HARTFORD, Conn.—With Connecticut licensing its first captive insurer last week, many see its revised captive law and its established insurance industry infrastructure positioning the state for success as a captive domicile.
Thomson Reuters Corp.'s captive, Thompson Reuters Risk Management Inc., became Connecticut's first captive when it relocated from Delaware.
It will write workers compensation, general liability, auto liability, property, terrorism, errors and omissions, and personal accident/travel coverage in the United States. Thompson Reuters also has had a Bermuda-domiciled captive since 1978.
Michael Warren, vp of risk management at Thomson Reuters in Stamford, Conn., said changes to Connecticut's 2008 captive law that were included in jobs legislation promoted by Gov. Dannel P. Malloy and signed into law in October made the state an attractive choice for the New York-based company's captive.
“I don't think, prior to that, Connecticut was a particularly captive-friendly jurisdiction,” Mr. Warren said.
“We were looking for a feasible venue onshore and Connecticut was a logical choice,” he said in noting that he and the Thomson Reuters Risk Management Inc. captive's two other directors all are based in Connecticut.
“Let's be honest. We had companies who were based here or who had large operations here who were forming their captives in other states,” Gov. Malloy said. “We've committed money, personnel. We've changed our rules. We're actively pursuing the relocation of captives to Connecticut and the formation of new captives.”
“I think they will do reasonably well even though the field is pretty crowded,” said Brady Young, president and CEO at Strategic Risk Solutions Inc., a Concord, Mass., captive manager. “Obviously, there are a lot of sizable companies based in Connecticut that either have captives or could have a captive.”
The state's existing insurance industry intellectual capital will serve as a strategic advantage for the domicile, Mr. Young said.
“There's a lot of infrastructure right there to support captives,” he said. “That being said, I don't expect wholesale movement of captives from other domiciles to Connecticut. New captives, they'll win their share.”
“I think the prospects for the domicile are terrific,” said Gregory V. Serio, partner and managing director at consultant Park Strategies L.L.C. in Albany, N.Y., and a director of the Connecticut Captive Insurance Assn. “I think it has a built-in infrastructure that you just don't find in a lot of other domiciles or prospective domiciles.”
“The other part of this—and I learned some of this firsthand doing some of this in New York—is you need the support of government from the top down,” said Mr. Serio, a former New York superintendent of insurance. He cited Vermont's success as demonstrating the value of a consistent commitment to captive insurance.
Connecticut's new captive law, which took effect July 1, includes a $7,500 first-year tax credit for new captives and allows the formation of pure captives, association captives, industrial insured captives, risk retention groups, sponsored captives, special purpose financial captives, branch captives and segregated cell companies.
Thomas B. Leonardi, commissioner of the Connecticut Insurance Department, said that while the state enacted a captive law in 2008, “the problem was the prior administration passed the law but didn't fund it. What we're excited about is this was a high-priority item for the governor.”
The law also authorized a 20% increase in the insurance department's staff, including several positions earmarked to regulate captive insurance. “As part of those 28 jobs, I believe five or five-and-a-half positions were set aside for the captive market,” Mr. Leonardi said.
“One of the key elements of a successful domicile is having the intellectual infrastructure, which Connecticut clearly has,” said Nick Pearson, a partner at Edwards Wildman Palmer L.L.P., a New York law firm that provided legal assistance with the Thomson Reuters captive's Connecticut formation.
“Another thing you need for a serious captive domicile is a regulator who understands captives differ from other types of insurance companies and has a desire to attract captive formations,” Mr. Pearson said. “Our experience with the Connecticut Insurance Department gave us every reason to believe the department embraces that.”
Mr. Pearson suggested that Connecticut benefited from using Vermont's law as a model. “They looked to a great model, which is Vermont, and basically took that as the model for Connecticut,” he said. “Vermont has had decades to perfect its law, so it is a good template. I think that was wise on the part of Connecticut.”
Marsh Captive Solutions manages the Thomson Reuters captive. Michael Serricchio, senior vp at Marsh Captive Solutions in Norwalk, Conn., said Connecticut's captive regulatory climate offers “strict oversight, but there's also pragmatic regulation and understanding of captive business plans.”
Mr. Leonardi said other captive prospects are considering the state.
“This is the first of what we hope will be several (applicants) in the next few months,” he said. “We want to look at good candidates,” he said, indicating that Connecticut will focus on financially stable companies that might have hard-to-place risks but a good exposure management history, rather than licensing potentially riskier captives simply to promote the domicile's growth.