Captive Insurance in British Columbia
Canada's first choice for captive insurance
British Columbia leads the way as a domicile for captive insurance
- Taxation
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- Tax deferral for captive insurance premiums
- No federal excise tax
- No provincial income tax on foreign risks
- Tax rate of 19% (15% in 2012) on foreign risks; 30% on domestic risks
- Deductibility of loss reserves
- No “mind and management” issue
- Low tax risk
- Ability to utilize any captive losses against other Canadian income
- Reduced offshore tax rate may be offset by increased costs of operation
- Reduced offshore tax rate is not available for Canadian risks
- A positive regulatory environment
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- Flexible captive insurance legislation
- No specific solvency ratios
- Easy access to reinsurance markets
- Considerable latitude in the scope of allowable investments
- Reasonable capitalization requirements:
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- Cdn $200,000 minimum share equity
- Availability of high quality professional services
- Economic, political and social stability
- Compatibility of local language, currency and customs
- Time zone convenience for Pacific Rim and North America
Income earned by a captive insuring non-resident property or events qualifies for a full refund of provincial income tax and incurs only the federal corporate income tax rate of 19% in 2009
Recent News
An American perspective highlighting use of a captive insurance company for Canadian businesses, groups, pools, entities, associations, and producers with potential loss and liability exposure from operations and exports to the US. Discussion of a variety of purposes of using a captive insurance company to treat these exposures and an overview for Canadians as to the process of determining whether a captive would make economic sense.
Choosing a domicile: onshore vs. offshore
The benefits of locating onshore:
- A captive domiciled onshore is a domestic insurer for Canadian tax. Offshore captives may be subject to federal excise tax (10% of premiums) on Canadian risks
- Lower costs for audit and legal fees, travel, and management in BC
- No tax risk or tax governance issues associated with offshore structure
- Valuable executive time is not required for meetings offshore for tax purposes
The benefits of locating offshore:
- Greater regulatory flexibility. Offshore captives usually allow lower minimum capital requirements and may not require regulatory examinations
- Taxes on income are negligible
- Can offer coverages not offered onshore, i.e. certain third party risks
- Greater flexibility to adapt to changing market conditions.
