|Title:||United States captive insurance market with net premiums written in dolalrs, operating income/loss, admitted assets, loss reserves, and percent change for 2006 to 2010|
Start of full article - but without data
U.S. Captive Insurance--Financial Indicators (2006-2010)
Pretax Net Operating Premiums % Income/ % Year Written Chg (Loss) Chg
2006 $XX,XXX,XXX X.X $X,XXX,XXX XXX.X 2007 XX,XXX,XXX -X.X X,XXX,XXX XX.X 2008 X,XXX,XXX -X.X X,XXX,XXX -XX.X 2009 X,XXX,XXX -XX.X X,XXX,XXX -XX.X 2010 X,XXX,XXX -XX.X X,XXX,XXX -X.X X-Year CAGR -X.X X-Year Change -XX.X
Net Income/ % Admitted % Year (Loss) Chg Assets Chg
2006 $X,XXX,XXX XXX.X $XX,XXX,XXX X.X 2007 X,XXX,XXX -XX.X XX,XXX,XXX X.X 2008 XXX,XXX -XX.X XX,XXX,XXX -X.X 2009 X,XXX,XXX XXX.X XX,XXX,XXX X.X 2010 X,XXX,XXX XX.X XX,XXX,XXX -X.X X-Year CAGR X.X X-Year Change X.X
Loss & LAE % Year-End % Year Reserves Chg Surplus Chg
2006 $XX,XXX,XXX X.X $XX,XXX,XXX XX.X 2007 XX,XXX,XXX -X.X XX,XXX,XXX X.X 2008 XX,XXX,XXX -X.X XX,XXX,XXX -X.X 2009 XX,XXX,XXX -X.X XX,XXX,XXX X.X 2010 XX,XXX,XXX -X.X XX,XXX,XXX X.X X-Year CAGR -X.X X.X X-Year Change -X.X XX.X
Source: A.M. Best Co.
There's a tinge of irony in Tennessee and New Jersey now trying to gain footholds as captive domiciles. While both states hope to emulate Vermont's regulatory success, each one has links dating back three decades to the Green Mountain State's early captive days.
In the case of Tennessee, that link involves captive legislation that remained dormant since it was passed in 1978, three years before Vermont rolled out its own, very similar law.
For New Jersey, the tie is more tangible. The state's new head of captives, Crosby Sherman, worked as an insurance examiner for Vermont in 1981 when its captive industry was first taking flight.
While some may think New Jersey is late to the game, Sherman said that criticism might be more valid if future captive growth was being measured against sand draining from an hourglass. "If you look back at Vermont's first five years, when I happened to be there, it was pretty flat in terms of their captive insurance growth," said Sherman, the manager of alternative markets for New Jersey's Department of Banking and Insurance. "I expect ours will probably grow quicker than theirs did in the first few years, once we get firm footing."
Sherman's assessment is based on the state being sandwiched in a highly developed urban pocket between New York City's financial center and Philadelphia.
Tennessee also believes the location factor will play to its favor.
Nashville attorney Kevin Doherty likes to point out that Tennessee and Missouri are the only states bordered by eight other ones.
"Nashville is a very easy place to get to and get home from," Doherty said. "In these tough economic times, when people have to make their budgets stretch further, I think the ability to come to a closer domicile is going to be very significant."
Doherty played a key role in revamping Tennessee's captive law, which was indirectly triggered with that state's 2010 gubernatorial election. Doherty, who has advocated on behalf of captives for two decades, said each candidate was invited to his law firm, Burr & Forman, during the campaign.
He said Bill Haslam, the race's eventual winner, was very interested in the captive issue when discussing it with the firm's insurance team and must have liked what he heard. In January, Haslam named firm partner Julie Mix McPeak to head the Department of Commerce and Insurance.
"She then asked me to assist in the writing of the new law," Doherty said.
That effort ultimately yielded a modernized law that authorized sponsored captives, branched captives and special-purpose financial captives. Captives are now also allowed to write workers' compensation coverage on a direct basis for the employees of their owners.
Doherty said he looked at laws in Vermont, South Carolina, Washington, D.C., Montana and Hawaii. He believes Tennessee will develop into a leading regional player for captives in time. He also said no one really competes with Vermont when it comes to captives.
"Vermont is the gold standard, the biggest and best in terms of numbers, sophistication and history," he said.
But Tennessee's tax structure has positioned it for consideration. Doherty said the X.X% rate on the $XX million in direct premium is the same as leading domiciles.
One key difference: Tennessee's minimum premium tax is $X,XXX, and the maximum premium tax is $XXX,XXX.
Vermont's premium taxes are levied on a graduated scale, with the highest rate being X.XX%, and the lowest rate being X.XXX%. The minimum tax is $X,XXX and the maximum tax is $XXX,XXX. Captives and cells under common ownership and control may be consolidated for tax purposes.
"It's logical that Tennessee ought to be able to compete for business in Tennessee, and also regionally," Doherty said.
Corporate Presence Key
Tennessee regulators licensed a captive in September, the first since its laws were updated. Nashville, Tenn.-based HCA Inc., a national operator of hospitals and health systems, created Park View Insurance Co. to handle risk mitigation. Doherty had previously formed a captive under the pre-existing law in 2009, the first formed in Tennessee in more than XX years.
Fred Eslami, a senior financial analyst with A.M. Best Co., said as captive domiciles, New Jersey and Tennessee rank relatively high, given the respective presence of major corporations.
"So the potential for growth is there," Eslami said. "But at the same time, the biggest challenge for these domiciles is that their growth doesn't come at the expense of consumers."
Eslami said the competition between Vermont and the largest offshore captive, Bermuda, appears to be fierce. An A.M. Best Special Report on captives (Aug. X, 2011) stated that newer captive domiciles are finding difficulty in establishing a market presence.
John Weitzel, a managing director at Maryland-based Taft Cos., said the captive domicile field is getting crowded.
He said some domiciles are offering tax holidays or other inducements to solicit business.
"The more common trend is for domestic domiciles to target business from offshore domiciles that might be adversely impacted by Solvency II or perceptions of IRS profiling," Weitzel said in an email interview.