Tennessee, which is one of the oldest domestic captive domiciles, has, in recent years, become one of the fastest growing.
Over the last 8 years, the number of active captives in Tennessee has more than doubled, jumping from 68 in 2014 to 150 at the end of 2022.
Captive premium volume has increased even more. In 2021, premium volume topped $2.1 billion, a 213 percent increase compared to 2015 when captives' premium volume was just under $670 million. While 2022 captive premium volume has not yet been finalized, Tennessee captive regulators project it will be around $2.5 billion.
Tennessee's growth as a captive domicile, experts say, has been fueled by sweeping improvements made by regulators and state legislators have made to the statute, and ongoing improvements in the captive law continue to support the momentum.
Included in the first round of changes, enacted in 2011, were revisions to the 1978 law, which, among other things, set new captive minimum capital and surplus requirements, allowed captives to provide workers compensation coverage if certain conditions were met, as well as mandating that premium taxes paid by captives be used to help fund the state's captive regulation.
And positive legislative changes have continued. For example, in 2016, lawmakers approved a measure that gives a 1-year premium tax exemption for captives that redomesticate from non-US domiciles. Other changes include clarification that the assets of any individual cell captive cannot be seized as part of litigation against another cell.
The 2016 measure also gave most captives more time to file their annual reports.
And legislative changes have continued. For example, legislation passed in 2017 includes provisions stipulating that dormant captives only have to maintain capital and surplus of $25,000 and are exempt from premium taxes, as well as slashing financial penalties on captives that do not make premium tax payments on time.
More recently, under legislation passed lin 2021, captives, with the approval of the state insurance commissioner, can invest capital and surplus, in various approved securities, providing for better returns on investments. The legislation also reduced the minimum capital requirements for protected cell captives to $100,000 from $250,000 and allows captives to provide parametric insurance.
With those enhancements to the law in place, captive growth was immediate. At the end of 2022, Tennessee had 150 active captives. That compares to just 2 before the 2011 legislation was passed.
"Tennessee really has come back," said Art Koritzinsky, captive advisory leader for the Americas with Marsh Captive Solutions in Norwalk, Connecticut.
It isn't only the statutory updates that have led organizations to set up captives in Tennessee. Just as important is the top quality and accessibility of Tennessee's captive regulators.
"They are highly accessible and very easy to work with," said Andy Rhea, president of Align Risk Solutions alternative risk management company in Nashville.
In February 2023, Mark Wiedeman was named director of Captives for the Tennessee Department of Commerce and Insurance. A Utah native, Mr. Wiedeman joined the Utah Insurance Department in 2012 and rose to become assistant division director. Before joining Tennessee's captive division, Mr. Wiedeman formed a business in contract examinations and captive insurance consulting.
Mr. Wiedeman's "proven leadership and sterling reputation in the captive insurance industry will build on our momentum as a first-choice domicile for captive insurance companies both domestically and internationally," said TDCI Commissioner Carter Lawrence.
The Tennessee Captive Insurance Association sponsors periodic events on captive issues as well as serves as a networking vehicle, while also sponsoring an annual meeting.
"The industry is also constantly evolving so it is important that captive owners and service providers stay current with the latest developments," the TCIA says.
For more information about the TCIA, call (888) 668–3188, or visit their website at tncaptives.org.