The Tennessee State Government is expected to make changes to its laws regarding captive insurance this week. A bill that would allow the formation of new captive insurance companies is on its way to Governor Bill Haslam’s office, where it is likely to receive his signature and be passed into law.
The state has not passed any new legislation regarding captives since 1990, which fostered in 16 new companies. According to legislators, the bill will not only bring jobs to the state, but also provide insurance companies more incentive to expand their operations in Tennessee.
Captive insurance companies have a specific objective: finance risk coming from their parent organizations. These companies are often established by big businesses as a way to manage their risk when entering new ventures. Tennessee’s bill is adapted from a similar measure passed in South Carolina, home to more than 160 captive insurers.
As per the bill’s provisions, captives will be able to allow employee benefits, such as workers compensation. The bill will also allow for the formation of the various incarnations of captive companies, each being subject to a new premium tax. The tax applies to the first $100,000 in premiums collected each year. The money will go to regulatory agencies as well as the state’s general fund. This too will create jobs as the Department of Insurance will have to hire additional staff to handle the workload.
The bill passed both the Senate and House with no opposition.