Captive Insurance Company Growth Strong in DC Domicile

Captive insurance company growth continues to be strong in the District of Columbia captive insurance domicile, captive regulators say.

So far this year, 12 new captives have been licensed, up from 9 at the same period in 2018, said Sean O'Donnell, director of financial examination at the District of Columbia Department of Insurance, Securities and Banking.

And more growth is coming. "We have more in the pipeline. This will be a good year," Mr. O'Donnell said October 22, 2019, at the annual conference of the Captive Insurance Council of the District of Columbia. Currently, 144 captives are licensed in the District of Columbia.

In addition, as more captives are licensed, captive premium volume also will increase, Mr. O'Donnell said. In 2018, captives licensed in the District of Columbia generated $1.4 billion in premiums.

At the same time, Mr. O'Donnell says there is rising employer interest in using their captives to fund employee benefit risks. "That is something that is increasing," Mr. O'Donnell said.

Of the District of Columbia's 144 captives, 37 (a significant number) are risk retention groups (RRGs), a special type of captive, which under legislation Congress passed in the 1980s can do business in any state after meeting the licensing requirements of 1 state.

RRGs, though, under federal law, can only write casualty coverages—except workers compensation—for their policyholder owners.

Legislation (H.R. 4523), though, introduced last month in the US House of Representatives, would allow RRGs to also offer property coverages so long as certain conditions were met. Those conditions include that an RRG would have to be operating for at least 10 years and maintain capital and surplus of at least $10 million.

But Mr. O'Donnell is skeptical amid continued opposition from the National Association of Insurance Commissioners that the RRG expansion will win congressional passage anytime soon.

"I don't know if this will go anywhere. Stay tuned for that," Mr. O'Donnell said.

One change, however, that could lie ahead is an update of the District of Columbia's captive statute, which was originally passed in 2000.

"We do want to keep our law fresh," said Dana Sheppard, director of the District of Columbia's captive insurance program, who also spoke at the captive conference.

On the captive regulatory side, though, Mr. Sheppard is very satisfied. "We have a great staff. They are very dedicated to the work they do," he said.

Click on the image below to learn more about the District of Columbia captive domicile.