As discussed in greater detail in the book:

Permitted Assets - A Moving Target

Records and Meetings

Licensing Fees, Annual Fees and Premium Taxes

Offshore or Onshore

STATE DOMICILES

For U.S. businesses, by far most new captive insurance companies are formed onshore as domestic captives. There are many reasons for this, such as to avoid the additional IRS reporting hassles of an offshore captive, but the biggest reason is simply that the states have become very competitive with  the offshore jurisdictions and now often offer more quality service at effectively lower net cost. Taking this into account with the fact that there is nothing shady about a domestic captive while the offshore jurisdictions inevitably have the lingering odor of offshore tax evasion and sleaze, and you can see why domestic captive formations have exploded at the expense of offshore captive formations that have fallen off.

Arizona

Hawaii

Kentucky

Montana

South Carolina

Utah

Vermont

OFFSHORE DOMICILES

In the early years of captives, no U.S. states had laws that treated captives any different than other insurance companies. This meant that a captive had to comply with very high capital and licensing requirements, rate filing requirements, policy filing requirements, and a bunch of other costly regulation that made no sense in the captive context. Thus, most captive insurance companies were formed outside the United States ("offshore"), usually in zero-tax or low-tax jurisdictions that also enticed captives with tax savings.

These days the IRS and Congress have eliminated the tax advantages for offshore captives except in rare circumstances, and more than half of the U.S. states have adopted captive enabling legislation so that it is just as easy (if not more so) to form a captive domestically. This has caused offshore captive formations to plummet and indeed even many existing captives are moving onshore. Still, there are special and unusual circumstances for offshore captives make sense for U.S. owners.

Bermuda

British Virgin Islands

Cayman Islands

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