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Tennessee 2016 Captive Growth and 2017 Proposed Legislation

Business Woman Drawing Growth Chart 480 x 377
February 07, 2017

The Tennessee captive insurance marketplace experienced 24-percent growth in 2016. The addition of 104 risk-bearing entities (RBEs) represents a record number of new formations, according to data released by the Tennessee Department of Commerce & Insurance (TCDI).

The new Tennessee captives are composed of 30 pure captives, 5 protected cell companies, 1 association captive, 1 risk retention group, and 67 new protected cells. Nine of the newly added captives are redomestications from other domestic and international domiciles.

“We are proud of the progress made last year to expand the Tennessee captive insurance market,” said TDCI Commissioner Julie Mix McPeak. “Forming over 100 risk bearing entities in 2016 and over 500 entities in five years is quite a feat. TDCI remains committed to its role of maintaining proper regulation of captive insurance in Tennessee.”

The new formations in 2016 bring the state’s total to 159 captive insurance companies and 379 protected cells formed, for a total of 538 RBEs. The captive insurance industry has already brought 82 new full-time, white-collar jobs and over $430 million in direct and indirect spending and capital investment to the state.

According to TDCI director of captive insurance Michael Corbett, the redomestication of nine captive insurance companies to Tennessee demonstrates the confidence business leaders have in the state’s regulatory environment.

New legislation has been introduced in the current session of the Tennessee legislature. If passed in its current form, HB 302 will do the following.

  • Require Tennessee captive insurance companies to pay a penalty of the greater of $500 or 5 percent of the amount of overdue premium taxes, plus a 10 percent annual interest rate on the late payment

  • Authorize certain captive insurance companies to apply for and operate under a letter of dormancy

  • Provide for the conversion of protected cells and pure captive insurance companies

  • Require all persons conducting captive examinations to be regular state employees compensated by the state and authorize the Insurance Commissioner to contract such services due to the unavailability of qualified regular employees

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