William Byrnes' Tax, Wealth, and Risk Intelligence

Why is this Topic Important to Wealth Managers? Provides specific information in regards to costs relating to the formation of an insurance company.  Discusses multiple domicile options and how they relate to each other.

Wealth managers may be interested to know generally what costs are involved to form and manage a captive insurance company in different jurisdictions.  Take for example Vermont.  It is known as the “Captive Capital” here in the States, and for good reason, Vermont has licensed over 900 captives at last count.[1]

The licensing fees in Vermont total $4,800 (in the first year and only $300 a year thereafter.) [2] However, there are a couple of downsides to the preliminarily greener pastures.  First, Vermont requires initial capitalization of a “pure”, which includes a traditional single parent, captive of $250,000. [3] Secondly, Vermont requires the captive to pay minimum premium tax of $7,500 which has an underwriting level of approximately around $2 million dollars at a rate of 0.38%. [4]

As a general rule, the formation and annual expenses, including premium taxes, of captive insurance companies will be lower in most offshore jurisdictions rather than domestic domiciles.

Read on about A Dollar Saved…Captive Insurance Company Costs