The Tennessee Senate has signed a new captive bill, bringing the legislation one step closer to law.
The new captive legislation, HB 2228, received 31 votes to none and now awaits full signature from Tennessee governor Bill Haslam.
Most notably, the legislation establishes a new way for captives to redomesticate to the state.
Currently, companies need to create a new Tennessee captive and then either merge the old insurer into the new one, or place its policies and assets in the new captive.
Under the new legislation, companies can simply register a transfer of the captive’s domicile once the insurance department has approved the redomestication.
The legislation also requires legal actions brought against a protected cell captive to specify which protected cells are a party to a suit. The change addresses industry concerns that the walls between cells will not be respected by courts.
Tennessee’s new captive legislation also reforms self-procurement tax forgiveness. Tennessee companies with foreign captives facing a liability on current or past-due procurement taxes will have those liabilities forgiven if they redomesticate that captive back to Tennessee by the end of 2018.
Companies will receive self-procurement tax forgiveness if they transfer a complete line of business into a newly formed Tennessee captive with at least $15 million of capital and $30 million of annual premium.
Finally, the legislation clarifies and set a uniform due date of 15 March for annual reports and payment of premium taxes, although risk retention groups must still file their annual report by 1 March.
Kevin Doherty, president of the Tennessee Captive Insurance Association and a partner at Nelson Mullins Riley & Scarborough, commented: "Once again Tennessee has shown that it is willing to do what it takes to stay at the forefront of the captive insurance industry and take innovative action to encourage movement of captives to Tennessee."
