Captive Insurance Domiciles Spreading as More States Adopt Legislation
It was Florida last year, then earlier this year North Carolina, and more recently Texas that passed legislation to allow captive insurance companies to be set up in their states. That spells good news for competitive, already-established captive states, as they see this as a sign that captive insurers is growing. In fact, of the leading captive states, Vermont and Utah say that the addition of new states embracing the captive insurance sector is a huge business opportunity for everyone.
“If I look at the captive industry, where there are opportunities and where I think it can evolve, I think it’s huge,” said Ross Elliott, captive insurance director for the Utah Insurance Department, in an interview with A.M. Best.
David Provost, deputy commissioner, captive insurance in the Vermont Department of Financial Regulation, echoes Elliot’s sentiment, saying that “ultimately all 50 states will become captive insurance domiciles.” Vermont was one of the nation’s first states to pass a law making it a captive domicile three decades ago and it has become the world’s third-largest. “Part of the states success,” Provost said, “was the luck of being among the first to allow captives. We did it very well. We took it seriously and committed resources to it.” In fact, since Vermont formed its captive insurance industry, 1,400 jobs have been created, generating $25 million in revenue.
Captives Now For Middle Market, Smaller Businesses, Too
When captives first began more than 50 years ago, they were vehicles for larger companies (Fortune 500) to use to insure their own risks. Today, the middle market tier of business has become increasingly exposed to captive insurance as an idea, due to its many benefits, and stands as a growth opportunity for the insurance industry. Elliot said there is no way of knowing how many companies in the middle-tier business bracket might want to jump into the captive arena. “Could there be several thousand eligible? Possibly. It’s a great opportunity for the whole industry.”
The benefits of a captive include: ability to get difficult coverages; active participation by shareholder/insureds in decisions influencing underwriting, operations and investments; ability to negotiate premiums with underwriters; implementation of closely targeted loss control; greater control of claims settlements to lower costs; tax advantages, among others.
Businesses when setting up captives have several captive solutions from which to choose depending on their needs and objectives, including:
- Risk Retention Group
- Single Parent Captive
- Association Captive
- Agency Captive
- Protected Cell Captive
- Series, LLC Captive
Caitlin-Morgan can help you establish any one of these captives for your clients. Just give us a call at 877.226.1027
Source: A.M. Best