Captive Insurance Gains Traction in More States
In July, we wrote about the spread of captive insurance companies in states across the country. We saw Florida in 2012 and North Carolina and Texas earlier this year pass legislation allowing for captive domiciles to be set up in their states. We’ve also been seeing greater use of captives by the middle market and small businesses where previously they were solely used by large Fortune 500 corporations. Moreover, we’re seeing captives being used in new and innovative ways. As we previously discussed, companies are now using captives to insure supply chain risks (business interruption exposures), political risks, and employee benefits.
Most recently, the state of Connecticut has approved a third captive insurer, which the head of the Connecticut Captive Insurance Association, Thomas Hodson, sees as a signal that its captive insurance initiative is gaining momentum. Connecticut has had laws in place to allow captives to form in the state since 2008. But it only began funding and staffing a captive insurance division within the state Insurance Department in 2012.
In addition, an Ohio Senate panel is meeting to discuss House-passed legislation that would make the state a captive domicile. House Bill 117 was passed by a 91-0 vote and sent to the Senate in early June. The bill, referred to the Senate Insurance & Financial Institutions Committee, allows for the creation of captive insurance companies, defined as companies insuring the risk only for a parent company. The bill also allows creation of some types of protected cell captive insurance companies, meaning captives containing separate cells that have assets associated with liabilities in each. Under HB 117, captives can offer various types of insurance, including commercial multi-peril; ocean marine; inland marine; medical malpractice; workers’ compensation; commercial automobile liability; commercial physical damage; fidelity; and surety.
To date, there are 31 states that allow captives to be set up within their borders, with Texas as the most recent to pass legislation. Captives provides a number of benefits for insureds, including: reduced cost of coverage, direct access to reinsurers, provision of broader or otherwise unavailable coverage, mitigation of the market swings of commercial insurance, improved cash flow, risk spreading, improved risk retention capability, and integration with an overall risk management plan. Caitlin-Morgan provides a number of captive solutions and can help you determine if a captive is right for your insured. Our expert consultants can assess your client’s needs and customize a captive solution that is perfect for them. Give us a call at 877.226.1027.