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Regulatory Uncertainty Continues for Captives

Regulatory Uncertainty Continues for Captives
November 21, 2012 tfirestine

On-shore and off-shore captives have both been uneasy over the prospect of changing regulations.

On-Shore

The Non-admitted and Reinsurance Reform Act (NRRA), a subsection of Dodd-Frank, has been keeping captive owners awake at night. The law states that no state other than the home state of an insured may require any premium tax payment for non-admitted insurance and that the placement shall be subject to the statutory and regulatory requirements of the insured’s home state as well. This is concerning for those who own a US captive, yet operate in a non-captive venue.

Off-Shore

Solvency II is meant to strengthen capital requirements for EU domiciled insurers and reinsurers, but a wider adoption is worrying captive owners.   Many offshore domiciles are implementing the guidelines to stay competitive in the world market, including two of the top captive domiciles (Bermuda and Cayman).  Bermuda has committed to the requirements while Cayman has flirted with the idea, worried about losing their edge in the captive insurance industry.  Both Bermuda and Cayman have promised to exclude captives from the requirements of Solvency II, but it is uncertain whether they can.

Contact Calculated Risk Advisors today to discuss how this regulations may impact your current and future alternative risk transfer options.