Tennessee Creates Its Own Captive To Reduce Costs, Increase Efficiency

The state of Tennessee has created a captive insurance company, the Tennessee Captive Insurance Company, to create savings and efficiencies in insuring state property.

The state is self-insured for property and general liability, with its self-insurance program administered by the Tennessee Department of Treasury, Division of Claims and Risk Management. The self-insurance program covers all state-owned buildings and contents, including the campuses of Tennessee's institutions of higher learning. The total property value under the program was $31.4 billion as of July.

The Tennessee Department of Treasury said in a statement that the Tennessee Captive Insurance Company will allow the state to increase efficiency as it insures property losses up to deductible limits while providing access to reinsurance markets, minimizing pricing volatility, and underwriting the state's unique risks.

The Division of Claims and Risk Management expects the new captive to help it insure unique and difficult risks and reduce the state's overall insurance costs. Using the captive is expected to also help the state better evaluate and control its risks.

Captive insurance companies in Tennessee are regulated by the Tennessee Department of Commerce and Insurance, which recently granted the state's new captive authority to operate, following the approval of authorizing legislation by the Tennessee General Assembly.

"Commerce & Insurance has advocated for captive insurance as a smart business option to lower costs and increase specifically tailored protections," Department of Commerce & Insurance Commissioner Carter Lawrence said in a statement. "Now that the state is establishing a captive insurance company, taxpayers will benefit from these same advantages."

The Tennessee Captive Insurance Company will initially issue only property and cyber-liability policies, but the state may add other lines of coverage in the future.

The state's new captive is governed by the Tennessee Captive Insurance Board, composed of Tennessee state officials, including the state treasurer, the commissioner of human resources, the commissioner of finance and administration, the comptroller of the treasury, and the secretary of state.