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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance

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The COVID-19 Pandemic: Opportunities and Implications for Captive Insurance explores the challenges presented by today's business and economic upheaval, as well as the hardening insurance market, and what it means for the captive insurance industry.

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Arkansas Statutes' Attractive Features Spur Captive Insurance Growth

The flag of Arkansas--a red flag with a white diamond surrounded by a blue diamond, 29 stars, and the word "ARKANSAS" on it
March 03, 2020

Arkansas is one of the smallest captive insurance domiciles in the United States, but on a percentage basis, it's one of the fastest growing.

The three captive insurance companies in the Arkansas Insurance Department licensed in 2019 brought the state's total captive count to nine, a 50 percent increase from the state's six captive insurers in 2018 and a three-fold increase from 2016 when Arkansas had only three licensed captive insurance companies.

As a captive domicile, Arkansas has several appeals. For example, Arkansas's captive insurance statute sets modest premium taxes. The tax rate on direct written premiums up to $20 million is 0.025 percent, while a 0.150 percent tax is assessed on the next $20 million of direct premiums, and a 0.050 percent tax is imposed on premiums exceeding $40 million, with a maximum annual tax of $100,000.

Another attractive feature of the state's captive insurance statute involves the deadline for captives to file their annual financial reports. While those reports are due March 1, captives can get extra time if they request an extension, and the request is approved by the state insurance commissioner.

In 2017, Arkansas lawmakers approved a provision allowing Arkansas captive insurance companies to go into dormant status. Dormant captives only have to maintain capital and surplus of $25,000 and are exempt from premium taxes.

In addition, Arkansas captive insurance regulators are easy to deal with, according to some industry professionals. "They are very willing to listen and work with you," said Victoria Fimea, senior vice president, legal counsel, and head of the regulatory department, North America, for Artex Risk Solutions in Mesa, Arizona.

Overall, Arkansas has positioned itself very well for future captive growth, Ms. Fimea added.

"We expect continued growth in 2020 and look forward to making more enhancements to our captive code in 2021," said Arkansas Insurance Commissioner Allen Kerr.

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