Texas Captive Insurance Association
CIT talks to Jim Arnold of the Texas Captive Insurance Association, ahead of the association’s first annual conference in Austin next year
CIT talks to Jim Arnold of the Texas Captive Insurance Association, ahead of the association’s first annual conference in Austin next year
Why has Texas decided to start licensing captives?
There are a lot of Fortune 100 companies in the state, AT&T being a perfect example. Most major corporations have to domicile their captives outside of the state in which they do business, and we wanted to change that for companies in Texas, because people here have been telling us that they would rather have their captive at home.
I think there was also some recognition that there are economic benefits to having a captive insurance industry. It’s a good clean industry, it provides jobs, and it provides revenue to the state.
What are the advantages of the captive legislation in Texas?
We’re new to the business so right now we have to go out there and make the case for companies to come to Texas to domicile their captives.
When we have the right regulations in place we think we are going to have a success story to tell. In a state with no captive industry, part of the process involves working with the regulators and making sure that the way they regulate is correct, and that they don’t do anything to discourage the creation of captives.
What sort of captive is Texas hoping to attract?
The legislation that we have passed here only allows pure captives. This means that for the moment, only the largest corporations will be able to domicile their captives here in Texas. What we had initially wanted to do was to license different kinds of captives, such as series LLCs and cell captives.
We think that there is an opportunity here for landowners that discover oil and gas on their property. That is certainly the kind of captive that we are hoping to attract. Companies that are interested in coming to Texas in the future have experience in farming captives, which face similar insurable risks, and so we are interested in hearing from them, too.
Are there enough service providers with sufficient expertise to service captives in Texas?
There are plenty of service providers in Texas, and there are service providers that are members of our association that are actually based outside of the state. One of our jobs in the association is to let people know that the captive industry is now alive and well in Texas. There are a lot of certified public accountants and financial planners in the state, but it is a matter of educating them and letting them know there are possibilities here. At our conference in February 2014, we are going to be communicating with service providers in other states to let them know that Texas is open for business.
Why was the Texas Captive insurance Association formed?
We started the captive association, because we wanted to make sure that the regulations that are put in place recognise that captives are a different kind of insurance company. We wanted to make sure that the rules that were written around captives recognised those differences, and we wanted to make sure that there would ultimately be no roadblocks to companies that want to come here and domicile their captives in the state.
The second reason is that we have a number of people who want to expand the kinds of captives that are available in the state, and so we are going to work to educate legislators in the interim on the merits of expanding the legislation. We meet every two years, so we will meet again in January 2015. By then the legislation will have been in effect, we will have some experience, and we will be able to go back to the legislator and say things are working well.
Are you happy with the captive legislation that has been passed in Texas?
There isn’t anything that we’re unhappy with, but we would like to see an expanded version of the legislation that will allow for different kinds of captives. I think the negotiations with the department for insurance have been going well. There is a new commissioner in Texas, who recognises the potential for captives in the state, and she said as much three weeks ago, in front of a senate committee. We are happy with what we have, but we would like to expand on it. We think that by 2015 we can make the case for doing that.
Republican John Smithee, the House of Representatives sponsor, who is very well respected and the chairman of the insurance committee, felt that we needed to start slowly. Although most other states already license captives, he wanted to make sure that we didn’t expand the opportunities for captives without fully understanding how they would work and how they would be regulated, and I respect that. It is all a part of the process.
In the next session, we are hoping to extend the legislation. We also think we are going to receive an interim hearing in the Senate on the possibility of expansion because the sponsor supported the more expansive legislation.
We have worked closely with regulators in the past few months, and we will continue to work with them on the regulations that are about to be finalised.
