Kansas mulls association, branch and SPI captives

The Kansas state government has introduced a bill aimed at modernising the captive insurance laws in Kansas.

Senate Bill 410 was introduced by the Senate Committee on Financial Institutions and Insurance, and would allow association, branch and special purpose insurance (SPI) captives to be set up in Kansas.

An association captive, also known as group captives, are captive insurance companies that are owned by an association or member of a common industry. A branch captive is a unit of an existing offshore captive that has been licensed onshore to transact business of insurance in the state in which it is domiciled. And finally an SPI captive are captive reinsurers used by other insurers to securitise risk.

Ken Selzer, commissioner of insurance for the Kansas Insurance Department, provided a testimony in support of the bill, noted that many states have already updated their captive laws and have received overwhelming and bipartisan support by their legislative bodies.

"Missouri updated its captive law in 2007 intending to become a regional centre for captive domiciles.  They now have 3 individuals regulating 53 captives.  Likewise, Texas updated its captive laws in 2013 and then made amendments in 2017.  There are now 32 captives in Texas.  Lastly, Oklahoma updated its laws in 2004 with several subsequent amendments.  They now have 70 captives operating in their state.

"The fact that Kansas has not updated its captive laws doesn’t prevent or discourage corporations from forming a captive.  They simply go to a state or offshore jurisdiction that has updated laws in order to form their captive.   Our goal is to keep the captive assets and related services in our state."

He also suggests a small additional cost to regulate an increased level of captive activity in Kansas, all of which would eventually be offset by fees charged to register and maintain the captive in the state.

Selzer continued: “This small additional cost and effort by the Kansas Insurance Department would be far more than offset by the additional economic development benefits to Kansas.

“These benefits include retaining in our state those captives that Kansas based corporations would already create to serve their risk management needs, rather than having them look to Missouri, Texas or other jurisdiction for a location for their captive.”