Delaware issues 48 captive licenses in 2010

By JERRY GEISEL • Business Finance • February 2, 2011

WILMINGTON, Del.—Delaware licensed 48 new captive insurance companies in 2010, a record that doubled the number of captives to 96 at the end of the year.

A majority of the new captives were small and qualify for special tax treatment under Section 831(b) of the Internal Revenue Code. Under that section, up to $1.2 million in premiums can be paid to the captive without the premiums being included in the captive’s taxable income.

In addition, Delaware attracted about 10 captives that previously were licensed in domestic and offshore domiciles, said Steve Kinion, director of the Bureau of Captive and Financial Insurance Products in Wilmington.

Delaware passed its original captive statute in 1984, joining what then was only a handful of U.S. states with a captive law. But captive growth didn’t start to take off until the passage of legislation in 2005 that slashed premium taxes and allowed sponsored or cell arrangements and special-purpose entities whose sponsors don’t fall into traditional business categories.

Mr. Kinion said he expects growth to continue in 2011, with the state expected to issue its 100th captive license early next month.