The Nevada Captive Insurance Association (NCIA) hosted its 8th captive conference on 25 September at the Bellagio hotel on the Las Vegas Strip. Commissioners and staff from the Western Region captive domiciles attended to discuss matters of importance to their regional captive movement, alongside tax updates, news from Washington, DC, and an address from Scott Kipper, Nevada’s new commissioner of insurance.
The Nevada Captive Insurance Association (NCIA) hosted its 8th captive conference on 25 September at the Bellagio hotel on the Las Vegas Strip. Commissioners and staff from the Western Region captive domiciles attended to discuss matters of importance to their regional captive movement, alongside tax updates, news from Washington, DC, and an address from Scott Kipper, Nevada’s new commissioner of insurance.
But the captive sector in Nevada is seeking to distance itself from the Las Vegas cliché. Before state insurance commissioner Brett Barratt resigned in August, he promised more white-collar jobs and less of a focus on tourism, with the signing of Assembly Bill 74 into law.
The bill was submitted by the Nevada Division of Insurance and has provisions that reduce compliance expenses by no longer requiring ‘pure’ captive insurers to be examined without cause, lowers application expenses and simplifies financial reporting.
Speaking at the time of the bill’s signing, Nevada’s governor Brian Sandoval said: “I am pleased to sign into law these provisions that will make Nevada a more attractive place to do business for captive insurers. These changes are closely aligned with Nevada’s business friendly attitude. Captive insurers are also an excellent mechanism for businesses to capitalise on their successful risk management.”
On top of the changes of Assembly Bill 74, Nevada is attractive to captives because it has no corporate income tax and business friendly corporate laws. A captive can typically incorporate in Nevada within 24 hours.
However, despite being at the forefront of the captive insurance industry in the US when the state first brought in legislation more than a decade ago, and winning a major coup in 2010 as NV Energy, the state’s largest utility, created a captive based in Nevada, it has recently fallen behind competitors.
Commissioner Barratt’s appeal to prospective captive owners spoke volumes about the state’s eagerness to make up lost ground.
Nevada had 130 captives as of June 2011, and maintains a close rivalry with Utah, a neighbouring state, which was among the fastest growing captive domiciles in the country in 2010.
With 188 captives, Utah is now second only to Vermont in terms of the number of licensed entities. Though the state only passed its first legislation in 2003, by eliminating premium taxes in 2004 and amending its legislation in 2008, Utah is working hard to prove it is a worthy competitor.
However, details of Nevada’s Assembly Bill 74 are not to be sniffed at. The bill focuses on the elimination of a requirement that every captive in the state be examined once every three years. Barratt has said that these examinations could cost companies between $8000 and $20,000. This amount is significant enough to force prospective captives to cross Navada off of their list.
The state hopes that this is about to change. When speaking about Assembly Bill 74, Barratt said: “Nevada has some of the most business friendly laws in the country, including not having a corporate income tax. But when we examined our captive insurance statute, we determined that we were being held back by having each captive go through an examination once every three years. The cost of those examinations combined with a relatively high premium tax was a real barrier to companies incorporating here.”
Associations are also helping to make a mark on the sector. The NCIA, a non-profit organisation, was formally organised in 2004 and it has been instrumental in promotion, fostering, and marketing Nevada as an attractive and competitive domicile. The association advises the insurance commissioner on matters affecting captive companies in Nevada, and it supports the industry on legislative and regulatory matters.
It appears as though Assembly Bill 74 is the big step Nevada needs to return to its former glory. Alongside significant corporate tax benefits and minimal reporting requirements, the state is seeking to position itself as a convenient alternative to offshore domiciles, celebrating on its governmental website, “legislative sessions of just 120 days each biennium”. But with competition from other Western states proving stiffer than imagined, Nevada’s vehemently ‘business-friendly’ stance may need to be re-examined, if the state is to kick things into gear for 2013.
