The Captive Domicile Close to Home John F Rehagen CFE Captive Program Manager Kansas City Area RIMS November 9 2010 Missouri Captive Insurance Background Missouri Captive Law Advantages ID: 569997
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Missouri The Captive Domicile Close to Home
John F. Rehagen, CFECaptive Program Manager
Kansas City Area RIMS
November 9,
2010Slide2
Missouri Captive Insurance
Background Missouri Captive Law Advantages
Future Expectations
Missouri Captive Insurance:
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Background
History of the Missouri Program
Law Enacted August 2007
Collaboration of Midwestern Business, Insurance Companies and Missouri Government
They wanted their captive operations close to home
Seen as an economic development tool by the state
Originally signed by Republican Governor
Expansion signed by current Democratic Governor
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Background
History of the Missouri Program
9 captive licenses issues as of 9/30/2010
First Pure Captive licensed, November 2007
First Special Purpose Captive Licensed, December 2007
First Association Captive Licensed, April 2009
Expect as many as 15 licenses issued by YE 2010
Premium Written by Captives Exploding
$30 Million in 2007
$123 Million in 2008
$1.1 BILLION in 2009$1.6 BILLION estimated in 2010
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Background
The Missouri Department
Receives no taxpayer money, funded by fees paid by its licensees and regulated entities
More than 500,000 members of Missouri’s workforce are licensed by the department
More than 7,000 companies are licensed or registered with the department
Full time staff of 534
2009 FY budget $36.9 million
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Background
The Missouri Department
Director appointed by the Governor an industry expertSeven divisions with long-term leaders and employees in place
Tasked with enforcing the laws and regulations of the state
Mission: To efficiently and effectively encourage a fair and open market for consumer service industries.
Key objectives: Protect consumers, encourage competitive marketplace and enhance state-based regulation.
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Background
The Captive Team
Department Director: John M. Huff formerly with Swiss Re
Division Director: Fred Heese CPA, CFE, 25+ Experience
Captive Program Manager
: John Rehagen, CFE
Support Staff
Captive Financial Analyst- AFE
Reinsurance Examiner- CPA,
ARe, 20 + Experience
Life & Health Actuary- 30 + ExperienceP&C Actuary- 30+ Experience
Division Counsel- 25+ Experience
Primary Consultant- Milliman, an experienced international firm
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Missouri Captive Law
Formation Types
Pure CaptiveAssociation Captive
Industrial Insured Captive
Branch Captive
Special Purpose Life Reinsurance Captive
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Missouri Captive Law
Requirements
Pure/Branch CaptivesInsures owners, affiliates and unaffiliated controlled entities
Minimum capital and surplus $250,000
GAAP Financials
Stock, Nonprofit or LLC
Industrial Insured Captive
Insurers members of the industrial insured group
Minimum Capital $500,000
GAAP Financials
Stock, Mutual, LLC or Reciprocal
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Missouri Captive Law
Requirements
Association CaptivesInsures association members
Minimum capital and surplus $750,000
GAAP or SAP Financials
Stock, Mutual, LLC or Reciprocal
Special Purpose Life Reinsurance Captive
Insurers life insurance company affiliates
Minimum Capital $250,000
SAP Financials
Stock, MO Statutory Close Corp, LLC or other form approved
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Missouri Captive Law
Ongoing Requirements
(Typical with all domiciles)Principal place of business in Missouri
Annual board meeting in the state
Resident incorporator and board member
Resident agent for service of process
Use of approved service providers
Material changes in business plan, dividend payments, loans or investments in affiliates and organization changes require prior approval.
Annual tax filing
Annual financial filing
Renewal Fee (Which is deductible from premium tax)
Audited financials and reserve certification.
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Missouri Captive Law
Captive Fees
Application/Licensing Fee $7,500Annual Renewal Fee $7,500
Fees are fully deductible from premium tax, no other hidden fees
One time Actuarial Application Review Fee $4,000 maximum
Payable to the actuarial review firm assigned by the Department
Premium Tax Rates
Millions of $ Direct Premium Assumed Premium
0-20 0.380% 0.214%
20-40 0.285% 0.143%
40-60 0.190% 0.048% 60+ 0.072% 0.024%
Minimum Tax $7,500, maximum $200,000
Don’t forget to deduct annual fees, many captives pay no premium tax
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Missouri Captive Law
Similarities with other Domiciles
Very low tax rates
Formation types
Minimum capitalization levels
Application requirements
On-going requirements
Coverages allowed
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Missouri Captive Law
Differences from other Domiciles
Fees deductible from premium tax
Only one fee, no additional fees for each filing
Fee structure allows responsiveness and growth
Alien redomestication stated in law
No resident captive manager required
Self management allowed in some cases
Does not allow Cell or RRG’s (Less NAIC/IRS scrutiny)
LOC’s Surety Bonds & Financial Guarantee Policies admitted for SPLRC
60 day decision required by SPLRC, others 30 or less
Biggest difference we have an office right here in Kansas City
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Missouri Captive Law
Recent Changes
Revised Effective August 2009
Removed restrictive investment requirement.
Standardized number of resident incorporators for all types
Added reciprocal organizational type
Added Alien redomestication
Eased admittance requirement for SPLRC assets
Solidified department funding to allow for growth
Changes encouraged continued growth and made Missouri more attractive not only for companies out of state but in state as well.
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Missouri Advantages
Location
Central Location, close to the majority of the countryDirect flights from every major city in the country
Borders 8 states and has 20 relative next door neighbor states
Department utilizes offices in KC, STL and Jefferson City
Direct access to the decision makers at the department who will come meet with you if needed.
Allows for prompt attention to your captive needs
All this allows for efficiency and reduces business cost
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Missouri Advantages
Other Advantages
Large commercial carriers in state unlike most captive domicilesAllows for potential reduction in fronting carrier collateral.
Captives admitted, not subject to self procurement tax in Missouri, eliminate fronting cost entirely.
Offshore captives can redomesticate
Remove negative perception related to offshore captive activities
Eliminate need for separate SAP statements and auditor fees
Lower cost of living here, reduce service provider fees
Recognition as a good corporate citizen keeping dollars at home
Local captive service providers and consultants right here ready to help you make your captive a success.
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Missouri Advantages
Companies interested in Missouri
Large National and International CompaniesBanks and Financing Companies
Privately Held and Midsized Companies
Professional/Trade Associations
Owners of Existing Captives- Missouri subsidiary or Branch less cost
Redomestication- Moving Captive Closer to Home
Companies with significant exposures in Missouri
Large Life Insurance Companies
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Missouri Advantages
Proposed uses for a captive
Nearly all coverages are allowedFund Deductibles
Commercial auto, property and liability
Excess Workers Compensation
Warranty
Product recall
Franchisee and Distributor cover
Business Interruption
Cover exclusions
Performance Bonds
TRIA
Credit Insurance
Med Mal
E&O
Employee Benefits
Access to Iowa FHLB loans
Reduce surplus strain from term life reserves
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Missouri Advantages
Licensing Process
(usually 30 days or less)Discuss your captive plans with the Department
Complete the application and provide requested documents
Licensing Fee, Draft Articles and Bylaws, Bio’s, Business Plan, Feasibility Study, Proforma Financials (Example docs are available to aide the applicant)
Department reviews documents and issues a certificate of General Good
Certificate and other organization docs are filed with the Missouri Secretary of State to form the captive insurance company
Department consulting actuary will review and issue an opinion, which is paid for by the applicant
Place the minimum capital and surplus in the captive
Department issues the license
Place additional recommended capital if any into captive and commence business
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Missouri Advantages
Redomestication Process
Basically a streamlined licensing process to change address
Discuss your captive plans with the Department
File the application material with some differences
File draft articles of domestication which are amended to meet Missouri law
In lieu of feasibility study simply provide the last three years annual statements, current year quarterly statements, most recent audit and examination if any
Provide a no objection letter from existing domicile indicating no regulatory issues
In most cases no outside actuarial review will be required.
Department reviews documents and issues a certificate of General Good to request that domesticating company continues its legal existence in Missouri
Certificate and other organization docs are filed with the Missouri Secretary of State to domesticate the captive insurance company
License will be issued upon certification of domestication
Foreign or Alien captives are allowed to redomesticate
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Future Expectations
2010 Outlook and beyond
Interest in redomestication from both on shore and offshore domiciles has spiked as a result of the recent changes in the law
Currently three additional applications are under review, more expected
Several Missouri companies are in the feasibility stage
Several Midwestern companies are in the feasibility stage
Future plans for several Insurance Companies include more SPLRC’s
Continued steady increase in new licenses issued each year
Continued steady increase in premium written each year
Continued increase in local service providers
Continued benefits to our local economy
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Future Expectations
Captive Insurance Association
Leading service providers from around the country recently organized the Missouri Captive Insurance Association
Association intents to be a means for service providers to network among themselves and captive owners to publicize their services
Plans to market the Missouri Captive Program across the country
Intends to develop relationships with other Captive Associations to provide access to high quality training and current captive information
Anticipates working closely with state government to keep the Missouri captive law attractive
Looking for more membership to help promote the benefits of captive insurance in Missouri
Interested in learning more, email the Executive Director at
mocaptive@gmail.com or visit their website at
mocaptive.com.
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Future Expectations
Missouri’s vision is to become the leading domicile in the Midwest
Location, simple processes and an updated law is making it happen
The Department is experienced with stable leadership
The state has embraced captive insurance
Missouri offers unique opportunities
Using our Midwestern work ethic and common sense approach
Listening to applicants and working with them on their plans
The law was designed for local businesses like yours
Let’s talk about how you can benefit by keeping your captive close to home
Questions???
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Contact us
John F. Rehagen,
CFE
Captive Program Manager
Missouri DIFP
301 W. High St., Suite 530
Jefferson City, MO 65101
Phone
:
573-522-2563 Fax: 573-751-5888
E-mail: John.Rehagen@insurance.mo.gov
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