Missouri and California are rumoured to be the only US states collecting taxes under the Non-Admitted and Reinsurance Reform Act (NRRA).
David Provost of the Vermont Department of Financial Regulation and Daniel Towle of the state’s Agency of Commerce and Community Development discussed the much criticised provision of the US Dodd-Frank Act during a press conference at the Vermont Captive Insurance Association's annual conference.
The NRRA should only affect surplus lines and reinsurance, say its opponents, but some states have or are planning to interpret it differently.
If the NRRA is applied to captives, states will levy self-procurement taxes on 100 percent of the premiums paid to a captive by a ‘home-state’ policyholder that has material risks located outside of that state.
But captive advocates as well as two of Dodd-Frank’s original architects have said explicitly that it should not apply to captives, and according to Towle and Provost, states are stepping back, with only Missouri and California thought to be collecting taxes from captives under the NRRA.
A legislative fix to the NRRA problem would be “ideal”, said Towle, but it is unlikely that this will happen without pressure from the captive insurance industry.
Vermont has licensed 13 captives so far this year, Provost went on to say, with the state looking to license its 1000th before the end of 2013.
Towle said: “I’m very optimistic about what kind of year this is going to be.”
