Captives
Tennessee Cuts Capital Requirements for Protected Cell Captives

• Timothy Darragh
• August 2021
• 

SEAT OF POWER: The Tennessee Capitol sits on a hill in Nashville. Gov. Bill Lee recently signed a bill amending the state’s captive insurance law.

Recent updates to Tennessee's captive insurance statute reduce capital requirements for starting protected cell captives, among various amendments signed into law by Gov. Bill Lee.

The bill Lee signed, H.B. 767, reduces the statutory capital needed by protected cell captive insurers to commence operations from $250,000 to $100,000, according to the amended law.

“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 Belinda Fortman, Tennessee Department of Commerce and Insurance Captive Sector director.

In a statement with the TDCI, Tennessee Captive Insurance Association President Kevin Doherty endorsed the amendments. “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,” he said.

In addition, the amendments will allow captives to write parametric coverage.

Doherty said the amendment would allow captives to offer parametric insurance in innovative ways to cover large numbers of insureds in natural disasters or other similar events.

Risk retention groups would not be allowed to write parametric coverage, according to the amendment.

Tennessee's captive insurance premium volume topped $1.6 billion and the number of active captives increased to 146, the statement said. The state now is home to more than 750 risk-bearing entities, it said.

The wide-ranging insurance bill also expands the list of conditions that allow companies credit for reinsurance.

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