The US State of Oklahoma has been a captive insurance domicile since 2004, and has worked to develop its offering so that the state can reap the benefits of a local captive insurance industry. It is the Oklahoma Insurance Department’s job to enforce Oklahoma’s insurance-related laws and provide consumers with accurate, timely and informative insurance information. It is also tasked with promoting a competitive marketplace in Oklahoma—a trying task considering states such as Vermont’s investment in the industry.
The Oklahoma Insurance Department’s commissioner and deputy commissioner have a mixture of insurance and legal experience that makes them well suited to contributing to the development of Oklahoma as an attractive destination for captives. The insurance department’s head is commissioner John Doak. He took up the role at the beginning of 2011, having previously worked in the executive level of the insurance industry at firms such as Marsh, Aon Risk Services, HNI Risk Services and Ascension Insurance. The insurance department’s deputy commissioner, Owen Laughlin, has practised law, worked in the banking business for 20 years and worked as an assistant district attorney. CIT talks to them about what Oklahoma is doing to attract more captives to the state.
How has captive insurance grown in importance to US and international companies over the last few years?
John Doak: Captives have grown rapidly worldwide, and especially in the US, because they have provided an alternative risk management tool for especially hard-to-insure or expensive risks. Many businesses have managed to stay viable by availing themselves of captives when other alternatives were unworkable.
Why did Oklahoma decide to allow captives in 2004?
Doak: It was thought that Oklahoma companies needed alternatives to manage their insurance needs, and that captives provide another option. In the last 10 years, Oklahoma has enhanced its efforts to become business friendly, reduce the cost of doing business and encourage expansion and new investment. The passage of the right-to-work law in 2001 is another example of a continuing effort by the Oklahoma legislature to build a great place to do business.
How has Oklahoma’s insurance department worked to develop Oklahoma as a viable US captive domicile?
Owen Laughlin: The Oklahoma Insurance Department has only recently begun to develop the captive market in Oklahoma. Revising the statute was the first step. We are in the process of developing the in-house expertise to effectively handle captive applications. Commissioner John Doak has made the timely and business-friendly processing of captive applications a priority.
What are the advantages and disadvantages of Oklahoma’s captive legislation, and what was the effect of the legislation’s implementation?
Laughlin: The Oklahoma captive legislation specifically tracks the language that is found in other US states that have successfully attracted captives, most notably South Carolina. The major difference was corrected by reducing the cap on the premium tax to $100,000. This brings Oklahoma law into compliance with other captive states.
What is the aim of the $100,000 premium tax cap?
Doak: The $100,000 premium tax cap is designed to place Oklahoma onto a level playing field with other captive-friendly states. Since Oklahoma is now receiving very little premium tax from captives, any increase will be an improvement and a benefit to state revenue.
What are your projections for how the tax cap will affect new captive formations in Oklahoma?
Doak: We have had numerous inquires since the passage of the new legislation. One significant new captive has been formed in Oklahoma and we have been informed that others are in the works. It is too early to gauge the long-term outlook, but we are optimistic that others will follow.
What sort of legislative environment is Oklahoma hoping to create for captives?
Doak: The Oklahoma legislature has worked very hard to build a business-friendly state in which to do business, and is committed to doing more. The captive legislation, and especially the amendments that were passed this year, is an effort to give businesses viable options when doing business here.
What about the service providers in Oklahoma?
Laughlin: There are some very experienced service providers located in Oklahoma that have routinely formed captives in other states, primarily because Oklahoma did not have a cap on premium tax, and because the Oklahoma Insurance Department was not a particularly friendly place to do business. Commissioner John Doak and his leadership team have many years experience in the private sector, and they are serious about making the department astute in captive formation and business friendly in general.
How will the Non-admitted and Reinsurance Reform Act (NRRA) affect new captive formations in states such as Oklahoma?
Laughlin: We believe that the jury is still out on NRRA and its application across the board. We are very opposed to the ceding of regulatory authority to the federal government.
What about other regulatory initiatives?
Doak: We are very opposed to federal intervention into the insurance market. State regulation of insurance has served the public and the insurance industry very well for decades, and there is no compelling need to change the regulatory framework now. The obvious result would be more cost to consumers and fewer insurance products from which to chooseTo view the full issue in which this article appeared - Click Here