He tells NU Online News Service that the domicile of Barbados has advantages for Canadian companies because it has a tax treaty with Canada.

Although the captive industry in Canada is still getting off the ground, he says companies in Canada have many of the same reasons for forming captives as those in the United States.

An example, he explains, is a company with a risk profile higher than many other companies in the same industry that doesn't feel it is getting an appropriate premium for the risk.

Steven Beeghly, with Kreger Beeghly, PLLC in Seattle, Wash., says in a white paper on the Canadian Captive Insurance Association website that captives could benefit Canadian businesses with U.S.-based risks, including branch offices, subsidiaries and products shipped to the U.S.

He says that an obvious reason for a captive is that the general price of insurance is much lower in Canada than the U.S. Generally speaking, he adds, “the USA has been loath to adopt tort caps or other mechanisms to limit damages in a tort suit that we understand may help to reduce costs in various provinces. Moreover, each state in the U.S. has its own set of insurance rules.”

He notes that this in effect creates one country with “seemingly 50-plus different regulators, with different sets of laws. The regulatory red tape adds to costs, not to mention different litigation costs.”

A Canadian company with workers in the U.S. may want to form a captive for claims control, customized coverage, profit, budget consistency, reinsurance access, group/ pool benefits and possible U.S. tax benefits, he adds.