Tennessee Governor Signs Captive Insurance Law

In a move that business groups say could change the risk management operations of many corporations, Tennessee Governor Bill Haslam signed into law a bill allowing for the creation of captive insurers.

Backed by Tennessee Insurance Commissioner Julie McPeak, the new law will allow for the formation of cell captives, branch captives, and special purpose financial captives, along with the standard single owner, association, industrial insured, and risk retention groups. The new law also allows captives to write workers’ compensation coverage for self-insured corporations, as well as employee benefits and medical stop-loss captives.

Burr & Forman, LLP, partner Kevin M. Doherty, who helped draft the legislation, said the new law will put Tennessee at the forefront of the captive insurance industry. He also said the formation of captives to prove workers’ compensation coverage to self-insured companies could change the risk management operations of companies around the state.

“The formation of a participation in a captive can be an effective risk management for virtually any company,” Doherty said.

The Tennessee Department of Commerce and Insurance is preparing to promulgate rules in anticipation of filings from insurers when the law takes effect on July 1.