Captive International spoke to Richard S. Smith, president of the Vermont Captive Insurance Association (VCIA), about the ongoing struggle to exclude captives from the Nonadmitted Insurance and Reinsurance Reform Act (NRRA).
How successful has the push for greater specificity in the NRRA been so far? How optimistic is the captive industry?
So far we have built up a coalition that represents the broad captive insurance industry. There are currently 20 members comprised of many of the leading captive associations, captive managers and service providers from around the country to support a technical amendment to clarify that captives are not part of the NRRA in Dodd-Frank.
We have successfully secured statements from two of the primary architects behind the NRRA, Judy Biggert, the former chairman of the Subcommittee on Insurance, Housing and Community Opportunity, and US Congressman Scott Garrett (R-NJ), stating unequivocally that the legislation was never intended to apply to captive insurance.
I am optimistic that we will get the change needed in law.
The Anderson Kill & Olick (AKO) white paper raises the possibility that legislative challenges could result in fragmented implementation of the NRRA. What would be the implications of that?
The AKO white paper raises many good points and reinforces the Coalition’s position. The evidence is mounting that this is not to apply to the captive insurance industry and the AKO white paper further supports that. It also reinforces that states that incorrectly apply this to captive insurance companies are likely to face litigation. It is our hope that states will not try to apply the NRRA to captive insurance companies.
This is an industry issue and not specific to a domicile. This will affect everyone and is not good for the future of captive insurance.
Should captives be preparing themselves for the worst? What options should they looking at?
Effectively operating a captive insurance company is part of good risk management strategy. Companies should continue to seek counsel from their advisors and evaluate what is best for them. This is the same advice I would have given prior to NRRA. The vast majority of captive insurance companies are taking a ‘wait and see’ approach versus doing something reactive because of the NRRA.
What moves has the VCIA been making to ensure the best possible outcome for its members?
Our activities to seek a technical amendment in Washington that clarifies the original intent of Congress on the issue is probably the best outcome we can work towards. In the meantime, we will provide education and support to our members as this issue evolves. We continue to stress that captive companies seek the proper analysis and guidance from their experienced captive professionals before making any decisions regarding their captives.
VCIA, NRRA, Dodd-Frank, captive insurance, insurance