New Captive Insurance Legislation Deepens Tennessee’s Commitment to Industry

NASHVILLE – Captive insurance legislation signed on May 12 is expected to maintain and further enhance Tennessee’s place amongst the most attractive states to locate a captive insurance company. 

The 2017 legislation, enacted as Public Chapter 354, further modernizes the Revised Tennessee Captive Insurance Act of 2011, which first energized captive insurance in Tennessee only six years ago.

“Less than ten years ago, successful Tennessee businesses had to look elsewhere to form a captive insurance company because there wasn’t a place for them here,” said Tennessee Department of Commerce & Insurance (TDCI) Commissioner Julie Mix McPeak. “Today, Tennessee is at the forefront of the industry due in no small part to the leadership of Governor Bill Haslam, the strong captive insurance team we have in-house led by Director Michael Corbett, and the robust support that we receive from members of the General Assembly.”

Tennessee’s captive insurance revival has helped pay dividends in bolstering Tennessee’s already-robust economy. In 2011, Tennessee only had two captive risk-bearing entities (RBEs). Today, Tennessee has 160 captive insurance companies and a total of 545 RBEs. For the 2016 tax year, total premium dollars surpassed $1 billion for the first time in the state’s history and a 2016 economic development survey of captive managers was attributed more than $650 million in direct and indirect spending in the state to the captive insurance industry.

A captive insurance company represents an option for many corporations and groups that want to take financial control and manage risks by underwriting their own insurance rather than paying premiums to third-party insurers.

“Tennessee’s captive laws already make the Volunteer State the strongest domicile in the world for the operation of cell companies,” said TDCI Captive Insurance Section Director Michael Corbett. “This legislation gives Tennessee protected cell captives even greater flexibility in moving cells between captives and spinning off individual cells into standalone captives. This is a significant efficiency for Tennessee companies.”

The legislation also allows captives to develop a process for a captive to exist in a dormant status so captive managers may procure insurance from the traditional market when advantageous and later return to the captive structure when the market fluctuates.

“This legislation reinforces the Volunteer State’s reputation as one of the nation’s premier captive domiciles,” said Tennessee Captive Insurance Association President (TCIA) Kevin Doherty.

The 2017 captive legislation drew bipartisan support from leaders in both houses of the General Assembly and was sponsored by Senate First Vice Chairman of the Senate Judiciary Committee Sen. Doug Overbey (R-Maryville) and House Majority Leader from District 63 Rep. Glen Casada (R-Williamson County). The legislation was recently signed into law by Tennessee Governor Bill Haslam. 

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