Missouri The Captive Domicile Close to Home

Missouri The Captive Domicile Close

to HomeJohn F. Rehagen, CFE

Captive Program Manager

Kansas City Area RIMSNovember 9, 2010

Missouri Captive Insurance• Background

• Missouri Captive Law

• Advantages

• Future Expectations

Missouri Captive Insurance: Nov. 9, 2010 2 SLIDE

BackgroundHistory 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


BackgroundHistory 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


BackgroundThe 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


BackgroundThe Missouri Department

• Director appointed by the Governor an industry expert

• Seven 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.


BackgroundThe Captive Team

Department Director: John M. Huff formerly with Swiss ReDivision Director: Fred Heese CPA, CFE, 25+ ExperienceCaptive Program Manager: John Rehagen, CFE• Support Staff

• Captive Financial Analyst- AFE• Reinsurance Examiner- CPA, ARe, 20 + Experience• Life & Health Actuary- 30 + Experience• P&C Actuary- 30+ Experience • Division Counsel- 25+ Experience• Primary Consultant- Milliman, an experienced international firm


Missouri Captive LawFormation Types

•Pure Captive

•Association Captive

•Industrial Insured Captive

•Branch Captive

•Special Purpose Life Reinsurance Captive


Missouri Captive LawRequirements

• Pure/Branch Captives• Insures 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


Missouri Captive LawRequirements

• Association Captives• Insures 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


Missouri Captive LawOngoing 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.


Missouri Captive LawCaptive Fees

• Application/Licensing Fee $7,500• Annual 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 DepartmentPremium 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


Missouri Captive LawSimilarities with other Domiciles

• Very low tax rates• Formation types• Minimum capitalization levels• Application requirements• On-going requirements• Coverages allowed


Missouri Captive LawDifferences 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


Missouri Captive LawRecent 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.


Missouri AdvantagesLocation• Central Location, close to the majority of the country• Direct 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


Missouri AdvantagesOther Advantages• Large commercial carriers in state unlike most captive domiciles

• Allows 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.


Missouri AdvantagesCompanies interested in Missouri • Large National and International Companies• Banks 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


Missouri AdvantagesProposed uses for a captive• Nearly all coverages are allowed• Fund 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


Missouri AdvantagesLicensing 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


Missouri AdvantagesRedomestication 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


Future Expectations2010 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


Future ExpectationsCaptive 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

[email protected] or visit their website at mocaptive.com.


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???


Contact usJohn F. Rehagen, CFECaptive Program Manager

Missouri DIFP301 W. High St., Suite 530Jefferson City, MO 65101

Phone: 573-522-2563 Fax: 573-751-5888

E-mail: [email protected]


Missouri The Captive Domicile Close to Home

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