Title Tag / Tennessee Breaks Out of the Pack – Spring Consulting Group
Meta Description: / The State of Tennessee has passed a bill, a re-write of their captive law that allows for the formation of protected cell captives, branch captives, and special-purpose financial captives.
Meta Keywords: / Tennessee Captive Law, cell captives, branch captives, workers’ compensation
Tennessee Breaks Out of the Pack
May 27, 2011
The State of Tennessee has passed a bill, a re-write of their captive law that allows for the formation of protected cell captives, branch captives, and special-purpose financial captives; the Senate passed it with a 27-0 vote and the House with a 97-0 vote. Governor Bill Haslam is expected to sign the bill into law, guaranteeing funding for their regulation.
The bill would allow firms or groups to cover employee benefits in accordance with the federal ERISA law. It would allow formation of protected cell captives, a form of rent a-captive wherein the separation of participant assets is protected by law. Tennessee captives will be able to write workers' compensation on a direct, non-fronted basis, qualified self-insured companies located solely in Tennessee, and only for their Tennessee employees. This is the first US domicile to specifically permit non-fronted captives to write workers' compensation. Don Riggin, Spring's senior property/casualty captive consultant said "while other domiciles allow workers' compensation large-deductible buy-back arrangements wherein a captive front is not required, it will be interesting to see if Tennessee's new approach catches on anywhere else."
The bill requires that premium taxes, which will range from a minimum of $5,000 to a maximum of $100,000 a year, will be allocated to the regulation of captives. The state is expected to increase its captive regulatory staff.
As the impact of this new captive legislation evolves, Spring will continue to monitor the landscape and provide you with additional details.
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