A real Southern welcome (South Carolina)

US Captive spoke with David Black, director of the South Carolina Department of Insurance, about the strength of the state’s offering and asked him what it is that has made South Carolina one of the country’s leading captive domiciles.

What sets South Carolina apart from the competition? What are the key attractions of the domicile?

Firstly, it is the expertise that we have developed over the years, handling a wide range of captive concerns. Secondly, we enjoy the strong support of the Governor—who has shown that she is very supportive of responsible efforts to aggressively grow this sector of the market. Thirdly, we have shown over the years a focus on helping owners and managers to successfully manage their solvency risk in a cost effective way.

South Carolina is a very pro-business environment, with a strong economic base located in a growing region of the States, and along with its outstanding natural beauty, there is much to attract captive owners to the state.

Which industries are best represented by captives in South Carolina?

We are well-diversified by both type of captive and by industry class. Probably our largest group would be finance, insurance and real estate. Having said that, we are also well-diversified across service industries and health, a range of wholesale and retail sectors, and heavy manufacturing and construction, so we have a nice level of diversity by industry.

What are your expectations for new formations in 2011-2012? Has interest in captive formations been on the rise?

I think we are on track to have a strong year relative to where we are in the insurance cycle. In a softer market the growth pattern is generally more moderate, but I believe that formations for 2011 will be up on those numbers that we recorded in 2010 based on the people that we are working with now and the interest that we have seen.

I think people are starting to see that the market is close to a turn and that’s driving some interest. Also some of the interest has been spurred by a realisation that with a certain amount of innovative thinking there are some things you can do in captives that even in a softer market are unique and productive.

How have you sought to respond to the changing demands of captive insurance? And how have you sought to innovate in your regulatory approach?

Our intention is to be very prompt and very predictable in our processes. In the recent past we have continued to add and develop staff capabilities to boost quality service, and we have also invested in additional technology to make it easier for an owner or a captive manager to do business with us. We are trying to do everything we canto incrementally improve the process, whilst at the same time hanging on to our main focus—that is to help captive owners effectively manage their solvency risk.

How important is a responsive and experienced regulatory authority to the strength of your offering?

In terms of years of experience and years of service, we have a lot of folks with 20 plus years of experience in captives and in insurance generally. It is critical to have a depth of knowledge and an appreciation of all aspects of the business and I think that we have that on the marketing side, on the licensing side and on the examination side, so I think that we boast a well-balanced team.

How important a role has the South Carolina Captive Insurance Association played in developing the domiciles captive industry and position?

They have been very effective and have been an important partner to us. We enjoy that association and our close ties have enabled us to work together on pushing for legislative changes for example, which will help us to better manage the solvency risks for owners. Likewise, they have been an effective advocate in raising the visibility of the South Carolina marketplace, and ours has been a positive, effective relationship.

How can US states best respond to, and fulfil, the specific needs of captive insurance entities?

I think you are seeing more and more owners attracted by the notion of being onshore. This has meant that the visibility of the onshore market has gone up and the demand for the onshore market has likewise risen. In response to this rise in interest, we need to be responsive and active listeners, to the owners, the managers and the other service partners, so that we can see new trends and react quickly to them as they impact the market.

South Carolina is the fourth largest domicile by captive numbers.What are your plans to further strengthen your position and how are you looking to build on your existing success?

We are in the early stages of looking at some additional marketing efforts. I have been working with others in the US to develop a strengthened marketing effort that would help us bring further business to the state. While we are in the early stages of this process, I am hopeful that with the Governor’s support and that of the captive association and others in the state we will be able to do some effective recruiting going forward.

What is the key to staying ahead of the curve as a domicile?

"Our intention is to be very prompt and very predictable in our process. In the recent past we have continued to add and develop staff capabilities to boost quality service, and we have also invested in additional technology to make it easier for an owner or a captive manager to do business with us."

It goes back to what I said. You have got to develop and maintain a reputation for being very prompt and very predictable in your actions. I think that as a regulator our interests align nicely with the captive managers and owners and as such we all have an interest in making sure that if someone comes to South Carolina to set up a captive, that not only is that operation a success, but that every operation in the state is a success. Our brand and our reputation are intrinsically linked with those of the captive managers and owners in the state and together we are working to further strengthen the South Carolina brand.

David Black is the director of the South Carolina Department of Insurance. He can be contacted at: dblack@doi.sc.gov