South Carolina: the total package
How does South Carolina compare with other domiciles in terms of size and expertise?
It depends how you measure it. For example, one of the most popular measures is the number of active captives. If you look at that, South Carolina is the sixth largest in the US and 14th in the world. But if you look at assets under management, South Carolina is number two in the US and number five worldwide. And if you look at assets per captive, we’re not only the largest in the US but also in the world.
In premium we’re number two in the US and sixth in the world. If you look at it from a variety of factors it gives you a clearer picture. Based on that you can say that we’ve been a very successful domicile over the years.
In terms of experience, South Carolina captive owners are at an advantage because over our 13 years as a domicile we’ve developed substantial expertise in the captive area. We’ve also been able to hire some very high-quality staff members who not only have the technical skills in accounting, finance and business management, but also knowledge of the captive industry and the larger insurance industry. I myself have been in the industry for 30 years and have experience in the traditional and captive markets, both in the private sector and in regulation. Our staff is very stable—we’ve had zero turnover in the last five years and very little turnover in the last 10 years.
Because we’ve been a very diverse domicile you get areas of expertise as well in the types of companies we license and the various business areas in which the parent companies are operating. For example, when most companies think about doing a healthcare captive the first domicile that comes to mind is the Cayman Islands. In actuality the single largest class of business that we license in South Carolina is healthcare-related. It’s professional liability, such as medical professional or nursing home professional liability. We’ve developed substantial expertise in service-related areas, as well: transportation, construction, wholesale, mining, real estate, home builders, developers and even financial services.
"We have a regulatory responsibility to keep them between the ditches, but outside of that we want to encourage and assist them in accomplishing the goals they've established."
That says a lot for not only the expertise within the regulatory environment—namely, the alternative risk transfer services division— but also in the body of service providers that are located in South Carolina. Every service you need is available here and linked to a captive practice. Say, for example, you need an attorney, an actuary, an auditor, banking facilities, investment management, insurance consulting, reinsurance services, insurance brokerage—every one of those disciplines is located here in the state and there is at least one firm that has a captive practice in each discipline. It’s hugely beneficial for the captive owners to be able to access that kind of expertise right here. It’s one-stop shopping.
How has the jurisdiction developed in the last 12 months?
One of the big features that we’ve tried very hard to work on—and the effort goes back further than 12 months—is a focus on continuous quality improvement. Seven or eight years ago we were not the most responsive domicile on the planet. The response times were outsidethe norm of standard industry expectations. Particularly in the last 12 months we have focused on an intense monitoring system to make sure that not only do we deliver according to standard industry expectations, but we exceed those.
As an example, the standard turnaround time for a captive application is expected to be 30 to 40 days. Over the last 12 months we have consistently turned around licenses in less than 30 days. We actually turned around a licence in 10 business days. Being flexible to address the needs of the client while still being compliant with regulatory requirements is the key. In essence, it’s stepping up to do what the client needs even if that means working outside normal hours. You just get it done.
With business plan changes, we get on average about 400 a year. Over the last 12 months, for the 400 business plan changes the turnaround time is down to 0.9 days. Believe me, that was not the case in the past. That’s every single business plan change. That doesn’t exclude outliers where there was additional information that took time to receive. That’s every single one. Those kinds of statistics go to underscore what I think is the big change, which is the client focus and continuous improvement that we’ve been striving for.
What is South Carolina’s regulatory philosophy?
It’s a great state for doing business. We’re very focused on a business-like philosophy. That really completes the package. We look at our captive owners as clients and our service providers as stakeholders. That attitude carries over in the value proposition. Captive owners have a business purpose for establishing theircaptive and they want to be in an environment that helps support achievement of those goals and objectives. That’s what we try to do. Yes, we have a regulatory responsibility to keep them between the ditches, but outside of that we want to encourage and assist them in accomplishing the goals they’ve established for their captive.
What makes South Carolina an exceptional domicile?
I don’t think you can point to any one particular chevron on our sleeve. The best way to answer that is to look at the total package. We just talked about the expertise in the department and the field. But we also have, in a broader sense, a well-developed infrastructure. Not only the providers but also within the state. There is ease of access to South Carolina and it’s a very affordable domicile.
There’s a lot of intrinsic value in the state; it’s a very high value destination. In 2012, Charleston—the ‘captive capital’ for the state—was the number one tourist destination in the world according to Condé Nast Traveler. How cool is that? That’s part of the package. Within two and half hours from virtually anywhere in the state you can go from the beaches to the mountains. In my private sector days we would have to go for board meetings to the same place all the time. Some of the board members were complaining, saying that they didn’t want to go back there again. In South Carolina there’s a huge amount of variety, familyfriendliness, affordability and outdoor activities. I’m not sure if you can snow ski, but maybe! There’s tremendous value, and that’s why I refer to it as a high value location.
As a captive owner you have to look at the total package. South Carolina is a prime example of a mature Southern domicile that brings a lot to the table. We have a new director and are very focused on delivering value and growing our domicile.
Jeff Kehler is the programme director, alternative risk transfer service at the South Carolina Department of Insurance. He can be contacted at email@example.com.