Nevada sees growth in captive insurers
File this one under “Strange but True”:
More and more states are crowding into the business of acting as the host location for captive insurance companies. But rather than slicing Nevada’s share of the pie into a smaller piece, all the new competition appears to be driving faster growth in the Silver State.
Thirty new captive insurers were approved by the Nevada Division of Insurance during 2013 — 17 of them in December alone.
The state now is home to about 150 captive insurers — insurance companies created by companies as a risk-management tool that allows them to save the costs involved in buying coverage from a traditional insurance company.
That’s the largest number of active captive insurers the state has recorded since it got into the business in 1999. Nevada ranks fourth in the nation as a domicile for captives.
Nevada officials have encouraged growth of the captive-insurance business in Nevada because it brings work to law firms, accountants, actuaries and other white-collar professionals in the state.
In fact, each new captive creates the equivalent of one new fulltime job in the state, once all the hours of those professionals is added up, says Michael Lynch, deputy commissioner of the Nevada Division of Insurance.
“The economic development side of it is important to us,” Lynch says.
Nevada has been chosen to host captives by companies from industries such as biotechnology, alternative energy, multi-national transportation and manufacturing as well as a growing number of financial institutions.
Fifteen years after it was a pioneer in offering a domicile to captives, Nevada now faces competition from about 30 states.
But the competition, Lynch says, is generating lots of buzz as insurance officials across the nation spread the word about captives. And that, in turn, is boosting formation of so many new captives that Nevada can more than hold its own despite the competition.
The state’s business-friendly corporate environment also protects its share of the captives market, Lynch says.
Particularly important is companies’ ability under Nevada law to create a “series LLC” — a type of limited liability company that allows risks to be segregated.
Other factors spurring recent growth, Lynch says, have been use of captive insurers as part of some corporate strategies to deal with federal healthcare reform as well as the return to U.S. domiciles of some captives that were launched in offshore homes during the 1990s.
The Nevada Department of Insurance aggressively markets the state as a home to captive insurers, using a small part of the premium tax that captives pay each year.
Early this month, for instance, the Division of Insurance and the Nevada Captive Insurance Association joined to be an exhibiting sponsor at the 2014 Captive Insurance Company Association conference in Scottsdale, Ariz.
Part of the pitch: With Nevada’s long experience in the business, it can offer the fastest application approvals in the nation.
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