Hawaii: Messy Captives Pay More

"Our fees range between $75 and $150 a half-day," he explained. "So the captives that don't have records as well put together as others may incur a higher fee for examination because it takes our staff more time to get through their records."

From a tax standpoint, he said the new law eliminates distinctions between pure captives and group captives.

Under the new structure, all captive insurance licensees will be subject to a flat .25 percent on the first $25 million of premiums, .15 percent on the next $25 million and .05 percent on premiums in excess of $50 million, according to the Hawaii Insurance Division.

The new law, "modifies our premium tax schedule," said Mr. Watanabe. "Rather than have a separate tax rate for groups versus pure captives we now have a single tax rate."

Mr. Watanabe continued that in Hawaii "we don't double-tax premiums into captives. The bulk of other domiciles have a minimum tax or they also tax reinsurance into the captive."

A similar graduated tax structure also exists in Vermont, he said, but both Vermont and South Carolina have a reinsurance tax.

Hawaii, he said, is "looking at a more long-term approach" by supporting its regulatory infrastructure with a combination of fees and taxes.

Mr. Watanabe said Hawaii has so far this year licensed five new captives, with another six ready to be licensed. The total figure for the year, he projected, will be 15.