Travis Wegkamp of the Utah Insurance Department discusses what’s in store for the state’s captive insurance market this year
Utah has a strong captives insurance market. The state ended 2020 with 382 active captive insurance companies in operation.
Over the last year, Utah has introduced several captive bills into its legislative plan. In April 2020, Utah governor Gary Herbert signed an insurance amendment bill into law, which includes amendments for captive insurance companies within the state.
As part of Utah’s 2021 General Session, House Bill 54 was introduced. The bill will amend the insurance code, including “significant” changes for captive insurance to ensure the state remains competitive. The State’s capital, Salt Lake City, is the host of the Western Region Captive Insurance Conference (WRCIC), which it is also a member of along with Arizona, Missouri and Nevada.
Despite the ongoing COVID-19 pandemic, the WRCIC is planned to go ahead as an ‘in-person’ conference between 14 and 16 June 2021 at the Little America Hotel in Downtown Salt Lake City.
What trends are you seeing within Utah’s captive insurance market?
Since the Protecting Americans From Tax Hikes (PATH) Act of 2017, we have seen a continuing trend for the last several years in terms of the type and size of captives licensed. The state has seen a good portion of micro captives — Utah benefited greatly from the micro boom — wind down operations and be replaced by larger captives with more robust risk programmes and higher premium volumes.
So, while we remain the second largest captive domicile in the nation, our overall numbers have decreased, but conversely, our premium volume has slowly grown to record highs. A trend we’re satisfied with. In terms of coverages, other than an increased interest in insuring against pandemic-related losses, no one type of coverage stands out as a new trend here.
Utah governor Gary Herbert signed an insurance amendment bill into law in 2020, which includes amendments for captive insurance companies within the state. How has this helped the sector?
The key provision in the 2020 bill was the allowance for captives to reinsure pure third-party risk with prior approval of the commissioner.
As long as I’ve been a captive regulator, those in the industry have sought ways to not only maximise profits but satisfy Federal requirements of risk distribution from third-party coverage. Since the passage of the amendment, many captives have taken advantage of this new risk avenue, and many have come here forming new captives purposefully designed toward utilising this specific line of reinsurance coverage from a traditional front.
What opportunities will this year’s captive legislative amendments provide Utah’s captive sector?
With the waning interest in micro captives, I feel we’re seeing increased interest in cell captives across the country. To help facilitate their formation and increase the likelihood of Utah as their domicile of choice; we’ve reduced the minimum capitalisation requirements for a sponsored programme to $500,000 with a minimum of $200,000 from the core. Down from $1 million and $350,000, respectively.
What challenges is Utah’s captive industry facing?
I don’t believe there are any challenges we’re facing that are unique to Utah, but rather those that the industry faces as a whole. These challenges include the Internal Revenue Service (IRS) scrutiny, general acceptance as an alternative risk transfer mechanism, and potential National Association of Insurance Commissioners (NAIC) overreach.
As for challenges with other domiciles, I believe Utah remains very competitive in terms of our fees/taxes and legislative environment and remains a top tier captive domicile in the country and the world.
The Western Region Captive Insurance Conference (WRCIC) is planned as an ‘in-person’ conference in June in Utah. How will this event benefit Utah?
Our WRCIC is a fantastic event that gives each of our member domiciles a chance to shine when they host the conference. It’s very beneficial whenever we can meet in-person, and often informally, with current and potential future owners as well as the industry service providers. I don’t know of anyone that comes to our beautiful state and leaves thinking it’s not a place they’d like to do business.
I’m extremely pleased that the WRCIC stakeholders who are courageously moving forward with the continued intentions of an in-person conference, it’s time!
Of course, we’re not oblivious to the continued concerns, and while we hope for a well-attended event, realistically I would expect the numbers to be fewer than normal.
But if people can safely attend a sporting event or go shopping at Walmart, they can certainly attend business conferences.
What else is the Utah Insurance Department working on in 2021?
We’re certainly always taking advice and looking into additional ways to expand our legislation and domicile appeal.
