While Montana is, in terms of population, one of the smallest US states, the opposite is true when it comes to captive insurance companies.
With 262 captives at the end of 2023 (including dormant captives and cell captives), Montana is one of the largest captive domiciles in the United States.
Captive managers and others say a key reason why Montana has grown so significantly since the passage of its captive statute in 2001 is the top quality of its captive regulatory staff.
"Regulators respond very quickly to questions. They will work with you to find solutions," said John Huth, chairperson of the Montana Captive Insurance Association and an independent captive director in Helena.
Montana's top captive regulators say they make it a point to be readily available.
"We answer our phones here in Montana. You can call some federal and state government agencies and get voicemail and recordings, but we answer our phones and are responsive," said Tal Redpath, captive insurance examiner in the Office of the Commissioner of Securities and Insurance, Montana State Auditor, in Helena.
"I started in the private sector and had experience working with a number of domiciles. Prior to joining the Montana captive program, I had structured captives for over 10 years and appreciated the way they handled business even before I relocated to Montana," said Patrick Hunter, an examiner who also works in the Office of the Commissioner of Securities and Insurance.
Captive executives say they enjoy working with Montana's captive regulators.
"Montana continues to be one of the top domestic domiciles we recommend for new captive formation and operation. The captive regulatory team offers a firm but flexible approach on captives, is always responsive, and willing to hear out a new idea for a captive insurance program," said Joe Streck, assistant vice president, consulting and management, at Innovative Captive Strategies in Bigfork, Montana.
At the same time, Montana lawmakers have done their part to keep the state's 21-year-old captive statute up to date.
For example, legislation passed in 2011 gave captive sponsors the authority to create incorporated cells within a protected cell captive insurer.
In 2013, Montana lawmakers passed legislation to allow Series LLC formations, a structure that has proven extremely popular for captive insurance companies.
Then, in 2015, the legislature changed the law to provide public entities with the authority to form a captive, a change that at least one public entity has utilized.
"We found Montana to be very competitive as a captive domicile with regulators that were very professional and easy to work with," said Alan Hulse, CEO of the Montana Municipal Interlocal Authority in Helena, which earlier set up a captive in the state.
"The time was right" for that public entity, Mr. Redpath said, adding that he expects the formation of more public entity captives in the future.
Montana's minimum captive capitalization and surplus requirements vary by captive type, with, for example, a $250,000 requirement for single-parent captives and $500,000 for risk retention groups and association captives. In the case of protected cell captives, the capitalization and surplus requirement is $500,000 or $250,000, if there are less than 11 cells and the risks are homogeneous.
A hidden gem, state captive regulators note, in Montana's captive statute is an entity type known as a captive reinsurance company, which is the equivalent of what other domiciles call an agency captive. The capitalization and surplus requirement for a captive reinsurance company is one-half the normal capitalization. For example, the capital and surplus requirement for a single-parent captive reinsurance company is just $125,000.
