Lori Gorman and Joe Rosenberger | North Carolina Captive Insurance Companies Division

Lori Gorman and Joe Rosenberger from the North Carolina Captive Insurance Companies Division discuss how the state is evolving with enhanced infrastructure, regulatory expertise, and a growing service provider network in its captive insurance market

What developments in North Carolina's captive infrastructure, regulatory expertise, and service provider network reflect the state's increasing sophistication and maturity, in addition to its quantitative growth?

Joe Rosenberger: North Carolina has solidified its position as the third-largest US domicile, overseeing more than 1,000 risk-bearing entities, including 293 captive insurance companies as of the end of 2024. The state’s standing as a leading captive insurance domicile is supported by the strength of its regulatory infrastructure and the expertise of its captive insurance team. The North Carolina Department of Insurance (NCDOI) operates a well-staffed division of dedicated captive analysts and an in-house actuarial team, ensuring efficient and thorough review of captive filings.

This integrated approach fosters responsive oversight and high-quality service through shared experience. Additionally, North Carolina boasts a large network of approved captive managers, with an increasing number of service providers establishing a presence in the state.

How have elements of North Carolina's regulatory approach, such as the commissioner's discretionary authority and the state's business environment, appealed to national and international captive owners seeking a stable domicile?

Rosenberger: While North Carolina's captive programme was originally designed to address the risk management needs of local businesses, its appeal has grown significantly. The state's flexible, business-focused regulatory philosophy continues to attract sophisticated captive owners both nationally and internationally.

A key aspect of this approach is the commissioner’s discretionary authority, which enables flexible capital requirements based on each captive insurer’s specific business plan and risk profile. While statutory guidelines, such as the US$250,000 minimum for pure captives, provide a regulatory framework, the NCDOI evaluates each application individually to ensure regulatory expectations align with the captive’s unique needs.

This case-by-case approach fosters innovation, supports the feasibility of captive solutions, and reinforces North Carolina’s reputation as a stable and business-friendly domicile with a prudent, consistent regulatory approach.

How do you see the evolution of cell structures and other risk-bearing vehicles in the domicile in response to increasing demand for flexible risk financing solutions and the need for more complex risk retention and transfer strategies, including emerging risks?

Rosenberger: The incorporation of cell structures has been pivotal in North Carolina's growth trajectory.

Cell structures have significantly contributed to the state's captive insurance growth, supported by its flexible regulatory framework, which allows multiple types of cell formations, including both incorporated and unincorporated protected cells, as well as special purpose cell structures such as limited liability company (LLC) cells and series LLC cells.

This variety enables captive owners to choose the structure best suited to their risk financing needs. Although North Carolina captives are restricted from directly writing certain personal lines, such as auto, homeowners, life, or workers' compensation, the state's Captive Insurance Act provides captive insurers with considerable latitude to address a wide range of other risk exposures.

Additionally, captives may reinsure otherwise restricted lines upon the commissioner's approval, offering flexibility that aligns with evolving risk management strategies, including emerging risks.

Can you provide examples of how the NCDOI has used its discretionary authority to address changing market conditions or emerging risks, while maintaining the stability of the captive sector and supporting innovation?

Lori Gorman: North Carolina's regulatory framework is often praised for its adaptability. Even in the face of increased regulatory pressure and heightened Internal Revenue Service (IRS) scrutiny, the captive insurance market continues to grow as a nimble, flexible alternative to the traditional market.

In the state, we regulate each captive based on the company's unique risk profile and its appetite to retain risk. During the recent pandemic, many businesses found substantial support through business interruption coverage provided by their captive insurance companies. While traditional insurance policies often excluded such coverage, captives offered tailored solutions that addressed the specific needs of their owners.

In addition to covering losses, captives provided business owners with greater financial flexibility by facilitating loans and dividend distributions to assist with cash flow management. As the frequency of natural disasters and cyber-attacks continues to rise, business interruption remains a critical risk, underscoring the value of the customised, integrated risk management solutions offered by captive insurers.

How does the North Carolina Captive Insurance Association plan to collaborate with its incoming CEO, to be announced at the 2025 Conference in Charlotte, to maintain the progress and direction of the state's captive programme after President Tom Adams' retirement in October 2025?

Gorman: Since the passage of the Captive Insurance Act in 2013, Tom Adams has played a crucial role in developing and supporting the captive industry in North Carolina.

Upon learning of his retirement, Commissioner Causey remarked that North Carolina’s captive industry has greatly benefited from Tom Adams’ thoughtful leadership and insights during his tenure as president and CEO of the North Carolina Captive Insurance Association (NCCIA).

The growth of North Carolina as a captive domicile is due in large part to the collaborative relationship nurtured between the NCDOI and the NCCIA over the years.

The NCDOI looks forward to continuing this relationship with Tom Adams' successor and the NCCIA board to promote the state as a leading captive domicile, while addressing the emerging needs of the industry in the coming decade and beyond.

What are some of the less quantifiable advantages that North Carolina offers to captive owners, aside from the economic benefits?

Gorman: North Carolina is an excellent state to call home for your captive insurer. Our programme benefits from the long-term commitment provided by Commissioner Mike Causey, the NCCIA, and other prominent state leaders.

The NCDOI offers a dedicated team of experienced professionals who are accessible and committed to providing exceptional customer service.

North Carolina also boasts a wide range of captive managers approved by the NCDOI to manage North Carolina-licensed captive insurers, alongside a diverse array of other industry service providers, including actuaries, attorneys, auditors, investment managers, and brokers who offer services to North Carolina captive insurers.

The state is consistently recognised as having one of the best business climates in America. From the mountains to the coast, we believe you will find our climate perfect for both work and play.

How is the NCDOI supporting captive owners to optimise their risk transfer strategies, especially in accessing reinsurance markets and developing tailored coverage solutions to address capacity limitations and pricing volatility in the current hardening commercial insurance market?

Gorman: Rising insurance costs and fewer participants in the commercial market are driving an increase in captive formations. For companies that self-insure, the opportunity to tailor coverage and gain greater control over their risk management programme are appealing benefits of captive insurance structures. Coverage related to supply chain, business interruption, and the property sector stand out as particularly challenging, following an increase in catastrophic events. As a result, more business owners with favourable loss histories are considering captives to contain costs, access tailored coverage, and benefit from the reinsurance markets to manage risk.

Many existing, mature captive entities are likely to expand as owners continuously assess their coverage needs. NCDOI strives to partner with regulated captive insurers by delivering prompt, consistent regulation in a fast-paced environment, as more captive owners seek to build value with captive structures that complement traditional insurance programmes.

What are the key strategic goals for the Captive Insurance Companies Division over the next decade to maintain North Carolina's position and advance governance, compliance, and risk management practices within the sector?

Gorman: As we look to the future, we view the captive industry as a leader in the risk management space, addressing emerging trends and new technologies.

As the concept of captive insurance has become more widely accepted, North Carolina has aimed to remain adaptable yet consistent in its approach to prudent regulation.

As regulators, we strive to ensure that captive owners and managers adopt best practices in corporate governance and build a strategic team of trusted service providers while operating in line with approved business plans.

New technologies, such as AI, may offer advantages like the ability to analyse large amounts of data and identify risks, but they also present new challenges, such as data breaches and privacy concerns.

We are committed to continually educating our team on emerging trends, new technologies, and captive solutions by attending industry events, including educational sessions, and offering continuous training opportunities.

Which sectors do you see experiencing significant growth in North Carolina's captive market, and are there particular advantages within the state's regulatory environment for the formation of captives, such as in employee benefits or emerging risk areas?

Gorman: With the continued hardening of the traditional market, we expect to see a broad range of industries remain interested in forming captive insurance companies.

We also anticipate a rise in interest from smaller to mid-sized companies with strong loss prevention initiatives and favourable loss experience.

Given the rising cost of healthcare, it is not surprising that employers are seeking more cost-effective strategies to provide these benefits to their employees, exploring options such as medical stop-loss structures along with other emerging risks.

North Carolina’s Captive Insurance Act offers a wide range of captive structures, including protected cell structures and special purpose series.

Participation in these types of cell structures can provide captive owners with a lower cost of entry for forming a captive, often with reduced capital requirements, shared service provider expenses, and flexibility for future growth.