More than simply a place to enjoy its famed Southern hospitality, South Carolina has emerged as one of the leading US captive domiciles thanks to the strength and flexibility of its regulatory approach.
South Carolina is in its 13th year as a captive domicile. It has grown to be the fourth largest US domicile, ranked by number of active companies (third largest, excluding mini-captives), and it is the second largest domicile for risk retention groups.
Worldwide, South Carolina is the fifth largest domicile based on premium volume, sixth largest based on assets and 12th largest based on the number of active companies. Additionally, seven of the 10 largest captive managers in the world have offices in South Carolina.
As a mature domicile, it is able to offer captive owners many benefits not afforded by other developing domiciles. Chief among these is a welldeveloped infrastructure of service providers and captive regulators. Captive owners have a selection of managers to choose from who represent independent management, broker-aligned managers, managers with worldwide operations or smaller, more boutiqueoriented managers. Owners have the option to choose a manager that fits their style, captive arrangement and philosophy.
The same is true for the other service providers necessary for a captive’s operation: attorneys, actuaries, auditors, investment managers, brokers, consultants, and bankers. Some of these providers, including the managers, have developed specialties within the captive industry, providing more options for owners seeking specific expertise.
The regulatory regime in South Carolina is built around a team of full-time captive financial regulators dedicated to the captive business. This offers captive owners a regulatory regime geared to the uniqueness of captive companies and the flexibility required to address the differences in captive arrangements. The financial surveillance and regulation team assigned to captives has experienced very low turnover, which provides consistency and stability of regulation. The captive division has always focused on training and the development of team members to ensure a thorough understanding of the captive industry and its regulation. This facilitates a regulatory regime that is rigorous, efficient, adaptable and reasonable.
Continuous quality improvement programmes have produced significant results over the years. Working with industry to develop service standards and metrics has driven programmes that have increased efficiency while driving down response times. Today, the captive division has utilised automation to reduce the reliance on paper, streamline processes and make the work of the managers less time-consuming— with the benefit of lower costs passed on to captive owners.
As it has engaged the captive industry so, too, the regulatory regime engages its captive owners. It has been a long-standing tenet within the captive division to view its managers and captive owners as one would view a client. This facilitates access to the regulators to discuss opportunities, issues, ideas, and cooperation resulting in a healthy captive marketplace that is well regulated, but open to new developments and innovation.
The philosophy of regulation in South Carolina has been largely consistent over time, with modifications in response to changes internationally, nationally, economically and legislatively. Built on a foundation of trust, but also an approach that is rigorous but reasonable, and flexible but prudent, regulation has evolved to accommodate changes in accreditation standards from the National Association of Insurance Commissioners; developments in international cooperation driven by the International Association of Insurance Supervisors; economic fluctuations, such as the recent financial crisis and recession; and evolving developments in the captive industry. South Carolina has demonstrated the ability to adapt to an ever-changing regulatory environment without compromising its core principles.
None of this would be possible without the intrinsic qualities of South Carolina as a great place for business and leisure. It is consistently ranked as one of the best states for business due to a low tax structure, well developed infrastructure for transportation by land and sea and a large pool of well trained workers.
Of course, one cannot fail to mention a mild climate that provides opportunities for outdoor activities all year long. Whether your tastes run to the beaches, golf courses, hunting, fishing, sailing or shopping, South Carolina has a wide variety of venues and history to enjoy. South Carolina has matured into a stable, adaptable and reliable domicile that offers many advantages for the captive owner. It is a great place to do business and to enjoy its famous Southern hospitality.
Jeff Kehler is the programme manager of the South Carolina Department of Insurance. He can be contacted at: email@example.com
South Carolina—the palmetto state*
- $3.5 billion of premiums written by captives in the state
- A captive domicile since 2000
- Now home to 160 captive entities
- Eight new captives formed this year
- The fourth largest US captive domicile by captive numbers
- Industries serviced include: healthcare, finance, real estate, manufacturing, construction and energy
- Regulatory contact—Jeff Kehler, programme manager
*Sabal palmetto, the cabbage palm, is the state symbol of South Carolina
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