20 June 2013Analysis

Texas announces Captive Association formation

Hot on the heels of Texas Governor Rick Perry’s signature on SB 734, which allows the establishment of pure captives in the State, the Texas Captive Insurance Association has announced its formation. Captive International spoke to founding member and 20-year captive veteran Michael Mead about the newest captive domicile in the Union.

How will the Texas captive law help business in state?

The Texas captive insurance law will encourage Texas-based companies to form their captives here which will create jobs and increase revenues in taxes and revenues generated by new business. Texas-based companies with captives licensed elsewhere may well consider the advantages of re-domiciling their captive to their home state for tax purposes.

Does Texas intend to focus largely on in-state companies?

The focus will initially be on Texas-based companies certainly. Over time, we hope to expand the offerings to provide a welcoming domicile for all companies.

The principal advantage will be companies wrestling with Nonadmitted and Reinsurance Reform Act  issues. While these issues are by no means settled, the lack of certainty causes many captive owners to elect to be domiciled in their home state, regardless of the ultimate resolution. Over time we know that Texas will demonstrate many additional advantages.

How does the state plan to differentiate itself?

Initially we don't see [the additon of Texas as a captive domicile] as changing the larger market. That is not the intent of the legislation. We are helping Texas based companies and beginning the process of creating a viable domicile.

Texas already has a business friendly environment with helpful regulations and regulators. The captive initiative is an extension of that culture. With no state income tax and overall encouragement to business, we think that the differences will be clear.

We regard the current legislation as the beginning of the process, not the end. We look forward to working with the Department of Insurance and the new director and all interested parties in the state as we continue to hone and perfect the legislation to the benefit of Texas.