28 February 2023Analysis

NCCIA seeks tweaks to Captive Practice Act

The North Carolina Captive Insurance Association (NCCIA) will seek legislation in the recently convened “Long” Session of the North Carolina General Assembly to make three enhancements to the Captive Practice Act.

NCCIA chair Diana Hardy stated that the enhancements will include a change relating to the retaliatory tax that is applied to risk retention groups (RRGs), reducing the maximum rate language in the statute to 2%.

According to Hardy: “The lower tax rate will make North Carolina more competitive with other domiciles resulting in the state being a more attractive home for RRGs.” Continuing, she said the second change will “make 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 final change is an extension premium tax holiday for captives that redomesticate to the state. “Due to a quirk in the language of the original legislation last year an un-intentioned early end date for the measure did not meet the 2 year intent of the statute as drafted,” said Hardy. “This adjustment will extend the tax holiday for the full two years as originally intended, effective upon ratification of the legislation.”
Even with the quirk caused by the shortened allotted time frame North Carolina received and approved 9 redomestications during the period, according to the NCCIA. Other redomestications are expected assuming extension of the legislation.