States competing fiercely for lucrative captive insurance business
Iowa is expected to enact legislation in the coming weeks that will open the state up for lucrative captive insurance business.
Gov. Kim Reynolds is expected to sign the bill into law, making Iowa the 36th U.S. jurisdiction (including the District of Columbia) to adopt a captive insurance statute. The race for captive insurance business picked up considerably in recent years.
Captive insurers are essentially a form of self-insurance whereby the insurer is owned wholly by the insured, as defined by the National Association of Insurance Commissioners. They are typically established to meet the unique risk-management needs of the owners or members. Additionally, they provide potentially significant tax advantages, which can prove integral to longevity and company profitability.
Attracting captive insurers yields revenue for states in the form of fees and premium taxes. For many years, Vermont and Delaware were virtually the lone states to court captive insurers, which traditionally domiciled in Bermuda or the Cayman Islands.
That has changed in the past decade.
Several states, from Tennessee to Arizona to South Carolina are touting their effectiveness at attracting captive insurance business. States such as North Carolina and Vermont recently passed updated captive laws to increase their attractiveness as a captive destination:
North Carolina’s new law includes a waiver of premium taxes for the year in which any captive insurer, whether onshore or offshore, moving its home base to the state, as well as a waiver of the next year’s premium taxes. Additionally, new law modifies the captive insurer audit exemption provision by granting the commissioner the authority to consider captive insurers’ requests for an exemption from an audit when the cost would pose a financial hardship.
Vermont’s made several updates to its captive insurance law, such as improving the confidentiality of company information and increasing funding for the Vermont Captive Insurance Division’s operations.
“Vermont is the gold standard when it comes to captive insurance regulation,” said Deputy Commissioner of Captive Insurance Sandy Bigglestone. “Captive owners have consistently communicated the need to operate in a jurisdiction with quality regulation because it adds value to their investment in managing their own risk and provides support for the captive operations of the organization.”
Iowa’s captive law
Iowa’s captive statute does not specify an effective date, but is expected to become effective July 1, “bolstering Iowa’s robust insurance industry with a modern, competitive statute,” writes Brian Thomas of the law firm Womble Bond Dickinson.
In addition to setting tax rates, the bill permits Insurance Commissioner Doug Ommen to suspend or revoke certificates to conduct business and creates a Captive Insurance Regulatory and Supervision Fund, for deposit of all revenue sources.
It authorizes the formation of pure, association, protected cell, special purpose and industrial insured captives, establishes regulatory reporting and examination requirements, and gives regulators the responsibility of administering the law and promulgating rules under it, Thomas explained.
The bill “is modern, well written and bears a strong resemblance to predecessor statutes from other jurisdictions,” he concluded.
InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.
© Entire contents copyright 2023 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.
The post States competing fiercely for lucrative captive insurance business appeared first on Insurance News | InsuranceNewsNet.
