Hardening Market Driving District of Columbia Captive Formations

Amid hardening conditions in the traditional market, District of Columbia captive regulators are expecting the domicile's captive growth to continue.

"Companies are forming captives to reduce their cost of insurance," said Sean O'Donnell, director of financial examination at the District of Columbia Department of Insurance Securities and Banking.

"We are definitely seeing an increase in activity due to the hardening market," added Mr. O'Donnell, who spoke at an October 27 online conference sponsored by the Captive Insurance Council of the District of Columbia.

So far this year, the District of Columbia has licensed 13 captives, with regulators expecting between 5 and 10 more captive applications to be filed before the end of the year. If all those applications are filed and approved by the end of the year, the number of new captives in 2020 would at least equal and possibly top 2019 when 18 captives were licensed. Currently, the District of Columbia has 152 captives, up from 128 in 2015.

"We expect to come close or exceed" the number of captives licensed in 2019, said Dana Sheppard, associate commissioner at the District of Columbia Department of Insurance, Securities, and Banking, who also spoke at the session.

Turning to another area, Mr. Sheppard said his department welcomes suggestions from the captive community on how to improve the domicile's captive statute and regulation.

Regulators want to know "what we can do to ease the burden of regulation" and make it less expensive to operate a captive, Mr. Sheppard said.