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The pros and cons of redomiciling a captive are measured not only in dollars and cents but also in relationships gained and lost, captive experts say.
Considering legal, accounting and license application fees, a captive owner can expect to spend $15,000 to $25,000 to redomicile in the United States.
“I don't think it's significant in the grand scheme of things,” said John Lochner, a director at Towers Watson & Co. in Simsbury, Conn.
When departing a domicile, captive owners do not face any costs “except paying their taxes before they're gone,” said David Provost, deputy commissioner of captive insurance for Vermont.
If a captive redomiciles to the headquarters state of its parent company, the parent could realize significant savings by paying taxes on admitted insurance rather than on nonadmitted or independently procured insurance, Mr. Lochner said.
The parent also might be able to dispense with a separate legal team for the captive and use its existing legal department, said Jason Flaxbeard, senior managing director for Beecher Carlson Insurance Services L.L.C. in Denver.
The cost of traveling—such as attending captive board meetings—also would be reduced, Mr. Flaxbeard said.
Captive owners should analyze their current and potential domiciles' long-term commitment to the captive industry, “which has wavered in some domiciles over the years,” Mr. Lochner said.
Given the factors involved in changing domiciles, an early step would be to analyze why the captive owner originally selected its facility's current domicile, Mr. Lochner said.
Other factors include the cost of operating in a domicile, its insurance regulations and its commitment to the captive industry.
While there are some costs to move a captive's domicile, Vermont's Mr. Provost sees no drawbacks.
“It's the kind of thing where a company ought to look to see that they're in the place they should be,” he said.
While several factors prompt captive insurance owners to redomicile their facilities, surplus lines regulations in the Dodd-Frank Wall Street Reform and Consumer Protection Act eventually could drive that activity inappropriately, captive experts warn.