Sunday, September 2, 2001

Hawaii attracts
100th offshore
insurance company

Hosting companies'
insurance subsidiaries
is getting popular

By Lyn Danninger

HAWAII HAS LICENSED its 100th captive insurance company, Aquablue Insurance Company Inc., as part of a small but lucrative niche industry expanding in the islands.

The company, owned by Citizen Watch Co. Ltd. of Japan, is the second captive insurer to be directly owned by a non-U.S. parent company and to insure non-U.S. based business, according to the state Insurance Division.

Legislation allowing captive insurance companies was passed in Hawaii 1986. The state now ranks as one of the top 10 locations in the world for captive business and one of two U.S. states to have issued 100 licenses.

For large companies, creating their own insurance subsidiary, known as a captive insurance company, can be a cheaper than contracting with an outside insurance company. With a captive insurance setup, the parent company enjoys a return on premiums in the form of a dividend while still not shouldering all the risk.

Such business is good for Hawaii, said state Insurance Commissioner Wayne Metcalf.

"It creates opportunities for professionals such as accountants, managers, attorneys and other insurance professionals," he said.

It's also been financially rewarding for the state, Metcalf said.

For the year 2000, Hawaii captives maintained more than $1.6 billion in assets, wrote $264 million in premiums and maintained $275 million in investments through local Hawaii financial institutions, he said. Among the companies that have set up insurance subsidiaries in Hawaii are Nike, Marriott and Clorox Co.

Setting up captive insurance companies in Hawaii has become increasingly attractive to both national and multinational companies in recent years. About 16 states permit captive insurance companies, but Vermont and Hawaii have so far had the most successful programs.

In 1998, Hawaii created the captive insurance branch as a part of the state Insurance Division. The branch both regulates and promotes Hawaii's captive insurance program.

Captives have traditionally been located in tax havens such as the Cayman Islands and other offshore locations around the world.

But in recent years, those destinations have been facing more scrutiny, have been pressured to clean up their financial industries by governments and multi-national groups, such as the Organization for Economic Cooperation and Development.

That has helped places like Hawaii become more attractive Metcalf said.

"The companies looking to establish a domicile in Hawaii are well known, solid, reputable companies that are concerned about maintaining their reputation. They're also looking to establish somewhere with a sound but coherent regulatory scheme," he said.

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