Finding like-minded partners and a domicile with the proper mix of regulations and services is essential when forming a cell captive, experts say.
Robert Vermes, Boston-based CEO of The Captive Advantage L.L.C., said the group captive formed by several nonprofit human services agencies in the Northeast operates as a protected cell in Bermuda.
The 11 members of TCA are grouped into a single protected cell, which is housed within a larger cell captive that is administered in partnership with Philadelphia Insurance Cos. and reinsured by Citadel Reinsurance Co. Ltd.
Mr. Vermes said that while the 11 member companies in the protected cell captive vary in size, they share a common outlook on risk.
Moreover, while the tax deductibility of premiums paid into a captive may be a prominent incentive for many companies to establish a captive, this isn't the case with TCA, Mr. Vermes said
“All of our members are nonprofits, so there is no tax advantage as there would be for a for-profit company,” he said. “Where they benefit is by better managing their risk, so for them it's all about risk management.”
Sanford Saito, Honolulu-based deputy commissioner and captive insurance administrator of Hawaii's Department of Commerce and Consumer Affairs Insurance Division, said finding like-minded partners is essential to growing a cell.
“It takes time to expand a cell program because you always want to know who you are partnering with,” Mr. Saito said. “That's probably the most important factor for cell captive formation.”
When forming a cell captive, Mr. Vermes said organizations should select a domicile with a knowledgeable regulatory staff.
“Bermuda is well-organized, and they understand captive insurance,” he said. “Their expertise there is second to none.”
As far as Hawaii goes, “we are a very stable domicile here,” Mr. Saito said. “We're very experienced with captive regulation, and the government is willing to spend the resources, so there are now 15 of us charged solely with captive regulation in Hawaii.”