2016 A Banner Year for Captive Growth in Tennessee

The Tennessee Department of Commerce & Insurance (TDCI) recently announced that a record annual total of 104 risk-bearing entities (RBEs) were added to the state’s captive insurance market in 2016. These new captives are comprised of 30 pure captives, five protected cell companies, one association captive, one risk retention group, and 67 new protected cells. Nine of the newly added captives are re-domestications to Tennessee from other leading domestic and international domiciles. The record number of new formations in 2016 brings the Tennessee’s total to 159 captive insurance companies and 379 protected cells formed, for a total of 538 RBEs.

“We are proud of the progress made last year to expand Tennessee’s captive insurance market,” said TDCI Commissioner Julie Mix McPeak. “Forming over 100 risk-bearing entities in 2016 and over 500 entities in five years is quite a feat. TDCI remains committed to its role of maintaining proper regulation of captive insurance in Tennessee.”

Part of Tennessee’s 2016 captive success is as a result of legislation passed last year that included a one-year premium tax holiday for captives that re-domesticate to the state. In addition to the premium tax holiday, the new law provides further incentive by stating any unpaid self-procurement tax would be forgiven if it were re-domesticated on or before December 31, 2018. The legislation also inserted distinct wording allowing for the re-domestication for corporations, rather than just limited liability companies. Moreover, language on the separation of cells within sponsored captive structures has been strengthened, while the annual report filing date deadline has been extended by two weeks.

Tennessee is very welcoming to captives providing a positive regulatory climate, with a commitment to being a top domicile, adopting modern captive laws, and having reasonable initial capitalization for captive and captive taxes. The state also has a flexible Protected Cell Company (PCC) arrangement that includes corporations, LLCs and Series LLCs.

“Tennessee has clearly established itself as the ‘it’ domicile for captive insurance,” said TDCI Director of Captive Insurance Michael Corbett. “The re-domestication of nine captive insurance companies to our state shows that more and more leaders in this industry are comfortable setting up their captives here.”

Caitlin Morgan Captive Services co-founded Constitution Insurance Company, a Protected Cell Company located in Tennessee, to allow insurance agents and policyholders to secure an enterprise risk solution that would allow them to retain risk and lower their cost of insurance. A PCC allows one captive insurance company to create one or more “protected cells” (PC) or “incorporated cells (IC). The protected or incorporated cells of the PCC function as independent entities. Under Tennessee law each unit and its assets and liabilities are separate from the actions of the other entities. A legal “ring fence” exists to protect the assets of one cell from creditors of another cell. Each cell is managed by their own board of directors, while its assets and liabilities are shielded from other cells.

If you would like to more information about our captive insurance solutions, including whether your company would make a good candidate for a captive, just contact us at (855) 975-4949, or complete the “Captive Candidate Financial Model” form here.