NORTH CAROLINA CAPTIVE INSURANCE COMPANY PROGRAM

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1 NORTH CAROLINA CAPTIVE INSURANCE COMPANY PROGRAM

2 Captive Insurance Company Regulatory Team Wayne Goodwin Raymond Martinez Ben Popkin Debra Walker Rick Kohan Ke Xu Jonathan Stark Kevin Brodie Rick Kilpatrick Leane Rafalko Ben Blackmon Kathy Hart N.C. Insurance Commissioner Senior Deputy Commissioner Legislative Counsel Deputy Commissioner Associate Actuary Chief Financial Examiner Lead Sr. Captive Financial Analyst Senior Captive Insurance Specialist Senior Regulatory Specialist Senior Captive Insurance Specialist Captive Insurance Financial Analyst Administrative Assistant Captive Insurance Companies Division 2

3 NCDOI Regulatory Approach The Act was crafted to provide the Commissioner with appropriate discretion to regulate each captive insurance company based upon the insurer s unique risk profile. The NCDOI does not take a one size fits all approach to regulation. The NCDOI will go out of its way to understand the needs of the captive insurance industry and to serve the industry appropriately. The NCDOI will make every reasonable effort to work with the captive insurance industry so long as there is adherence to the legal requirements. The NCDOI will exercise discretion in the favor of the captive insurance industry wherever reasonably possible. 3

4 Types of Captive Insurers Permitted in NC Pure Captive Insurance Company Insures the risks of its affiliates. Protected Cell Captive Insurance Company Comprised of a core and cell entities, incorporated or unincorporated, which are legally separate from each other. Each cell has dedicated assets and liabilities attributed to it, and the assets of an individual cell cannot be used to meet the liabilities of any other cell. This type of captive insurer is typically attractive to smaller organizations as an efficient and convenient risk management strategy. Special Purpose Captive Insurance Company Does not meet the definition of any other type of captive insurer defined in the statutes and is designated a special purpose captive insurer by the Commissioner. Association Captive Insurance Company Insures the risks of the member organizations of an association and affiliated companies. 4

5 Types of Captive Insurers Permitted in NC (cont d) Industrial Insured Captive Insurance Company Insures the risks of the industrial insured group and affiliated companies. Risk Retention Group ( RRG ) Restricted to writing only liability coverage and formed for the principal purpose of assuming and spreading risk for commercial liability exposure. Not all RRGs are licensed as captive insurers. The formation of RRGs is authorized by a federal law the Liability Risk Retention Act of 1986 that limits many of the regulatory requirements that otherwise might be imposed on RRGs by non-domiciliary states. Special Purpose Financial Captive Insurance Company Reinsures the risks of an affiliate, usually a life insurance company. 5

6 Minimum Capital & Surplus (G.S ; ) Type Minimum Capital & Surplus Pure *$250,000 Special Purpose *$250,000 Association $500,000 Industrial Insured $500,000 Risk Retention Group $1,000,000 Protected Cell $250,000 Special Purpose Financial $250,000 * Or other amount as determined by the Insurance Commissioner 6

7 Forming a New Captive Insurer All captive insurers: G.S and ; Protected Cell: G.S and ; SPFC: G.S , and ) Step 1 Step 2 Step 3 Step 4 Self Assessment or Pre-Feasibility Feasibility Study Application Begin Operations Plan of Operation Organization Select Service Providers Capitalization Meet with NCDOI Licensing Several of the items shown above will be occurring simultaneously. Primary NCDOI Involvement Goal is no greater than 2 weeks 7

8 N.C. Competitive Advantages Dedicated and Experienced Staff Dedicated staff for captive insurance program and in-house actuarial support Access to additional staff, if workload demands are heavy NCDOI conducts the financial analysis and regulatory audits providing cost-savings to captive insurers Seasoned insurance professionals possessing industry and regulatory experience Reputation for being a fair regulator Keenly aware of the importance of customer service and consistency in regulation 8

9 N.C. Competitive Advantages (continued) The North Carolina Captive Insurance Act Provides regulatory flexibility and allows the Commissioner to use prudent judgment and discretion. The Act provides the Commissioner with discretion to regulate each captive insurance company based upon the insurer s unique risk profile. Allows for the formation of incorporated and unincorporated protected cells Allows for special purpose captive insurance companies Provides for a low cost of captive insurer formation and operation: Adequate and reasonable capital requirements No fees (except for special purpose financial captive insurers) No mandatory NCDOI audits (except for RRGs) Competitive premium tax rates Possible exemption from the annual report requirements (case by case basis only) Possible exemption from annual audit requirements for captive insurers writing less than $1.2 million in premium (case by case basis only) 9

10 North Carolina Regulatory Audits The North Carolina Captive Insurance Act does not require a mandatory regularlyscheduled audit (i.e. most states require a regulatory audit every three to five years) The Department relies on the independent CPA audit that is required on an annual basis NCDOI audits in addition to the CPA audit are seen as a duplication of efforts If issues cannot be resolved through analysis, conference calls, and meetings, the NCDOI will conduct a target audit of a specific issue If an audit occurs, it will be conducted by in-house audit staff, and the captive insurer will typically only be billed for the travel expenses of the in-house audit staff 10

11 The North Carolina Captive Insurance Company Program Today Strong growth of NC licensed captive insurers continues as the program enters its 3 rd full year. As of today, 97 captive insurers have obtained approval to operate with 96 currently active, including: Pure captive insurers 71 Protected cell captive insurers 13 Special purpose captive insurers 10 Risk retention groups protected cells or series are currently approved. Approximately 335 captive insurance risk-bearing entities are approved to conduct business. 42 captive managers are approved to manage NC captive insurers, and 23 captive managers are actively managing NC captive insurers. 11

12 Website: Online filing system Other forms & instructions Captive insurance program news List of approved captive insurance managers List of licensed captive insurance companies North Carolina Captive Insurance Act (including document updated for all 2014 and 2015 legislative amendments) Sign-up to receive updates Staff contact information Captive insurance events Resources (brochure, links to other agencies and websites, etc.) 12

13 Contact Information Ray Martinez Debra Walker Senior Deputy Commissioner Deputy Commissioner Ray Jonathan Stark Leane Rafalko Kevin Brodie Lead Sr. Captive Financial Analyst Senior Captive Insurance Specialist Senior Captive Insurance Specialist Rick Kilpatrick Ben Blackmon Rick Kohan Senior Regulatory Specialist Captive Insurance Financial Analyst Associate Actuary Kathy Hart Administrative Assistant Captive Insurance

14 Q&A 14