Domicile Update:District of Columbia (DC)

This article is provided by Strategic Risk Services. Contact details for the company can be found at the end of this article. DC entered the captive industry through the enactment of its Captive Insurance Company Act of 2000. Since that time it has grown quite rapidly and now boasts over 40 captives. Yet despite this growth, it felt compelled to replace its captive legislation with the Captive Insurance Company Act 2004. The law contains several new provisions aimed at establishing DC as a leading captive domicile worldwide. New Provisions In addition to lowering the premium tax rate, there were two unique provisions contained in the law. ?Best Practices: this provision allows the Commissioner the flexibility to approve any captive arrangement, which would be acceptable in any other captive jurisdiction worldwide. ?Segregated Cell Companies: These vehicles can now be set-up by any individual or entity without the need for a specific traditional insurance company sponsor. This provision within the DC law potentially allows risk retention groups (RRGs) to operate as segregated cell companies and has been touted as a major benefit of DC as a domicile. However, caution should be exercised as it is uncertain how this structure will be accommodated with the provisions of the Risk Retention Act itself. The effects of the above are to give DC the most flexibility of the onshore domiciles. Combining this with a commitment to the regulatory infrastructure puts DC in a strong position to continue growing as a captive domicile. Infrastructure DC's trade association, the Captive Insurance Council (CIC), is comprised of experienced legal and captive professionals that are working closely with the DC Department of Insurance, Securities and Banking to both promote the domicile and regulate the captives. 100% of revenues collected from premium taxes are credited to the regulation and supervision of captive insurers. Why DC? The principal reasons we see captive owners expressing interest in DC as a domicile are: ?Location: The nation's capital is readily accessible and close to other regulatory bodies, including the Department of Labor, which needs to approve the insurance of ERISA programs in captives. DC is home to 6,000 associations, a ready source of group and RRG business. ?Reinsurer and investment flexibility: The Commissioner may allow credit for reinsurance and approve investments outside of the NAIC Model Act Provisions. ?Regulatory flexibility: The best practices provision and several other aspects of the new captive law provide considerable flexibility for the Commissioner to consider different forms of captives on their own individual merits without being overly restricted by the legislation. ?Associations and Groups: A high proportion of DC's captives are RRGs. With e proximity to so many Associations this is a natural focus for DC and the revisions to its segregated cell provisions enhance that. Outlook The new captive law provides DC with tremendous flexibility with many individual regulatory decisions at the discretion of the Commissioner. This will attract a lot of activity in the domicile and could result in rapid growth. The Commissioner will need to maintain a strong hand over the District's flexible captive regulation to ensure that DC's reputation is protected. This will be particularly important with the emphasis that DC has placed on RRGs and the resultant scrutiny of other states' Insurance Commissioners as these RRGs look to write direct in their states. If DC can maintain a reputation for strong regulation within its flexible law, it will be well positioned to grow and become a leading onshore domicile in the US. About SRS SRS provides underwriting, management and wholesale brokerage services in the alternative insurance market. They design, implement, manage and grow captive and ART programs on behalf of corporations, groups and insurance companies. SRS is an approved manager of captive insurance companies in Arizona, Bermuda, Cayman Islands, South Carolina & Vermont. Through a wholly owned subsidiary SRS is also licensed as an insurance broker in Bermuda. For more information on SRS, visit them at www.strategicrisks.com. Contact: info@strategicrisks.com