www.captiveinternational.com EDITOR’S LETTER 3
and making plays
for new business
Owen Faulkner, editor, Captive International
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Captive International – ISSN
Cover Image: Courtesy Labuan IBFC
his month in the exciting world of captive insurance, the industry
has been tackling legal quandaries at both state and federal levels.
Our most-read story this month was the cease & desist order
issued by Washington State to Microsoft’s captive licensed in Arizona,
Cypress Insurance, for being noncompliant with Washington’s surplus lines law.
The development has perhaps larger implications for captives writing direct
insurance policies without fronts. It raises all sorts of questions as to whether
there are other Fortune 500 captives not paying the surplus lines tax which
have insurable assets in the state, and also how conflict in legislation between
two states—in this case Arizona and Washington—can be resolved.
Risk retention groups (RRGs) scored a win as the long-awaited decision in
Reis et al v OOIDA was handed down. It was unanimously ruled that the federal
law—the Liability Risk Retention Act (LRRA)—pre-empts state insurance laws
that regulate the business of a foreign RRG in the state it operates in.
This month also featured a number of high-profile appointments, including
Aon Captive & Insurance Management announcing John English as its new CEO;
Artex hiring a new vice president; Clearwater Compliance naming a new CEO;
and The Hanover appointing a new head of alternatives markets.
In terms of domiciles, Connecticut—a relatively new domicile which granted
one new captive licence in 2017, bringing it to a total of 14—introduced
legislation allowing for agency captives.
Vermont made a serious play for offshore reinsurance business by introducing
new legislation offering an onshore affiliated reinsurance alternative to insurers
affected by the recent imposition of the Base Erosion Anti-Abuse Tax (BEAT) on
reinsurance ceded to offshore affiliates.
Provisions laid out in the Tax Cuts and Jobs Act are said to significantly reduce
the long-standing tax advantages of offshore domiciles over those in the US, so
it will be interesting to see whether these developments onshore bear fruit, and
whether other domiciles follow suit.
This issue features an interview with Farah Jaafar-Crossby, the new CEO of
Labuan IBFC Inc, who explains how the domicile has grown in the last few years
and established itself as a key player in Asian markets.
In other articles, Phillip Giles of QBE North America weighs in on the viability
of captive insurance and associated health plans; Steven Bauman of XL Catlin’s
North America captive practice has the details on mitigating cyber risk through
captives; and Matthew Queen of Venture Captive Management looks at the
onshore vs offshore debate, and how tax reform has shaken up the process of
domicile selection. l