The president of the Vermont Captive Insurance Association (VCIA), Richard Smith, has said he is more comfortable with The US Department of the Treasury’s proposed changes to the Terrorism Risk Insurance Act (TRIA).
The US Treasury proposed a rule, put forward in a notice on December 27, 2016, that would exclude captive insurance companies from the regulatory definition of “small insurers” under the Terrorism Risk Insurance Act.
Furthermore, the proposed changes include a series of new data collection requirements that captive insurers would have to comply with in January, which has since be extended to May 15.
One of Smith’s primary concerns with the proposed changes was that there had been a fundamental misunderstanding as to what captives are and that the US Treasury were potentially going to treat them more vigorously.
VCIA had written a letter back said they weren’t necessarily against the carving of captives out from the definition of small insurers, but wanted to gain more clarity as to why this had happened.
“What came out in December was – I now feel more comfortable with why they're carving out captives. I think they are carving them out for good reasons. When I say carving them out I mean creating a different bucket outside of traditional insurers and small insurers. They will be treated a bit differently,” Smith said.
“We had a lot of back-and-forth with the folks at Treasury. Now the one caveat is I haven't any seen details from Treasury on how they're going to treat captives, and I'm hoping for something soon on that.”
While he doesn’t think Treasury would try to do anything intentionally to negatively impact the captive insurance industry in terms of the TRIA programme, he said that captives need to be prepared to push back if they think the programme doesn’t work for them going forward.
When asked what might not work in terms of the definition, Smith added: “I think if there was any unintentional language in the rules becoming promulgated that would carve out the captive insurance industry, or even a part of it that should legitimately part of the program, what we often find is that there's a lot of unintended consequences when professional federal agencies get involved with a program that has captives in it.”
He suggested this was because there’s not as much understanding of the captive industry at the federal levels than at the state level.
“We're going to continue to be vigilant,” Smith said.
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VCIA, TRIA, Richard Smith, North America, Captives, US Treasury