Tennessee Reopens for Business from Captive Insurers

Applications are now being accepted in Tennessee for firms looking to create captive insurers under the state’s revised law.

The Tennessee Department of Commerce and Insurance released a new application form for companies to use as required under a new law allowing for captive insurers.

The form, among other things, calls for a $675 application fee, a required actuarial feasibility study, a biography of all officers, and an outline of the necessary capital and surplus requirements.

Business groups lobbied for the new law, which lawmakers approved earlier this year. They said it would make the state more attractive for large employers. Tennessee initially passed a law in 1978, but after reaching a high of 16 captives in 1990, the industry declined until there were just four captives as of last year. The new law is based largely on laws passed by Vermont and South Carolina.

The law allows for the creation of cell captives, branch captives, and special purpose financial captives. The new law also allows captives to provide workers’ compensation coverage for self-insured corporations and to write excess or stop-loss coverage for employers not qualified as self-insured.

The minimum capital and surplus requirements for single-parent captives is $250,000, for association, industrial insured, and protected cell captives is $500,000. Risk retention groups would have to have $1 million in capital and surplus. There is also a minimum annual premium tax of $5,000 up to $100,000 to pay for the regulation and oversight provided by the state.