By CYRIL TUOHY, managing editor of Risk & Insurance®
After a blistering 2008, during which Utah registered 31 new captive insurance companies, the state is on track to register as many as 20 or 25 new captives this year, according to Ross C. Elliott, captive insurance director for the Utah Insurance Department.
Elliott, who took over the captive insurance unit earlier this year, said he had received a number of new inquiries over the past several weeks, after a slow start earlier this year.
"We are very optimistic about the captive business in our state," he said in a phone interview with Risk & Insurance®. "Earlier this year, we had some concerns about the slow economy and how that would affect us, but the last couple of weeks, we've received several calls from people asking about forming captives here."
Utah last year was second only to Kentucky, which led the nation in registering new captives. Kentucky registered 36 new captives.
Elliott and John Soules, president of the Utah Captive Insurance Association, pointed to a business-friendly environment and the ease with which captive owners and managers can reach Salt Lake City for the state's strong showing.
Setting up a captive costs $5,250.00 in startup fees, and that much in annual renewal fees. There is no premium tax.
"Utah is a preferred domicile because it is an easy place to get to," said Soules, an executive with Moreton & Co., a full-service insurance broker serving the intermountain West.
Skiing makes Utah an attractive destination in winter, and the stunning beauty of its vast national parks also make it a destination for visitors in the summer.
Soules also said that Utah had benefited from a number of redomestications, as offshore locales had become less attractive places in which to do business for U.S.-based companies insuring U.S risks.
"The redomestications are coming from the Caribbean islands, Bermuda, the Caymans and Barbados. There's just no good reason for captives primarily dealing with U.S. risks and taxed as U.S. entities to be offshore anymore," he said.
Beyond these reasons for Utah's attractiveness as a domicile in the eyes of managers and owners is Utah's own desire to branch out beyond the "Don Spann Era."
Spann, who came from a regulatory background as the former insurance examiner for the Tennessee Insurance Department, is credited with anchoring Utah's captive industry in pure captives--companies that only insure the risks of a parent company.
These captives have provided Utah with a steady income stream. In the last fiscal year, for example, the Utah's Captive Insurance Division brought in $690,000, with the bulk of those revenues going to Utah's general fund, Elliott said.
With Spann's departure, the Utah captive insurance industry is looking to Elliott to grow the industry beyond its core of pure captives, as all but two of the state's 122 captives are pure captives.
Elliott's background includes running a captive management firm; working for Alta Holdings Inc.; and managing a group of property/casualty, life and large agency units.
Utah's Insurance Department is beginning to lay the groundwork for more complex captive structures, according to Elliott.
Elliott's arrival is more than welcome, according to captive industry boosters. "We'd like to see the Utah industry move beyond pure captives to include group captives and protected cell captives in the future," said Soules.
The brightening economic picture will hopefully allow the state to consider hiring more specialized examiners to review group and protected cell captives, which require longer reviews than pure captives because of their insurance structures, Soules also said.
December 1, 2009
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