1. Offshore vs. Onshore
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2. Anne Marie Towle, CPA Nicola Neilon, CPA Robert Vogel, CPA
Offshore vs. Onshore
Anne Marie Towle, CPA
Vice President, Senior Captive Consultant Willis Global Captive Practice – Chicago, IL
Nicola Neilon, CPA
Partner , Casey, Neilon & Associates, Strategic Wealthcare Advisors, Carson City, NV
Robert Vogel, CPA
Vice President , Pro Group Captive Management Services - Carson City, NV

3. Offshore vs. Onshore
The selection of a captive’s domicile is one of the most important decisions involved in a captive feasibility study. And the first critical question that needs to be resolved is “onshore or offshore?” This is such an important issue that it needs to be resolved before any of the other issues are addressed since all financial and operational assumptions are dependent on the domicile chosen.
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4. Domicile Selection Offshore vs. Onshore
Domicile decision metrics:
Capitalization and surplus requirements
Regulatory environment
Availability of local infrastructure expertise
Political considerations
Cost of operations
Tax Considerations
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5. Capitalization and Surplus Requirements
Offshore vs. Onshore
Capitalization and Surplus Requirements
Capital Requirements are generally lower off shore than onshore
Example
Utah Pure Captive $250,000
Bermuda Class 1 Pure $120,000
However, less capital is not always better
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6. Regulatory Environment
Offshore vs. Onshore
Regulatory Environment
US regulatory governance has State and National accreditation standards that focus on solvency, stability and protection of insured's
Offshore domiciles governance is individual per country, can change easily and the focus generally on financial dollars flowing into that country
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7. Availability of Local Infrastructure And Expertise
Offshore vs. Onshore
Availability of Local Infrastructure And Expertise
Onshore domiciles have been conducting the “business of captives” since 1970’s and still developing in terms of service providers, regulatory experience and choices
Some Offshore domiciles have been conducting the “business of captives” since the 1800’s, yet others are much newer however tend to be rich with service providers but not necessarily with the same transparency as onshore
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8. Political and Perception Considerations
Offshore vs. Onshore
Political and Perception Considerations
Offshore
The American consumer has become acutely opinionated on U.S. corporations conducting their affairs offshore and could harm companies reputation.
Patriot Act
911
Money laundering
Reputation
Onshore
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9. Cost of Operations Offshore vs. Onshore Cost of Service providers
tend to be 20% more offshore
Cost of Travel and services
Ease of geographic location
Conducting business between different time zones
Natural disasters and the interruption of business activities
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10. What does this mean to you?
Offshore vs. Onshore
U.S. Taxpayer?
Why Insurance Matters?
Why Offshore?
Why Onshore?
What does this mean to you?
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11. Offshore vs. Onshore
U.S. Taxpayer ?
The process of selection a domicile begins with a determination of the financially optimal tax treatment of the captive facility:
Do we want the captive to be a U.S. taxpayer?
if no, then the captive will need to be offshore;
if yes, then the captive may be either offshore or onshore.
If the captive is not going to be a U.S. taxpayer, then which offshore domicile is optimal?
If the captive is going to be a U.S. taxpayer, then which domicile (offshore/onshore) is optimal?
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12. Why Insurance Matters Offshore vs. Onshore
Tax deduction for premiums paid to captive by policyholder
Favorable insurance tax treatment of captive (deduction for discounted insurance reserves, unearned premiums)
– Offshore CFC captives - Subpart F income
– Domestic captives - direct federal income tax
Onshore captives
– Possible IRC § 831(b) investment income only taxation
Offshore captives
– Possible IRC § 953(d) onshore tax election
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13. Why Offshore Offshore vs. Onshore
Traditionally, off-shore domiciles have been chosen by large global organizations because of
Tax benefits
Lower minimum capitalization requirements
Less conservative premium-to-surplus ratio requirements
A depth of experience working with global organizations
Easy access to offshore risk transfer markets
Flexibility of regulation
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14. Why Onshore? Offshore vs. Onshore
Currently over 30 domiciles have enabling captive insurance legislation
Tax benefits
Ability to write employee benefits in U.S. captive
A depth of experience working with small, medium and large organizations
Flexibility of regulation
Desire to be a U.S. Taxpayer
Lower operating expenses
Ease of accessibility
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15. What does this mean to you?
Offshore vs. Onshore
What does this mean to you?
Recommendations:
Work closely with captive consultant, tax and legal advisors to determine best option for your company
The initial option may change to a different domicile in the future due to economic, regulatory or company goals
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16. Thank you for your participation today Questions?
Offshore vs. Onshore
Thank you for your participation today
Questions?
Anne Marie Towle, CPA
Vice President, Senior Captive Consultant Willis Global Captive Practice – Chicago, IL
Nicola Neilon, CPA
Partner , Casey, Neilon & Associates, Strategic Wealthcare Advisors, Carson City, NV
Robert Vogel, CPA
Vice President , Pro Group Captive Management Services - Carson City, NV
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