What is a Captive Company?

1. What is a Captive Company? Captive Companies are a type of self-insurer that are created and controlled by a parent company in order to insure its risks. Captives offer better control over a company’s cash flow, provide coverage that are usually hard to come by, save money on risk management costs, get stable insurance pricing and much, much more. Choosing Correct Domicile Out of the many parameters to be kept in mind while establishing a captive ( or even chooing one for investment ) –Choosing Captive Domicile is one of the most integral ones. Selecting a domicile favourable to the growth of your captive is pertinent to its success and valuation of the captive. The list of domiciles is long as more and more countries wasn’t to seek the economic benefits inherent to providing robust financial infrastructure to international clients. How to choose the correct domicile? Is your captive company positioned for success? Is this where you want to invest your life savings on? Do you have access to the domicile in times of need? So many questions and more when it comes to selecting the right domicile for your intended captive. A few points to be considered during selection include: 1. Regulatory environment of the domicile in question and its recent tax rules. This sets the tone for all future tasks – from licensing to operations. Study in detail captive Laws as

2. the regulatory climate is bound to differ from one captive to another. Business plans from prospective captives must undergo - a. A regulatory review b. Review by panel of experts c. Review by paid actuarial consultants 2. Capitalisation, taxation, and fees. A captive owner gets to comprehend what to anticipate while dealing with regulators through a deeper understanding of the taxation details and capitalisation. Some of the details under this include: Capitalization requirements – Minimum amount of money requisite to commence operations. Surplus requirements – Minimum written premium-to-surplus ratio allowed by captive domiciles. A lower ratio equals less money and higher volume of insurance written. Investment restrictions – From prohibition of certain investments, to mandating specific maximum percentages of funds, one needs to go through all details of restrictions and “admitted assets” Reporting and Auditing – The types as also the frequency with which reports must be filed with local regulatory authorities. Loss reserving requirements – Few domestic domiciles require captives to post-loss reserves depending n their minimum loss ratios. Income Tax and Local Tax – Total written premium and its taxability will differ from one domicile to the other. Government fees – Captives are often levied a charge for operating within certain jurisdictions

3. Formation Costs – Stam tax, registration fees, incorporation expenses etc. come under this. 3. Local Captive Community Assessment Investors need to assess the public as well as the private captive sector in their chosen domicile and ascertain the kind of representation and support that can be availed. The best domiciles will have harmony between the captive regulators and service providers. One would find – in a thriving Local Captive Community, the following: a) Open communication b) Positive relationship c) Professionals focused on supporting industry 4. Onshore/ Offshore Implications This is the final element while choosing the perfect domicile for your captive insurance company. Whether or not the domicile is onshore will have a significant impact on its business. Onshore domiciles have had a history of being stricter than their offshore counterparts. But as US domiciles try ever so aggressively to attract captives, the lines have become blurred and now a list of pros and cons exist for both types. Prospective captive owners and existing owners – both need to let their guiding principles help determine which domicile would be most beneficial to their business plan. Contact US E-mail:- info@captivearuba.com Phone No.:- 0297 2904000 Website:- https://captivearuba.com/