Modernizations to Tennessee’s Captive Statute Strengthen Volunteer State’s Role as First Choice Captive Insurance Domicile

NASHVILLE – Newly approved updates to Tennessee’s captive insurance statute will help fuel the Volunteer State’s growing reputation as a first-choice domicile for companies looking to establish a captive insurance company.

Tennessee Governor Bill Lee recently approved the latest modernizations to Tennessee’s captive laws, including authorizing parametric insurance coverage and reducing the statutory capital needed by protected cell captive insurers to commence operations from $250,000 to $100,000, amongst other improvements.

A captive insurance company (called a “captive”) represents an option for many corporations and groups wanting to take financial control and manage their business risks by forming their own insurance company. The Tennessee Department of Commerce & Insurance (TDCI) is responsible for properly regulating Tennessee’s captive insurance industry.

“By reducing the minimum capital and surplus needed to start protected cell captive insurance companies, Tennessee is sending a strong message that we value companies’ freedom to invest their money to obtain the highest return on investment possible rather than allocate money in excess of what is needed to support the potential risk of insurance losses in their captive,” said TDCI Captive Sector Director Belinda Fortman. “By modernizing Tennessee’s captive insurance statute to reduce the minimum coverage for protected cell captive insurers as well as including parametric insurance coverage for the first time, the Volunteer State is providing strong incentives for captive owners to choose Tennessee as their captive domicile.”

2020 was another record-setting year for Tennessee’s captive insurance section as captive premium volume topped $1.6 billion and the number of active captives in Tennessee increased to 146. Today, over 750 risk-bearing entities call Tennessee home. Additionally, TDCI’s leadership has drawn international accolades as Fortman was recently named to Captive Review magazine’s “Power 50” list.

Said Fortman: “Through the first five months of 2021,Tennessee has averaged 10 new captive formations a month, which is an impressive pace that we hope to see continue. The growth of the captive insurance industry in Tennessee that we are seeing today is a byproduct of years of focused teamwork and the far-reaching vision of Tennessee’s leaders. I am thankful for the hard work and support of Governor Lee, the members of the Tennessee General Assembly and the captive insurance stakeholders who are helping make Tennessee truly the ‘Gold Standard’ of the South.”

Tennessee Captive Insurance Association (TCIA) President Kevin Doherty said: “The TCIA is grateful that the Department and the General Assembly, two of the three legs of the proverbial three-legged stool, have continued to support important updates like this to the captive law that help Tennessee remain at the forefront of our industry. Specifically, the TCIA supports the reduction in the minimum capital for protected cell captives to $100,000 and believes this will help to spur significant growth in cell captives in Tennessee. The TCIA also believes it is significant that Tennessee is leading the way now in permitting captives to offer parametric insurance that can offer innovative ways to cover large numbers of insureds in natural disasters or other similar events. As the third leg of the stool, the TCIA looks forward to continuing to work with the other two legs of this public private partnership to maintain Tennessee’s prominence as a captive insurance domicile.”

To learn more about captive insurance in Tennessee, visit captive.tn.gov or call (615) 741-3805, (855) 809-0069 (toll free) or email at captive.insurance@tn.gov.

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