Kentucky Department of Insurance
Unlike many other US captive insurance company domiciles, Kentucky has not seen its captive count increase in recent years.
In fact, Kentucky's captive count and premium volume have fallen. As recently as 2014, Kentucky had 119 active captives, generating close to $120 million in premium volume.
By the end of 2020, though, the number of Kentucky-licensed captives had fallen to just 45. While premium volume for 2020 is not yet available, in 2019 premium volume had slipped to about $107 million.
State officials say a good portion of the fall in licensed captives can be attributed to declines in energy, steel, and manufacturing companies doing business in the state, while some captives moved to other domiciles.
In addition, some of that reduction was due to a one-time situation in which a captive manager left the state and took its business elsewhere, said Stuart Ferguson, managing director of the Underwriters Group Inc. in Louisville and chairman of the Kentucky Captive Association.
But that decline has eased during the last couple of years. For example, the state's captive count dropped by 11 in both 2020 and 2019. That's sharply less compared to 2014 and 2015 when Kentucky lost 31 captives.
In fact, experts say Kentucky has many attractive qualities as a captive domicile, which could lead to more growth ahead.
"Kentucky has the capacity to grow. The captive law is a very good one and the state captive regulatory staff is comprised of talented and very experienced individuals," said Chaz Lavelle, a partner with the law firm Dentons Bingham Greenebaum L.L.P. in Louisville.
"We have high-quality regulation, with regulators easily accessible," Mr. Ferguson said.
While Kentucky's captive count has declined, captive parent organizations continue to be diverse.
"Kentucky has not specialized in a particular type of captive or industry. The industries and coverages insured span the spectrum. Kentucky captive owners come from a number of industries including automobile, health care, energy, manufacturing, real estate and construction, banking, and shipping/transport and logistics," said Russell Coy, captive coordinator at the Kentucky Department of Insurance in Frankfort.
Of Kentucky's 45 captives, 34 are pure captives, 8 are group/association captives, and 3 are risk retention groups. Kentucky does not license cell captives.
Kentucky captive insurers range significantly in size. For example, in 2018, 5 captives wrote more than $5 million in premiums, while 12 wrote between $2 million and $5 million in premiums, and 30 wrote between $1 million and $2 million in premiums.
Kentucky's premium taxes are modest, with a 0.40 percent tax up to $20 million, with the tax rate falling to 0.30 percent on premiums between $20 million and $40 million, 0.20 percent on premiums between $40 million and $60 million, and .075 percent for premiums exceeding $60 million.
Capital and surplus requirements vary by type of captive. For example, the minimum capital and surplus requirements for a single-parent captive and special-purpose captives is $250,000 and $500,000 for consortium/association captives, as well as for industrial insured and agency captives.
