What should you do before you form a captive?
Interview the providers, build the governance, take the tax advice, then apply
Fenhua Liu's advice is about what happens before an application exists. Start from the department's published list of captive service providers, managers, CPAs and actuaries, and interview them rather than taking the first name offered. Make sure the captive is being set up as a genuine risk management solution aimed at long term success, develop the corporate governance to support that, and negotiate with providers on both service quality and cost. She also suggests taking tax advice on whether a captive is right for the business at all.
Liu calls this pre work, and the word is doing something. None of it happens inside the application, and none of it is the regulator's job. It is the part an owner either does or skips, and skipping it is visible later.
The starting point she gives is concrete: the department publishes a list of approved service providers, including captive managers, CPAs and actuaries, and the advice is to interview them.
Key takeaways
Liu says to start from the department's published list of captive managers, CPAs and actuaries and interview them rather than appointing the first name offered.
Negotiate providers on service quality as well as cost, and set the captive up as a long term risk management solution with governance built to support it.
She also advises consulting tax advisers on whether a captive is right for the business before applying.
Interviewing rather than appointing is the actual advice. She frames it as finding the services you actually need, which presumes knowing what those are, and then negotiating with providers on who can deliver the best service at a sensible cost.
Both halves matter. Comparing only on price selects for the thinnest scope of work, which is the trap Utah's director described when he said management fees vary because firms sell very different jobs.
From the conversation
Fenhua Liu
Assistant Deputy Commissioner and Director of Captive Insurance, Connecticut Insurance Department
“they're going to negotiate with the service provider to see who can provide the best services with very high cost efficiency”
Transcript
Read the full transcript 4 turns
HostThat makes sense. Ben why is there anything you'd like to leave business owners looking to form a captive and it can etiquette with any piece of advice also how could they contact your department if they're interested in learning more
Fenhua Liu? Yeah that's a good question. For capital owners I would if I can give them an advice I would say they need to find they're going to find a different captive service provider available on the website. Our website we have about over a hundred twelve or twenty I think capital service provider including capital managers, CPA's and actuaries so they've got an interview with them to find
Fenhua Liumake sure they find the service they need and they also need to make sure they set up the captive for the good with management solution for long term success so they need to develop a good couple of governance and they're going to negotiate with the service provider to see who can provide the best services with very high cost efficiency. So that's very it's a pre-work which
Fenhua Liuis good. They may also need to consult with tax advisors to see if this is good for them
Citations
Sources
- Captive Insurance Regulation, Connecticut Insurance Departmenthttps://portal.ct.gov/cid/mission-and-divisions/captive-insurance
The views expressed are those of the featured guest, drawn from a recorded conversation, and reflect their own professional experience. Nothing on this page is insurance, tax, legal, or investment advice. Consult your own advisors about your specific situation.
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