In this video, Bruce Wright, partner at Eversheds Sutherland (US) LLP discusses direct procurement taxes in the context of captive insurance. Most states have a statute that is either a direct placement statute or an industrial insured statute. The direct placement statutes generally provide that, in one way or another, the insured has to leave the state to negotiate, obtain, and pay for an insurance policy before returning to the state with the policy. Industrial insured statutes are somewhat different in that they allow an insurer that is not licensed in the state to utilize the statute to write business in the state.

What we are seeing now is much more of a compliance concern with direct placement taxes, which Mr. Wright believes will be an ongoing issue for captive insurers. With feasibility studies, this has become a more regularly added cost of running a captive, according to Mr. Wright.