South Carolina DOI
Standing out from the crowd
Joe McDonald of the South Carolina Department of Insurance explains why South Carolina has the stability and continuity to stand out as a captive insurance domicile of choice.
“We are prepared to meet the needs of owners and service providers and respond as changes in the market take place.”
Joe McDonald
South Carolina DOI
How does the captive insurance market currently look in South Carolina?
We’re seeing steady and healthy activity in the captives market in South Carolina. Our portfolio of companies has grown and there remains a lot of interest in placing captives here. As the global interest in alternative approaches to risk has increased, South Carolina has certainly benefited.
The continued mutual support that exists between the public and private sectors in the captive insurance space in the state has done a lot to help drive business here. That, along with the stability afforded by the continuity in the perspective of leadership has created a framework for captives and service providers to flourish and take advantage of how the global insurance market has impacted alternative risk.
What does South Carolina offer as a domicile for captives?
We offer many things. We are a mature domicile with experienced regulators and a competitive statute and tax structure. Our attitude toward captives regulation is open-minded, but rigorous when necessary. We apply a balanced approach that is thoughtful, consistent, and flexible.
The philosophical stance we take to regulation informs everything we do. This stance is rooted in fundamentals that focus on ensuring solvency and good governance and operations, while keeping in mind who is ultimately impacted by losses and insolvency. We strive to provide excellent service that will add value to the captive. We do this with an understanding and insight based on our cumulative knowledge acquired through years of learning.
We want quality business here in South Carolina and we want to do business with like-minded professionals who have similar standards and goals.
Why did South Carolina become a captive insurance domicile?
The foresight of the regulators and legislature at the time our statute was passed in 2000 is the reason South Carolina became one of the first onshore captive domiciles. These leaders saw an unmet need in the market that would allow companies to finance and control their own risks in more sophisticated ways.
This offered the opportunity for owners to benefit from their risk management efforts and their own loss history and not be beholden to the cyclicality of the market, but to take more control of their own futures.
What makes South Carolina unique as a domicile?
As more states pass captives legislation, it can become difficult to stand out from the crowd. What makes South Carolina unique as a domicile is our autonomous captive insurance division, our dedicated business plan change analyst, the types of captives our statute allows, the experience of our team, the support we receive from director Michael Wise, and the relationship with industry and the robust service provider network we have in the state.
Geographically we are in a convenient place to get to, and South Carolina is a fabulous place to visit and hold annual board meetings, with Charleston having one of the most concentrated networks of captives professionals anywhere in the US.
Do you see any trends emerging in the captive insurance market?
The most notable trends I see are the number of formations; retentions continuing to increase; and new lines being added to existing programmes. Also of note are the types of captives being formed. We are seeing a lot of interest in sponsored cell arrangements and group captives.
In South Carolina we have the ability to license special purpose captives that give the director immense discretion for proposed programmes that don’t meet the statutory definition of any other type of captive. We’ve seen an uptick in these licences as companies often require coverages that can’t be obtained in the commercial marketplace or are not financially feasible.
What do you foresee in the future for South Carolina’s captives market?
No-one knows the future, but with director Wise leading the Department of Insurance and the world-class team we have here in South Carolina, we are prepared to meet the needs of owners and service providers and respond as changes in the market take place—so the future for South Carolina’s captives market looks bright.
Some statutory and regulatory changes are approaching in the upcoming legislative sessions. Most of the proposals to changes in our statute come from input from the industry and internal suggestions on how we can increase efficiencies and provide more flexibility and discretion when needed, while also maintaining high standards for regulation.
That said, our statute was written in a way to give regulators and industry a spectrum of existing options and approaches. This means that we don’t have to make statutory changes annually to keep up with other domiciles or to remain competitive—we have the tools in place to do so already.
Joe McDonald is director of captives at the South Carolina Department of Insurance. He can be contacted at: jmcdonald@doi.sc.gov
Share this page
Image credit: Video by Alexander Petrov' on Envanto