The Federated States of Micronesia’s captive law was enacted in 2006. It was intended to provide Japanese corporations with an optimal means of implementing a captive insurance company in a

conveniently located domicile with a prudent and responsive regulatory and legislative environment.

Micronesia is an independent republic that covers about one million square miles in the Western Pacific Ocean. It is located about 3,000 miles southwest of Hawaii and 2,000 miles southeast of Japan. The country has full diplomatic relations with nearly 60 countries, including the US, Japan and China. It is also a member of several international organisations including the UN, Asian Economic Development Bank, International Monetary Fund, and World Bank.

Captives are regulated by the Federated States of Micronesia Insurance Board and the insurance commissioner, which are supported by a staff of in-house examiners and financial analysts.

The licensing authority currently allows for single parent and group captive structures with minimum required capital and surplus of USD 100,000, subject to additional amounts as may be prescribed by the insurance commissioner depending on nature and volume of risk retained by the captive.

Captive Insurance Times Domicile Guidebook Captive Insurance Times Domicile Guidebookwww.captiveinsurancetimes.com www.captiveinsurancetimes.com124 125

Federated States of Micronesia

Captive Insurance Times Domicile Guidebook Captive Insurance Times Domicile Guidebookwww.captiveinsurancetimes.com www.captiveinsurancetimes.com126 127

Minimum capital and surplus may be in the form of cash, irrevocable letter of credit or other security deemed appropriate by the insurance commissioner.

Investments are generally required to be made in secure and highly rated securities and other investments, subject to the condition that the insurance commissioner may limit or prohibit any investment that threatens the solvency of the captive.

As of 31 December 2018, there were 25 actively licensed captives that had combined total assets of approximately USD 614 million, total equity of USD 349 million, and written and/or assumed reinsurance premiums of USD 466 million. There were three new

captives licensed in 2018, as compared to five new licenses issued in 2017. All captives are required to file annual audited financial statements, which may be prepared based on US generally accepted accounting principles (GAAP), Japanese GAAP, International Financial Reporting Standards, or other comprehensive basis of accounting.

Annual actuarial certifications are also required to be prepared by members of the American Academy of Actuaries, the Institute of Actuaries of Japan, or other loss reserve specialists as may be approved by the insurance commissioner and the insurance board.

Annual operating costs include a premium tax of 0.05 percent on gross premiums that were

Federated States of Micronesia

not previously subject to tax, less any return or assumed reinsurance premiums. Annual captive licensing and business registration fees are about USD 550. All captives are also required to file a relatively simple annual income tax return that is computed at 21 percent of net income as reported in their annual audited financial statements.

Micronesia’s captive insurance industry is also supported by the Federated States of Micronesia Captive Insurance Council (FSM-CIC), the private sector trade association comprised of service providers and captive owners formed in 2009.

In addition to providing input and comments to the Micronesian National Government, the FSM-CIC hosts an annual seminar on the domicile

in Tokyo updating the marketplace on trends in the captive space. For further information about the FSM captive domicile, please contact insurance commissioner Nakama Sana at nks@fsminsuranceboard.com, or Jim Moonier, president of the FSM-CIC at jim@mra.fm.

Sponsored by

TELEPHONE: 691 320 1830EMAIL: INFO@MRA.FMOFFICE: VB CENTER, SUITE 2A, POHN UMPOMP PLACE, NETT, POHNPEI, FSMMAILING: P.O. BOX 902, KOLONIA, POHNPEI, FSM 96941

The FSM is an independent sovereign island nation consisting of four main

states – Pohnpei, Yap, Chuuk and Kosrae - and is a member of the United

Nations. In 1986 the FSM emerged from its position in the U.N. Trust

Territory system to independence and operates as an associated state to the

United States under a treaty called the Compact of Free Association.

The FSM has a very long and deep government and personal linkages to

the East Asia and Japan, in particular. Japan administered the FSM for about

30 years under a League of Nations Mandate before and during WWII.

Many Micronesians have relatives living in Japan and approximately one if five Micronesians have Japanese heritage.

Moreover, the national government of the FSM has made a long term commitment to serve East Asian

companies with the innovative development of its Corporate Registry

Program and the FSM Captive Insurance Domicile Regime.

Nam Madol - a UNESCO World Heritage SiteFor your reference here is a link: https://whc.unesco.org/en/list/1503

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