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Captive.com
On-The-Spot Coverage
Monday, November 13, 2006 16th World Captive Forum Delaware: Corporate Gateway to the USA By Chris Mancini, captive.com, LLC The morning of Monday, Nov. 14, was set aside for domicile presentations, with the afternoon being reserved for the ever-popular golf tournament. Even as I write this, the view from my balcony reveals foursomes on the course, enjoying 80-degree sunshine, a light breeze, and the inevitable frustration of cajoling a disinclined white ball to find its way from the tee to the expectant cup. For myself, I prefer not to subject myself to this level of mortification, since my life features plenty of other embarrassments without adding golf to the list. Unfortunately, it was not possible to be present at all of the morning’s presentations. Because Delaware is such a new domicile, it made sense to attend their session to give captive.com visitors a sense of the history behind Delaware’s captive legislation, along with some facts and opinions on where they are heading. Before a small but appreciative audience, Richard Klumpp from Wilmington Trust and William P. White, the Captive Insurance Program Administrator for Delaware, delivered a concise summary of the specifics on how Delaware has positioned itself as an extremely attractive option for captive formations and redomiciliations. Richard Klumpp opened the session with specifics on why Delaware is the “Corporate Gateway to the USA.” Despite Delaware’s relatively diminutive geographical size, it is impressive that more than 750,000 business entities have their legal home in the state, specifically:
It is clear that the state’s corporate laws are flexible and modern, and updated annually. This includes both corporation and alternative entity statutes. .Favorable taxation rates, the annual fee structure, the legal/court climate, business infrastructure, and an exceptionally responsive state government add to the benefits when considering Delaware as a captive domicile. Mr. Klumpp continued with a brief history of how the domicile’s Captive legislation came to be. Almost 2 years ago captives came up when considering legislative updates to the state’s comprehensive insurance laws. Amazingly, in a period of 3 months from April through June of 2005, Delaware’s insurance legislation was summarily updated to enable captives to enter the business community. This is not unusual for Delaware – it’s simply how they do business. Clearly, flexibility and speed make this domicile special. Bill White took the floor next, continuing the session with his own thoughts. Said Bill, “The interesting thing about Delaware’s captive law is that it is not stand-alone legislation.” He went on to explain how the captive component of the insurance statute gives the captive access to all Delaware’s corporate entity laws, including the state’s existing legal and financial services structure. This feature allows considerable “big picture” flexibility for developing an effective risk management strategy for organizations that utilize captives as a part of the corporation’s overall business structure. “The captive insurance law is innovative and responsive,“ reported White. He further illustrated how the captive can organize on any structural basis available to the larger corporate community such as Llc, trust, reciprocal, or any other corporate structure that is approved by the commissioner. As an illustration of this innovativeness, he added, “Captives can own captives in Delaware.” Prior to accepting his current position in Delaware, Bill took a hard look at the state from the standpoint of whether their laws would be an asset or an impediment to the captive regulatory process. Clearly, he came away favorably impressed, and ultimately accepted the position. He shared with us a few of the aspects of the domicile that he personally found most attractive. One tactic that I found particularly unique is that in conjunction with passing the captive component within Delaware’s legislation, several years worth of funds were allocated to the program up front. This funding gives new captives considerable monetary assistance at startup, continuing until they can move forward and operate on their own. Bill went on to describe the state’s consultative regulatory approach, whereby regulators are literally participants in the overall business marketplace. A dedicated staff focused on current and emerging market needs is in place. Interestingly, Delaware is currently working on an electronic, on-line process whereby numerous transactions, including payments, may be accomplished online. Captive.com anticipates an updated Delaware website late in November. Watch for that, coming to the Domicile Showcase soon. Delaware recognizes that the ART market is changing. In the past, captives were formed because of pricing, predictability, and inconsistency in coverage. While these considerations are still important, there is currently greater motivation based on capacity alternatives. TRIA, sidecars, and securitization are key components involved in current thinking leading to a decision of whether or not a captive makes business sense. Clearly, Delaware is prepared to discuss alternative market regulatory and legislative needs. They are anxious to consult on developing innovative risk financing mechanisms. Finally, they can guarantee clear and timely responses about what is necessary in terms of regulatory requirements. A question and answer period ended the session In response to a question about what types of captives Delaware’s business plan is targeting – new or redomiciliation – Bill made it clear that both types of expansion are in the domicile’s sights. He added that employee benefits is one consideration driving companies onshore from offshore jurisdictions. He offered an example: A corporation’s captive entity in Delaware could be formed to specifically work synergistically with the same company’s offshore captive entities. In this scenario, Delaware can play to its strength, and part of that strength is in their ability to cooperate with other domiciles, and work with them to expand options for both the domicile and the corporation forming the captive through a creative variety of captive structures designed to enhance the company’s business objectives. In summary, Delaware brings to the captive world flexible and modern statutes. Captives domiciled in this jurisdiction will benefit from respected court systems and legal services, exceptionally business-friendly service, an unsurpassed infrastructure, and a “can do” attitude that will serve them well. I wouldn’t bet against them! More information, contact: William P. White Richard F. Klumpp, JD, CPA
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