While many factors contribute to a final decision around domicile selection – and every client may have unique requirements – costs, tax, and the regulator’s expertise are some of the most common considerations for captive owners.

Speaking on the latest episode of the Global Captive Podcast, EY’s Mikhail Raybshteyn and Ted Clabault were joined by Patrick Theriault, of Strategic Risk Solutions, to discuss the shifting domicile landscape and what goes into the selection process for new and existing captives.

Captive consultants will typically compile a list of suitable domiciles for clients to choose from, based on a number of factors and variables, often utilising a rating system.

“We have clients who may come to us with a predisposed notion of where they want to be, or maybe they’ve been to a domicile and want to confirm their understanding,” said Mikhail Raybshteyn, partner and Americas captive insurance services co-leader at EY.

“On the other hand, we may have clients who come to us and say they have no idea where they want to go.”

Raybshteyn explained the number one factor he looks at for domicile selection is economic costs, “that’s the first thing – how much it costs to be in one jurisdiction versus another.”

“Now, those economic costs may or may not be the deciding factor,” he added.

Proximity to the domicile, experience with the location, or sometimes the number of captives, and the knowledge of a particular industry can also play a role.

“We have domiciles that develop very specific knowledge of certain industries – healthcare, automotive, warranties, or oil and gas,” Raybshteyn said.

“Going into a domicile that may be marginally more economically favourable, but where you would be the only oil and gas captive, may not be the most advantageous choice.”

Direct and indirect taxes can also be a factor depending on the geography and operations of an insured, and these may impact the feasibile domiciles available to them.

“While they may or may not exist outside the US, they can be felt quite significantly, especially if it’s a large captive.”

Raybshteyn said when he goes down the list of factors to determine which ones move the needle for the organisation, tax considerations do not always feature.

“A client might say, ‘fine, I’ll pay an extra few thousand dollars in tax, but the regulator is much better,’” he added.

“Or 70% of captives in the domicile are in their sector, so they want to be there because of the knowledge base in their particular industry.

“We weigh these factors, but ultimately, it’s a business decision for the client to decide where they want to go.”

Patrick Theriault, managing director at Strategic Risk Solutions, said one nice thing about being in the captive business is that clients get to select their regulator.

“Ultimately, they have choices, and they can make the choice that’s best for them,” he said.

Theriault explained for that reason, the number one factor for SRS is selecting a domicile with clients is the regulator because “at the end of the day, you’re going to be dealing with them for a long time”.

“Ease of doing business is probably the second decision factor for us, and cost is certainly right there as well,” Theriault added.