Tennessee


The captive insurance market in Tennessee continues its evolution by building on the successes and synergies created over the previous six years.

Six years ago, Tennessee’s captive insurance market was virtually non-existent. Back in 2011, Tennessee had only two captive insurers. Seeing an opportunity to improve Tennessee’s future, governor Bill Haslam and Tennessee Department of Commerce and Insurance commissioner Julie Mix McPeak reinvigorated the industry by rewriting the state’s captive insurance statute.  

As a result, Tennessee witnessed explosive growth. The state now ranks among the most attractive domiciles for captive companies. The state has 550 risk-bearing entities representing over $1 billion in annual premium. The latest annual survey of Tennessee captive insurance professionals shows that the captive insurance sector generated an economic impact of over $692 million during 2016 in the state, representing an increase of 59 percent compared to 2015.

Change didn’t happen overnight, or without teamwork, but by working together, the governor, the commissioner, the general assembly and the business community (represented by the Tennessee Captive Insurance Association) reinvented Tennessee as a domicile of choice.

For example, there is ever-increasing concern with the optics of domicile selection. As a result, Tennessee decided to make it extremely cost effective for offshore captives to redomesticate onshore. In 2016, the statute was changed to allow for a one-year tax holiday for all offshore captives redomesticating to Tennessee. This provided a no-cost solution for domestic corporations wishing to bring offshore captives home. So far, Tennessee has seen offshore captives returning to Tennessee from Cayman, Bermuda and Nevis.

It is important to note some of the attributes that continue to make Tennessee an excellent location for captive insurance companies. Having learned from other domiciles, it is clear that owners and captive managers are all looking for expediency. We have found that owners are looking for a location that has all the necessary service providers available to establish a captive and make its ongoing management as easy as possible.

With Nashville, captive owners find a great city to fly in and out of, along with captive management, actuarial, accounting, and financial expertise all located here. Coupled with easy access to the state’s captive regulatory section, also located in Nashville, this makes for a nearly seamless opportunity to get the most done in a short period of time.

Speaking of the state’s regulatory section, it is worth noting that, alongside our desire to provide timely and efficient regulations, we also understand that captive insurance companies have a cost component. In particular, after a captive, with audited financials, has been in place for five years, the statute requires the captive section to perform an examination. Most domiciles farm out these examinations to third-party examination firms, which significantly drives up costs. Recognising this, Tennessee’s captive section is committed to performing all examinations in house for those captives that have been performing annual audits.

Tennessee hasn’t been content to rest on its laurels. Three new recently-created rules continue to modernise captive insurance in Tennessee and set the Volunteer State apart from other US domiciles.

First, Tennessee will allow individual protected cells to go dormant and later to be restarted. Second, new captives and cell companies will no longer be required to be audited if they were formed in the last quarter of a year, thus representing cost savings for the captives and cell companies. Finally, a full financial exam will not be required where specific limited questions have arisen about the operation of a captive company. These new rules take effect 21 December 2017.
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Tennessee’s governor, commissioner, general assembly and business community have all worked together to create ‘explosive growth’ in the state’s captive insurance industry. Julie Mix McPeak explains more
Newly-appointed chairman of CCIA Michael Maglaras suggests that the future is bright for state’s captive industry
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