8 August 2022Reinsurance

Tennessee creates Tennessee Captive Insurance Company

Tennessee has established the Tennessee Captive Insurance Company, in a bid to create additional efficiencies and savings when insuring state property.

­Administered by the Tennessee Department of Treasury's Division of Claims and Risk Management, the State of Tennessee is self-insured for property and general liability. This covers all state-owned buildings and contents, including the campuses of Tennessee public institutions of higher learning, with a total property value of $ 31.4 billion as of July 2022.

Businesses can use captive insurance to mitigate risk and manage costs in certain aspects of their operations. According to the State implementing the Tennessee Captive Insurance Company allows Tennessee to operate with a high degree of efficiency as it works to insure property losses up to deductible limits, access the wholesale reinsurance markets to reduce premiums, minimize volatility in pricing, and underwrite the state’s own unique risks.

The Division of Claims and Risk expects the captive to help them insure unique and difficult risks and reduce overall insurance costs. The use of a captive will also allow the State to better evaluate and control the risks of Tennessee state government.

Captive insurance companies in Tennessee are regulated by the Tennessee Department of Commerce and Insurance, which recently granted the nonprofit state captive authority to operate, following its recent approval of the authorising legislation by the Tennessee General Assembly.

“Commerce & insurance has advocated for captive insurance as a smart business option to lower costs and increase specifically tailored protections,” said Department of Commerce & Insurance commissioner Carter Lawrence. “Now that the State is establishing a captive insurance company, taxpayers will benefit from these same advantages.”

The potential savings from the captive will benefit taxpayers as they will be used to write policies with lower premiums, or to return or invest the savings to prepare for future claim payouts and ultimately save taxpayer money. The state captive insurance company initially will only issue property and cyber liability policies, but the State may add other lines of coverage in future years.