TCIATennessee Captive Insurance Association, Inc.

Captives 101

TCIATennessee Captive Insurance Association, Inc.

STATE OF TENNESSEEDepartment of Commerce & Insurance

TCIATennessee Captive Insurance Association, Inc.

TDCI’s History

• In 1878, the Tennessee General Assembly recognized the need for consumer protection and insurance regulation by creating the Bureau of Insurance with the state treasurer acting as insurance commissioner. • In 1913, a separate Department of Insurance was formed

under the direction of a commissioner, who became an officer in the governor’s Cabinet. • The Fire Prevention Division was added in 1937, and, to

reflect its expanded role in business regulation and consumer protection, the State Insurance Department became the Department of Commerce and Insurance in 1983.

TCIATennessee Captive Insurance Association, Inc.

TDCI’s Mission

• Protecting the interests of consumers while providing fair, efficient oversight and a level field of competition for a broad array of industries and professionals doing business in Tennessee.

TCIATennessee Captive Insurance Association, Inc.

Captive Insurance

• Captive insurance companies are insurance companies established with the specific objective of insuring risks emanating from their parent group or groups

TCIATennessee Captive Insurance Association, Inc.

Commerce & 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.

TCIATennessee Captive Insurance Association, Inc.

Commerce & Insurance

The Law permits the formation of:

� Traditional single parent captives (Pure)� Group captives� Industrial insured captives� Risk retention groups� Protected cell companies� Branch captives, and� Special purpose financial captives

TCIATennessee Captive Insurance Association, Inc.

Commerce & Insurance� Let’s take a few minutes and go beyond the dry statistics

and talk about how captives have been employed by companies taking advantage of this unique risk management tool:

�Roofing Company Captive�Supply Chain Captive�Medical Stop Loss Laser Captive�Automobile Dealership Captive�Construction Company Captive

TCIATennessee Captive Insurance Association, Inc.

Captive Basics

• Know and Document your Business Purpose• Why create a Captive Insurance Company?• Risk Funding and Risk Financing

TCIATennessee Captive Insurance Association, Inc.

Application Process

• Prepare documents necessary for incorporation and submit an application to the Captive Section for approval of an insurance license. • Sounds easy enough, but you’ll need to assemble a team

to put all the pieces in place.

TCIATennessee Captive Insurance Association, Inc.

Application Process

• A captive team includes:• An approved captive management firm• An approved actuary• An approved CPA• An attorney• A financial institution• Possibly a third party administrator

TCIATennessee Captive Insurance Association, Inc.

Where to begin?

• Speakwithyourinsurancebroker• Speakwithanexperiencedcaptivemanager• Speakwithyourattorney• SpeakwiththeCaptiveSectionoftheTDCI