Kevin Doherty
Nelson Mullins Riley & Scarborough
Tennessee continues to surpass expectations in terms of year-on-year captive growth, according to Kevin Doherty of Nelson Mullins Riley & Scarborough

Since Tennessee governor Bill Haslam changed the captive legislation in the state five years ago, how has the captive insurance market developed?

The growth has been dramatic lately. It’s like a snowball, and it seems that we are doubling the numbers of captives each year, as well as the number of investments, the amount of premium and the number of employees at the department. It started out slowly in 2011 and 2012, but gained steam, and now it’s rolling downhill gaining momentum. I expect quite a lot of further growth in the future.

Did the legislation changes earlier this year strengthen the market?

Yes, many companies have taken advantage of the tax-free holidays in the new law that grant premium and self-procurement tax forgiveness for companies moving their captives to Tennessee. And I think more will take advantage of it. In particular, we have had a number of major companies and captives based in Tennessee that have moved their captives to Tennessee at least in part for these reasons.

How many captives have you licensed this year so far, and how many do you project for the end of 2016?


In total there are approximately 140 captives, with around 300 cells, so there are an estimated 450 risk-bearing entities. We have continued to surpass our expectations, and every year there are more captives and cells than we anticipate.

What types of captives are popular in Tennessee? Do you see many redomestications?


Protected cell captives, both incorporated and unincorporated, are very popular in Tennessee. In addition, Tennessee corporate law allows for series limited liability companies, and many have used this option in connection with the incorporate protected cell structure.

We also have seen a lot of pure, or single owner, captives, particularly among the larger public companies, and we’re actually starting to see some association captives and risk retention groups as well. It’s a pretty broad focus, and Tennessee is welcoming to all types of captives.


We also have seen several redomestications, and I am working on a handful right now. We have had redomestications from Vermont, Delaware, the Cayman Islands, Georgia and South Carolina, most of them being Tennessee companies that previously had captives elsewhere and wanted to bring them home.

But we have also seen some captive redomestications from non-Tennessee companies.

What is Tennessee’s view on self-procurement taxes?

We just enacted, in 2016, a tax holiday for self-procurement tax that would forgive any previously due self-procurement tax for any captive that forms or moves to Tennessee by 2018. This is significant because Tennessee clarified its self-procurement tax law in 2015, and this new law has motivated several Tennessee-based companies to put their captives in Tennessee.


Once the tax holiday finishes, what will stop captives leaving Tennessee? What is keeping them there?

As always, for any domicile, captive owners need to be confident that the state is committed to the captive insurance industry, that they have the ability to understand and properly regulate captives, and that the other prerequisites to a successful domicile are present. In particular, I always like to talk about the ‘three-legged stool’ of a captive domicile (remembering that the three-legged stool is the strongest of chairs).

Every successful domicile must have and maintain: a strong executive branch, which includes the governor, the insurance commissioner, and the captive division; a flexible and knowledgeable legislature that is willing to consistently make updates to the law to keep it competitive; and a robust private sector that provides the necessary expertise to keep the wheels of the captive insurance industry moving, including captive managers, actuaries, accountants, banks and attorneys.

Tennessee today has a very strong three-legged stool, and we are all working as hard as we can to keep it that way.

Interviews
The latest interviews from Captive Insurance Times
Features
The latest features from Captive Insurance Times
Having the ability to stabilise regulatory and fiscal certainty through self-funding will continue to drive expansion of the self-insured and medical stop-loss captive markets, says Phillip Giles of QBE North America
Attendees of the European Insurance Forum in Dublin heard how insurance and reinsurance professionals are readying for turbulent times ahead
Join Our Newsletter

Sign up today and never
miss the latest news or an issue again

Subscribe now
Interest in forming new captives and protected cell companies is on the rise, according to the latest Aon Global Risk Management Survey
SACs in Bermuda, first crafted in the statute in 2000, are a useful tool for both captive and commercial insurers, says Kim Willey of ASW Law
Rule-focused decisions have kept captives from delivering full value, say Carrie Lam and Steve Prince of Collins Barrow
Attendees of this year’s European Insurance Forum can expect a full and comprehensive agenda. Eddy Van Cutsem explains
Richard Paris-Smith of Willis Towers Watson explains how the UK’s recent changes to the Ogden discount rate will affect captive insurers
Reputation insurance is an important part of any company’s risk management strategy, according to Dr Nir Kossovsky of Steel City Re
Domicile profiles
The latest domicile profiles from Captive Insurance Times
In an era of increasing uncertainty, Tamatoa Jonassen suggests that the Cook Islands can be a bridge to financial security in a captive
With a dedicated captive plan in place, the Lone Star State is on the rise, says Josh Magden of the Texas Captive Insurance Association
Asset Servicing Times

Visit our sister site
for all the latest asset servicing news and analysis

assetservicingtimes.com
After 36 years of captive business, Vermont boasts a culture of legislative change, and still has a few tricks up its sleeve. Dan Towle and David Provost explain
After a successful 2016 and the licensing of its first securitisation cell company, Malta insurance industry professionals are looking ahead to 2017
Missouri’s captive programme is approaching a decade in operation. John Talley explains how the state has made it to this milestone
Less than 10 years ago, the Bahamas was a virtually forgotten player in the external insurance marketplace, according to Tanya McCartney and Michele Fields. But today, the jurisdiction has a reputation as a market leader
As the new head of insurance supervision in Cayman, Ruwan Jayasekera reveals how he will strive to meet international best practices and standards while encouraging innovation in the domicile
Danielle Hermansen of PKF Malta discusses how Malta can and is fully utilising its potential in the insurance industry