Known as the Grand Canyon State, Arizona has seen slow but steady growth within its captive industry
There are many factors to consider when selecting a captive domicile, besides an attractive regulatory environment. The State of Arizona, with its favourable year-round climate, is a haven for business people and pleasure seekers.
Known as the Grand Canyon State, Arizona attracts international tourists and professionals alike for the fresh air and sunshine, world-class convention centres, and all the activities one would like to enjoy.
The Arizona Department of Insurance and Financial Institutions (DIFI) has a stable team of professionals who are knowledgeable, accessible and responsive and have the necessary experience to foster a sound and competitive captive programme.
Last year, DIFI licensed 12 new captive insurance companies, bringing the total to 133.
Arizona captives wrote more than $9.4 billion in gross premiums in 2019, and there are now more than 130 licensed captives and captive risk retention groups in the state.
According to Michael Low, partner at Kutak Rock, the new captives are coming from the construction, healthcare and technology sectors.
Vincent Gosz, chief captive analyst at Arizona DIFI captive programmes, says the state has also approved two new licenses so far this year and have several others in various stages of the application or pre-application process.
Gosz explains: “We are generally seeing an uptick in captive formations, pre-application activities and inquiries, as well as increased requests for business plan changes to amend limits, retention, and adding new lines of coverage to existing policies.”
Arizona historically has experienced slow, but steady growth.
As the economy recovers from the pandemic, Low says he expects to see an increase in general business operations in the state, including more captive formations.
“Arizona is a pro-business state that leads the nation in the percentage of new business formations. We expect this to continue,” he adds.
Why Arizona?
As a mature and experienced domicile, the Arizona captive programme enables organisations to meet many of their needs and challenges in a manner more responsive to their organisation’s objectives.
Commenting on what Arizona has to offer potential captive owners compared to its other competitors in US, Rae Brown, senior consultant, management services at GPW and Associates and president of the Arizona Captive Insurance Association (AzCIA), explains that the state has a well established captive law and a history of solid, fair regulatory management.
She explains: “One area providing convenience and financial relief is that Arizona does not require a regulatory financial examination for pure captives unless there is a reason.
This eliminates examiner and service provider time and costs.”
Arizona also does not impose a tax on premiums but instead has a $5,000 annual license fee making them an attractive domicile for captives with large premiums.
The state also provides a small company exemption of annual actuarial opinion and audit for qualifying captives.
Gosz notes that Arizona offers a mature and well-established captive domicile to include experienced and responsive regulators, as well as access to a large number of captive managers, attorneys, and other service providers specialising in insurance and captive insurers.
Conference
Arizona is a member of the Western Region Captive Insurance Conference (WRCIC), which links the Arizona, Missouri, Nevada and Utah captive insurance associations together to jointly host an annual industry conference. The WRCIC board made the decision to cancel 2020’s conference because of concerns around the COVID-19 pandemic.
In December 2020, the WRCIC said it was moving forward with plans for a multi-state in-person conference, which is scheduled for 14 to 16 June 2021, in Salt Lake City, Utah.
Organisers from WRCIC highlighted that it will monitor and assess the safety of an in-person event being possible and keep all registered attendees updated as summer 2021 approaches.
Explaining how AzCIA supported the captive industry during the pandemic, Brown outlines that AzCIA’s 2020 focus was to actively stay connected through our breakfast meetings that include industry speakers to provide education and current events.
She adds: “We are hoping to have the opportunity to return to live meetings later this year. Our members have diligently supported the virtual meetings, but we all look forward to meeting in real-time as soon as it is safe to do so.”
2021 initiatives
AzCIA spent the end of 2020 engaging with its local captive community. The association set an objective to creatively adjust how it engaged with the community.
It also continued working with the Department of Insurance in its efforts to market Arizona as an attractive captive domicile.
Brown says that this year, one of the main focuses is to welcome the newly appointed director of the Arizona DIFI, Evan Daniels.
She states: “We want to partner with Daniels to immerse him into the value that captive insurance brings to Arizona. We met with him to begin our partnership, but the pandemic delayed our efforts until this year.”
Despite the challenges brought by 2020, Daniels says Arizona’s economy has weathered the health crisis and stands poised to be a leader in the country’s economic recovery.
“Arizona is a great place to live, work, and play, and our regulatory environment and institutions are ready to welcome and work with new market participants,” Daniels add
