Tennessee: A Domicile of Choice

Constitution Insurance Company is a Protected Cell Captive (PCC) domiciled in Tennessee since 2011, which has seen significant growth in the captive space. Fifty-seven (57) new captive insurance companies, in fact, chose Tennessee as their domicile in 2015, according the Tennessee Department of Commerce & Insurance. These new captives are comprised of 47 pure captives, four Risk Retention Groups (RRGs), and six PCCs (containing 106 protected cells). The addition of 57 new captives represented a 37% increase over last year, advancing Tennessee’s overall number of captives to 126.  Including cell companies, cumulative risk bearing entities (RBEs) closed the calendar year 2015 with 430 RBEs, a 58% increase over cumulative calendar year 2014.

Tennessee Broadened its Captive Laws in 2015

In 2015, the state broadened its captive laws, which served to enhance Tennessee’s growth in the captive industry by including workers’ compensation captives, and allowing captive insurance companies to use any type of limited liability company (LLC) structure, including series LLCs, which has been a popular form with Protected Cell Captives.

Under the 2015 legislation, captive insurance companies in Tennessee also gained greater flexibility in managing their investments. Reserve capital can now be held in cash or cash equivalents. Companies can file a statement of investment policy and are free to make investments in conformity to the investment policy, instead of specific restrictions on the type of investments where the surplus can be invested.

Why Tennessee?

There are many benefits that make Tennessee the ideal domicile for captives, including:

  • Positive regulatory climate – the state regulatory staff has a sterling reputation as knowledgeable, experienced and supportive of the captive industry
  • Commitment to being a top domicile
  • Modern captive laws
  • Reasonable initial capitalization for captive
  • Reasonable captive taxes and cap
  • A flexible Protected Cell Company arrangement, which includes corporations, LLCs and Series LLCs; inclusion of Series LLC provide a significant administrative advantage by streamlining the process as they do not require registration with the Secretary of State but are still regulated by the Department of Commerce and Insurance in Tennessee 

Tennessee has made a name for itself in the captive world in having the ability to attract new captive formations and redomesticate existing captives from onshore and offshore domiciles through ever-improving legislation and a well-trained regulatory staff capable of meeting the needs of service providers and owners. Constitution Insurance has leveraged the domicile benefits offered in Tennessee, which translates into real added value for our clients.