Kentucky Competes for Captives, Follows Workers’ Comp Closely
With “firm but flexible regulation” in place, Kentucky Insurance Commissioner Julie Mix McPeak says her state is an attractive draw for the captive insurance market and she hopes to encourage continued broad interest.
“We are about to bring a captive manager on board for the first time to truly interface with the captives that already exist that might be domiciled in other states and also with some new companies that might be interested in forming captives,” Mc Peak said. “We’re proud to say that we have about eight captives approved in the state right now, but we have probably twice that many applications in various stages of completeness.”
With several large corporate entities headquartered in Kentucky including UPS and Papa John’s Pizza, McPeak sees real benefits in the captive program: “We just think it’s a nice alternative to the self-insurance ability,” she said.
McPeak spoke with Insurance Journal’s Andrea Ortega-Wells at the winter meeting of the National Association of Insurance Commissioners in December. The complete video interview is available at www.insurancejournal.com/broadcasts, in the video section of the Web site.
The focus on captives indirectly ties into Kentucky’s efforts regarding workers’ compensation issues and the state’s mining industry. Mining accidents and accidental deaths in recent years have fostered volatility but McPeak is hopeful that the market will stabilize.
“We’re very pleased that our loss cost was actually a decrease for this year of roughly nine percent or so on average,” Mc Peak said. “However, we’ve had some occurrences that might cause that decrease to be rather short-lived.”
According to McPeak, In Kentucky’s last legislative session, lawmakers passed a bill that stipulates if the Department of Mines and Minerals certifies a mining area drug free or compliant with safety procedures, credits could be accrued against their workers’ compensation insurance coverage.
With much of the region facing the real probability of natural catastrophic risks, specifically her neighboring states to the south and east, McPeak agrees with the concept of a national catastrophe mitigation plan: “And that’s not just out of support for my friends in the southeastern zone,” she said.
Tornadoes, more than hurricanes affect the Kentucky insurance market and also of concern is the state’s proximity to the New Madrid Fault Line.
Being without earthquake coverage is not an option for her state, McPeak said. If insurers are writing habitational risk in Kentucky, she wants them to at least offer earthquake coverage.
“We have tried to be reasonable about that with some of the recent catastrophic exposures for some of the companies and say that whatever the cost of your reinsurance is, you can pass that on to the consumer,” McPeak said.
Visit www.insurancejournal.com/broadcasts for the entire interview.