STATE OF TENNESSEEDEPARTMENT OF COMMERCE & INSURANCE

CAPTIVE INSURANCE SECTION

TICUA

CFO and HR Staff Retreat

Nashville, Tennessee

November 30, 2015

A captive insurer is generally defined as:

• An insurance company that is wholly owned

and controlled by its insureds; • Its primary purpose is to insure the risks of its

owners, and

• Its insureds benefit from the captive insurer’s

underwriting profits

Captive Insurance

Captive Insurance is utilized by insureds

that choose to:

• Put their own capital at risk by creating their

own insurance company,

• Work outside of the commercial insurance

marketplace, and

• Achieve their risk financing objectives.

Captive Insurance

Captive Insurance

Captive Insureds Put Their Own Capital

at Risk:

• Any insured who purchases captive

insurance must be willing and able to

invest its own resources.

• The insured in a captive insurance

company not only has ownership in and

control of the company but also benefits

from its profitability.

Captive Insurance

Working Outside the Commercial

Insurance Marketplace:

• Insureds in a captive choose to put their

own capital at risk by working outside of

the traditionally regulated commercial

insurance marketplace.

• The traditional insurance regulatory

environment tries to “protect” the insured

from the insurer.

Captive Insurance

To Achieve Risk Financing Objectives:

• The main reasons why organizations wish to

better control their risk management

programs are excessive pricing, limited

capacity, coverage that is unavailable in the

"traditional" insurance market, or the desire

for a more cost efficient risk financing

mechanism. Other reasons include: • Broader coverage,

• Stability in pricing and availability,

• Improved cash flow, and

• Increased control over the program.

Captive Insurance

Tennessee is the second-oldest US captive domicile, having first passed a captive law in 1978.

Tennessee Governor Bill Haslam updated the regulatory framework, contained in the Revised Tennessee Captive Insurance Act. This new Act became effective on September 1, 2011.

Changes in the new Act put Tennessee on the leading edge of captive regulations in the United States.

RECOMMENDATIONS

Recommendation 1: Dedicate a Captive

Insurance Section within the Insurance Division

with the goal of establishing Tennessee as a viable

captive domicile to promote investment and job

creation in the state.

Regulatory Team

Julie Mix McPeak – Insurance Commissioner

Michael Humphreys – Assistant Commissioner

Michael A. Corbett – Director – Captive Section

Tony Greer – Chief Counsel for Insurance

Ben Whitehouse – Assistant General Counsel

Jennifer Stalvey – Insurance Examiner

Cathy Thomas – Insurance Examiner

Kurt Polasko – Insurance Examiner

Kira Burnett – Administrative Secretary

Of the existing and in process captives,

there is a wide variety of types:Medical Stop Loss

Liability

Credit

Medical Malpractice

Property

Workers Compensation

These captives include:Newly created captives

Expansion of existing captives

Re-Domestication of existing domestic and

foreign captives

Profiles

In the rearview mirror

12/31/13

28 Risk Bearing Entities

20 Captive Companies

8 Cell Companies

9/1/15

312 Risk Bearing Entities

86 Captive Companies

226 Cell Companies

Globally Competitive Market

• International

• Bermuda

• Cayman

• Gibraltar

• Guernsey

• Luxembourg

• Malta

• Hong Kong

• Domestic

• Tennessee

• Connecticut

• Delaware

• Missouri

• South Carolina

• Vermont

• Utah

Tennessee Advantages

Up to date statute

Well trained staff (all ACI Department)

Regulate to yes.

Central location

Strong support from Executive Branch,

Legislature and Business Community.

But…the strongest compelling

reason…?

Strength of Tennessee

2nd Day of Spring – Burlington, VT

STATE OF TENNESSEEDEPARTMENT OF COMMERCE & INSURANCE

CAPTIVE INSURANCE SECTION

TICUA

CFO and HR Staff Retreat

Nashville, Tennessee

November 30, 2015