A new coalition wants to have the Non-admitted and Reinsurance Reform Act (NRRA) clarified so that it does not apply to captive insurance.
The NRRA, which is a part of the US Dodd-Frank Act, deals with how surplus lines taxes on non-admitted insurance premiums are levied.
Before the NRRA was implemented, US states would tax that portion of any surplus lines premium paid to cover loss exposures in that particular state.
The NRRA eliminates this distribution scheme in favour of one that only allows the insured's ‘home state’ to collect the tax.
Captive insurance professionals argue that the NRRA should not apply to captives.
Vermont’s director of financial services, Dan Towle, said that there is a tremendous amount of misinformation being shared about the NRRA that is “clearly trying to take advantage of the ambiguous language of the act”, which is doing a “disservice to the captive insurer and to the industry”.
In response to this, the Vermont Captive Insurance Association (VCIA) has formed the Coalition for Captive Insurance Clarity (CCIC), which plans to expound parts of the NRRA sub-section of Dodd-Frank.
It welcomes industry members to join in the effort to amend the law, and will work with members of US Congress to make the necessary changes.
The VCIA has hired FaegreBD Consulting, which is one of the architects of the NRRA, to work with the association’s long-time lobbying firm McIntyre & Lemon, to help to amend the law.
Richard Smith, president of the VCIA, said: “The NRRA language in Dodd-Frank is a top concern of our members and has created apprehension industry-wide. While there are ambiguities in the law, it is clear that there was no intent to have it apply to captive insurance, and I am optimistic that we can be successful seeking clarification.”
Vermont’s governor, Peter Shumlin, said the confusion could be damaging to the captive insurance industry. “The captive insurance industry expects and desires strong regulation.”
“Companies need to have the choice of where they domicile based on regulatory strength, not based on tax ambiguity. Vermont has consistently proven itself as the ‘gold standard of domiciles’. This fix is needed to ensure that companies continue to have a choice of where they domicile.”