Captive-friendly clarification a victory for the CCIC
Outgoing Representative Judy Biggert, who served as chairman of the Subcommittee on Insurance before being defeated in recent elections by Democrat Bill Foster, affirmed in a letter to her committee successor that the Nonadmitted and Reinsurance Reform Act (NRRA) was never intended to apply to captive insurance. According to Biggert the NRRA, which is part of the larger Dodd-Frank Bill, has simply been “misinterpreted” by some states.
According to the Coalition for Captive Insurance Clarity (CCIC), Biggert’s letter is “a clear indication of congress’ intent not to include the captive industry in NRRA.” Richard Smith, president of the Vermont Captive Insurance Association (VCIA), a leading party in the CCIC, said: “this endorsement from the outgoing subcommittee chairman, who played a substantive and important role in crafting the NRRA, makes it crystal clear – captive insurance is not and never was intended to be included in Dodd-Frank.”
The letter has been applauded by those within the captive industry, with Tom Hodson, president of the Connecticut Captive Insurance Assocation (CCIA) stating that “this is a very important step toward clarifying that the NRRA does not apply to captive insurance programmes. The confusion, however, will only be settled by either an amendment to NRRA or judicial action. Representative Biggert's remarks will certainly carry great weight in the final disposition of this issue."
It seems that the matter is not over yet however, with the CCIA announcing this week that its board of directors have authorised it to join efforts to resolve the issue that "will only be settled by either an amendment to NRRA or judicial action. Representative Biggert's remarks will certainly carry great weight in the final disposition of this issue", said Hodson.
Captive International spoke in further detail with Richard Smith, president of the VCIA and the man heading up the CCIC about the implications of Biggert’s letter.
How definitive is Biggert's letter in deciding the captive position?
The letter helps to lay to rest the notion that captives were meant to be any part of the NRRA legislation. However, it is certainly not definitive as we cannot say here at the CCIC that we have accomplished our task. That said; it will provide more ammunition and evidence to bolster our calls that a technical amendment is now warranted and that captives should be excluded from the NRRA.
How quickly do you expect resolution on the issue?
The CCIC is pushing for clarification on the issue as soon as possible, but we can’t predict how quickly Congress may act on this. My hope is that it will be dealt with in the near-term, but we shall see. Working closely with the requisite committees that are dealing with amendments to Dodd-Frank, we hope that they will look favourably on our petition and understand why we are requesting this amendment.
Do you expect this news to rein in calls to domicile captives in company's home state?
Biggert’s letter is certainly helpful and hopefully provides the industry with a little more certainty. It should help clarify matters for those who decided to change domicile, or chose their domicile, in response to the NRRA legislation.
We want folks to choose their captive domicile based on the best needs of their company and the situation of their captives, not based on what we see as an accident in federal legislation. Our hope is that people will see that there is now more evidence that this issue does not apply to captives and that before they make any precipitous decisions about domicile that they should look more closely at this issue. And this is really all we can ask for: for people to consider the issue armed with the facts.