdles continue to be what they’ve always been for the past decade or so, at least since I’ve been in the industry: the awareness of captives as alternative risk financing vehicles, and the Internal Revenue Service and Tax Court’s inability to truly understand a captive, its legitimacy and value to businesses and the economy.In terms of what the future holds for Utah as a captive insurance domicile, I see continued maturity and growth as a domicile and recognition as a leader in the industry, as well as ongoing efforts for Utah to be more widely considered as a captive domicile for foreign businesses.We would be happy to see more captive investments here from foreign companies seeking alternative insurance opportunities. We see the ongoing hard insurance market as an opportunity for the captive insurance industry to continue to grow and demonstrate its usefulness and viability, and Utah is poised to be the captive domicile of choice.