NCCIA issues update on captive bill
The North Carolina Captive Insurance Association (NCCIA)’s Captive Insurance Revisions Bill was introduced and passed its 1st Reading in the North Carolina Senate on Monday, March 20 as SB 319.
The bill’s primary sponsor is Senator Todd Johnson, chair of the Senate Insurance Committee. He is joined initially by Senators Jim Perry and Benton Sawrey as co-sponsors. All legislation must pass 3 readings on the floor in each chamber.
According to the NCCIA SB 319 has three major components. The first is a change relating to the retaliatory tax that is applied to risk retention groups (RRGs), reducing the maximum rate language in the statute to 1.85%. The association had originally planned to ask for a reduction to 2%. When explaining the proposal to Senator Johnson, he suggested to the NCCIA that if North Carolina wanted an incentive for RRGs to domesticate in the state the NCCIA should consider a tax amount lower than the norm. At Senator Johnson’s direction the amount requested in the legislation was set at the 1.85% level.
The second change makes clear the commissioner can examine any RRG when he deems it prudent and reasonable and that the costs for such examinations will be the responsibility of the examined risk retention group.
The third change is an extension of the premium tax holiday for captives that redomesticate to the state. Due to a quirk in the language of the original authorising legislation an un-intentioned early end date for the measure did not meet the 2-year intent of the statute. This adjustment will extend the tax holiday for the full two years as originally intended until January 1, 2025, effective upon ratification of the legislation.
NCCIA Chair Diana Hardy noted that, “Even with the quirk caused by the shortened allotted time frame North Carolina received and approved 7 redomestications during the period. We are confident there will be redomestications, assuming extension of the legislation.”
The bill had its first hearing in the Senate Commerce and Insurance Committee on Tuesday, March 28th. SB 319 was given a favourable report and was referred to the Finance Committee for further discussion and action.
A copy of SB 319 is available on the General Assembly Website at: https://www.ncleg.gov/Sessions/2023/Bills/Senate/PDF/S319v1.pdf