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Captive Insurance Companies Redomesticating to Tennessee May Receive Tax Break

Tennessee Flag
June 17, 2016

The recently enacted provisions in Tennessee's 2016 legislation make it easier for companies to redomesticate to Tennessee.

The legislation provides a seamless procedure effectively transferring the captive entity directly from the old domicile into Tennessee by registering with the secretary of state's office once the captive has been approved by the Department of Commerce and Insurance.

In addition, captives redomesticating from offshore to Tennessee are now eligible to forgo paying premium taxes in either the first or second year of their operation. The only tax break caveat is a commitment to stay in operation for 5 years or pay back the forgone premium tax with interest.

"With this legislation in place, if you are a Tennessee business there is now no reason to have your captive based anywhere else," said  Kevin Doherty, Tennessee Captive Insurance Association (TCIA) president.

The 2016 legislative changes represent the third update to the Tennessee Captive Insurance Act of 2011. Since that legislation's passage, Tennessee now has 133 captive insurance companies and 321 cell companies for a total of 454 risk-bearing entities (RBEs). In 2011, there were two.

"The captive insurance industry operates in a competitive, fast-moving environment that demands competitors keep pace or be left behind," said Michael Corbett, Captive Insurance Section director. "Tennessee must be nimble and forward-looking if we are going to surpass the goals we've established and continue our unprecedented growth.

"I'm grateful for the foresight that Governor Bill Haslam and Commissioner Julie Mix McPeak have shown by supporting these changes in the legislation," Mr. Corbett continued.

Changes to the protected cell law make Tennessee the strongest domicile in the world for the operation of cell companies, according to a June 17, 2016, Tennessee Department of Commerce and Insurance press release. Tennessee regulators have asserted the legislative changes are the strongest protections available in the captive industry. The changes ensure the assets of individual cells are isolated from any other cell owner, the press release states. Other revisions in the recently enacted legislation include self-procurement tax forgiveness and setting a uniform due date of March 15 for annual reports and payment of premium taxes.

Read the entire press release.

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