DOMICILE FOR CAPTIVE INSURANCE COMPANIES
FSM is the nearest and most Japanese friendly captive insurance domicile:
- As of September 2015, seventeen Japanese controlled captive insurance companies have been licensed and are operating in the FSM.
- More Japanese captives have moved or established in the FSM in the last five years, than in all other domiciles combined.
- Nine captive managers, including five of the eight largest in the world, have been licensed in the FSM.
- Thirty-one infrastructure and service providers are members of the FSM Captive Insurance Council, Inc.
What a captive Insurance company is:
- A “pure captive” is wholly-owned by one parent
- The parent is usually NOT an insurance company
- Captive is formed to insure the risks of the parent
- Located offshore or onshore, but usually in a different jurisdiction
for tax and regulatory reasons
- Captive insurance co must be licensed (by FSM)
- Regulated by captive-specific legislation
There are over 7,000 captives in the world and growing with over 3.000 from the United States but about 100 from Japan so far. They are domiciled in one of 67 jurisdictions
or domiciles, including Bermuda, Cayman Islands, Vermont, Hawaii, Singapore and
Benefits to organizations registering captive insurers in the FSM:
- Three classes of captives: pure, associated, and Multiple Corporate Captive (similar to PCC)
- Tax advantages: a 21% corporate income tax rate, and premium taxes capped at $20,000
- Foreign Exchange: FX risks are reduced, by functional currency choices and tax payments made in other currencies
- Operating costs: legal, accounting, agency, principal representative and captive management costs are lower
- Languages: several service providers have Japanese language capabilities
- Redomestication: existing captives can redomesticate to the FSM, to avoid extra costs and dissolving a legal vehicle
- No resident director: unlike certain domiciles, a resident director is not required
- Loans to parent: unlike certain domiciles, loans to parent are allowed up to 50% of assets
- CPAs and actuaries: captives are permitted to use Japanese CPAs and actuaries
- Minimum capital: the FSM requires captives to have a minimum of $1 million in capital