John Rehagen

Captive program manager, Missouri Department of Insurance, Financial Institutions and Professional Registration

The Midwest state has enjoyed a sharp increase in the number of captives redomiciling there since it made proactive amendments to its insurance legislation.

Missouri entered the captive arena relatively late—at the end of

2007—but it has since proved to be a success story. Businesses wanted an option that allowed them to keep their captive near the base of operations, while the state saw an obvious benefit in developing this industry in Missouri. The result was a collaborative effort between Midwestern businesses, insurance companies and state government that ensured the smooth passage of legislation establishing Missouri as a domicile.

In the first few months, two newly licensed captive insurance companies produced $30 million in premiums. The captive programme continued to grow throughout 2008, delivering $123 million in premiums written despite the Internal Revenue Service’s (IRS) attempts to eliminate tax benefits for captives and the continued soft commercial market cycle. While the growth in premiums was impressive, the crisis in the financial markets placed many redomiciliations and new programmes on hold. In response to the difficult financial climate, Missouri passed a revision to the captive law in 2009 designed to make new formations and redomiciliations even more attractive. Restrictive investment requirements were eliminated, redomiciliation for alien companies was clarified, new formation types were added and additional options were incorporated to address issues that our special purpose captives were having in securing credit. As a result, captive premiums increased dramatically in 2009 to $1.1 billion in what was only the second full year of the programme.

This explosive growth demonstrated that Missouri had the necessary

ingredients to become a major US domicile, not least its location in the Midwest, which affords easy access from anywhere in the United States.

Missouri has two large metropolitan areas located on either side

of the state, and approximately 40 percent of the largest publicly traded companies are located within a 500-mile radius. The state department has offices in St. Louis, Kansas City and Jefferson City, and uses those offices to ease the burden for out-of-state travellers. These cities also offer easy access to state departments and to a multitude of insurance and captive insurance experts. It usually takes time for a new domicile to gain the critical mass needed to attract the service providers necessary to operate captive insurance companies. In Missouri, however, those service providers are already here.

St. Louis is a hotbed for captive insurance company development because there are many large companies located there and it has a good service provider infrastructure. As a result, many captive experts are based there. From PricewaterhouseCoopers (PwC), St. Louis, David Monday manages the captive consulting group of PwC. The group offers a full range of captive services for new or existing captives, including auditing, consulting, feasibility and review of existing captive plans. Larry Pevnick and his team at Brown Smith & Wallace specialise in captive audits and tax advice, also from an office in St. Louis. Marsh Captive Solutions has dedicated its office in St. Louis to captive development throughout the Midwest. Milliman conducts many of the department’s captive application actuarial reviews out of its St. Louis office. Attorneys throughout St. Louis already serve captive clients. Taken together, all these captive experts actively support Missouri’s captive industry.

Kansas City is increasingly becoming a major centre of captive insurance activity. Lockton, the world’s largest privately held

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