Missouri: the captive domicile closer to home


Missouri: the captive domicile closer to home

Located at the heart of the US, Missouri offers captive owners stability, business-friendly regulation and an increasingly experienced captive team.

Stability, responsiveness and flexibility are what your captive can expect in Missouri. Missouri’s common-sense regulation and location at the geographic and population centre of the US create the fuel that drives our successful domicile. Missouri is within a time zone of the majority of the country, which makes it easy to get to and from, as well as a natural fit for companies considering forming or relocating their captives. Missouri offers convenience and expense reductions for those companies that choose to keep their captive close to home. Missouri is a great place to do business; numerous Fortune 500 companies are headquartered here or have significant distribution or strategic production facilities in the state. The captive law is conducive to successful operations, and the department prides itself on hard work and its reasonable approach. Governors and legislators from both political parties have endorsed the original captive law and a recent update that has accelerated captive growth. Missouri continues to offer the politically stable, pro-business climate needed for successful captives.

The captive programme has continued to grow despite persistent soft-market conditions and the effects of the financial crisis. Since legislation was updated in 2009, the captive programme has seen even more dramatic growth. The legislative changes modified licensing and redomestication requirements to adapt to the credit crisis and make Missouri attractive to companies located anywhere. 2010 was a great year; captive premium increased from $1 billion to $1.5 billion. Many domiciles would be pleased to reach $500 million in premium, but that was just the increase in Missouri last year. Licences issued doubled in 2010 from six to 12, and nine of the 12 licences have been issued since the legislative update. The momentum of the captiveprogramme is increasing, and maintaining legislation that is beneficial to captive insurance and the state is a priority.

While the premium increase is remarkable, the department is keenly aware of the issues related to growing too fast. Responsiveness and personal attention to applications and business plans are being maintained. Owners know that the department can work at the pace of their business. Application reviews are typically completed in less than 30 days, and business plan changes can be completed in just a few days. Fees paid by owners go directly to ensuring there is always adequate staff in the captive section and those fees are always 100 percent deductible from future premium tax. All captives enjoy this cost reduction, but as a result of this deduction, captives that write less than $2 million in direct premium and assume less than $3.5 million pay no premium tax. This unique fee-based structure has ensured that the department is responsive now and in the future. Midwestern business and insurance companies partnered with state government to enact the captive law in 2007. It was flexible enough to allow for most traditional captive structures as well as take advantage of the unique international reinsurance experience within the department. The law allows for regulation that is appropriate to the success of each captive and limits regulatory mandates imposed by other outside agencies. Because of this flexibility, Missouri has proven attractive to very large captives owned by national and international insurance companies as well as pure and association captives from across the US. Currently, owners hail from the District of Columbia, Maryland, Minnesota, Missouri and New York. In addition to Midwest locations, Missouri’s programme is truly attracting owners from around the country and for all types of business.

"There are now 11 captive managers approved in the state. Four managers are capable of providing management directly from their Missouri offices and others have captive consultants in the state as well."

With the growth in the programme, the service provider base has grown significantly. There are now 11 captive managers approved in the state. Four managers are capable of providing management directly from their Missouri offices and others have captive consultants in the state as well. There are 11 actuaries approved to certify reserves for captives, and the St. Louis office of Milliman Inc. provides services for the department for life and health captives. There are eight certified practising accountant firms approved to conduct independent audits, half of which provide services from within the state. There are over a dozen Missouri attorneys that provide legal and other services for our captives. One of the benefits gained from locating your captive in Missouri is the infrastructure that is available in our large cities such as Kansas City and St. Louis. There is also flexibility to allow for the use of your existing legal, audit and actuarial relationships if desired through a relatively painless approval process.

In an effort launched by captive experts in the state, Missouri’s captive insurance association, MOCIA, was formed in November of 2010. Its goals are to promote captive formations in the state by providing information, facilitating communication between its members and with the department, and to provide captive education. The president of MOCIA is Michael Mead, the 2011 CICA distinguished captive service award winner and well-known industry veteran. Michael has been a part of the success of other domicile associations and brings experienced, high-profile leadership to his position with MOCIA. David Dimit, the executive director of the association, has nearly 30 years’ experience both as a captive member and president, as well as a consultant in captive formations. He now brings his talents and experience to promote captive insurance in Missouri. As David puts it: “Our association intends to promote the advantages and benefits of the flexible, sensible and economical captive climate promoted by the Missouri Insurance Department. Missouri is poised to become one of the sought-after captive domiciles because of the ease of formation and the low costs of operations. We already have association members from across the US working to make our state even more responsive to the needs of captive companies.”

MOCIA will participate in hosting the Western Region Captive Insurance Conference in September of 2011 and expects to promote educational seminars throughout the area.The department is supportive of MOCIA’s goal of facilitating captive growth in Missouri.

Missouri has some other unique opportunities for potential captive applicants to explore. There are a number of very large commercial insurers either based in the state or with major operating arms located here. Examples include RGA Reinsurance Company, Swiss Re, AIG, Met Life, American Financial, Arch Capital Group and Allianz SE, to name but a few. Many of these companies actively front and provide reinsurance for captive insurance companies; some also provide captive programme design. Because the commercial insurer and the captive are both regulated and considered admitted insurers by the department, there is potential for reduced reinsurance collateral for a Missouri captive using a Missouri front. The collateral amount could be negotiated based on the creditworthiness of the captive and owner, and could lead to significant cost savings. A foreign or alien captive using a front would be required to post 100 percent collateral, since it is a non-admitted insurer that is not licensed or regulated by the department.

Another unique opportunity in Missouri is access to the Iowa Federal Home Loan Bank (FHLB). Insurers are allowed to become members of the FHLB and can gain access to low-interest funds if they meet certain membership requirements for investment in the mortgage industry. There are collateral requirements and FHLB stock purchase requirements imposed by the FHLB, which may not be possible for all owners to meet. For those companies that qualify however, it can be very beneficial. Missouri’s position as the only captive domicile in the Iowa FHLB region is an added benefit available for captives licensed here.

There are many benefits to licensing your captive in Missouri. The department is committed to providing a well-staffed, stable, responsive and flexible domicile that will benefit the state and your captive. 2010 was a great year, but the future is even brighter. With an excellent and continually growing service provider base and outstanding captive veterans leading the association, there is a wealth of captive expertise working to ensure Missouri is the go-to domicile in the Midwest. Missouri is a great place to do business and you’ll find our commonsense approach to regulation and our Midwestern work ethic to be very conducive to maximising the value of your captive. So whether you are considering forming a new captive or moving your existing captive closer to home, Missouri is ready to listen and work with you to get the job done right and on time.

John Rehagen is the captive program manager at the Missouri Department of Insurance, Financial Institutions and Professional Registration. He can be contacted at: john.rehagen@insurance.mo.gov. Forms and additional information about the Missouri captive insurance programme are available at: www.insurance.mo.gov/captive.

Missouri, US, domicile report, captive, insurance

Captive International