Captives Exec Sees Nasty Interstate War

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By Caroline McDonald

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NU Online News Service, May 15, 11:43 a.m.EST?A bid by South Carolina to lure captive insurers fromother jurisdictions is a sign that a bare-knuckled brawl isunderway for such business, the leader of a captives associationsaid.

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"The gloves are off. It's not a gentlemanly game, it's 'we wantour share and we're going to do anything to get it,'" remarked CarlModecki, president of the Captive Insurance Companies Association,based in Minneapolis.

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His comments came after the South Carolina Captive InsuranceAssociation Inc. scheduled a two-day "Captive RedomesticationSeminar" for June 12-13 in Columbia, S.C.

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Mr. Modecki explained that, "Captives are a hot commodity rightnow. Every domicile wants to get its fair share of them, and eventhough they're being set up at an all-time rate, people still wantto go after some of the older ones." The reason, he said, is thatsome domiciles "have made a commitment to the larger insurancemarket. So I think we're going to see more of this."

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Some of the newly-formed domiciles, he added, are politicallymotivated and "clearly, Vermont's success is why everyone is goingafter" the captive market.

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Even New York, he said, is "talking about redoing its captivelaw, and when you get New York into the game, you're starting toplay in the big leagues."

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Mr. Modecki, principal of Carl A. Modecki Consulting Services inTallahassee, Fla., said that not only has the phenomenon beennoticed, but the topic is being added to CICA's members-onlymeeting, scheduled for Oct. 14 in New York City.

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He said Leonard Crouse, director of captive insurance for theVermont Department of Banking Insurance and Securities, had agreedto participate in the session, "so, it's clearly a topic that's outthere."

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"That people are doing a two-day seminar just shows how muchinterest there is," he added.

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Clayton Ingram, director of business development for the SouthCarolina Department of Insurance, said he is a scheduled speaker atthe seminar, which was the brainchild of the SCCIA.

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"Since we're the new players in the game and we weren't at thetable before, people who located elsewhere may want to reconsidertheir move," he said.

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Mr. Ingram said South Carolina "gets calls all the time" fromcompanies interested in redomesticating. Much of that interest, hesaid, is from offshore relocations.

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"For most of these groups there is really no advantage to beingoffshore anymore," he said. "Most of them have elected to be taxedas U.S. corporations anyway, and the time and expense of operatingoffshore have outweighed whatever positives there were in thebeginning."

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South Carolina, he said, has structured its laws "to make itpossible to do pretty much anything onshore that you can dooffshore," he said.

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Mr. Crouse, the Vermont captive insurance director, is less thanenthusiastic about the seminar's focus. "It's nothing that's everbeen done in this business. Never," he said. "If a company wants toredomesticate, there is a reason for it. This sets a precedent andit's something that's not done."

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Mr. Crouse continued that, "People go where they want to go"because they like the regulations, the location, "or the CFO wantsto go to a certain spot. And what's South Carolina going to offer,"he asked. "Lower taxes? No taxes? No regulation?"

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Mr. Crouse added that if the Vermont Captive InsuranceAssociation were to consider hosting such a seminar, "it woulddefinitely talk to me beforehand, because that's the way weoperate."

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If a captive already established in another domicile "were tocall and ask me why they should go to Vermont I'd tell them,one-on-one," he explained. "But I'm not going to have a seminarsaying move your captive from Hawaii or move your captive fromBermuda and come to Vermont. The brokers will bring those captivesin."

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