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The outgoing chair of a key U.S. House of Representatives subcommittee has stated that the Nonadmitted and Reinsurance Reform Act of the Dodd-Frank Wall Street Reform and Consumer Protection Act was never meant to apply to captive insurance.
Judy Biggert, who was chairman of the committee's Subcommittee on Insurance, wrote in a letter to the new chairman of the House Committee on Financial Services, Rep. Jeb Hensarling, R-Texas, and the committee's new ranking member, Rep. Maxine Waters, D-Calif.: “As a supporter of NRRA and an advocate for its inclusion and passage as part of Dodd-Frank, I can tell you unequivocally that the NRRA was never intended to include the captive insurance industry.”
The NRRA “was intended to create certainty in the tax treatment and regulation of the surplus lines and in the reinsurance industry,” the letter said. “Despite this very specific purpose, a couple of states are misinterpreting the application of NRRA's definition of 'Non-Admitted.'”
The Coalition for Captive Insurance Clarity, an industry group formed under the leadership of the Vermont Captive Insurance Association to promote clarification—possibly through legislative action—that the NRRA was never meant to apply to captive insurance, cited the Illinois Republican's letter as an indication that Congress did not mean for the NRRA to apply to captives.
In a statement, Richard Smith, president of the VCIA, said, “This endorsement from the outgoing subcommittee chairman, who played a substantive and important role in crafting the NRRA, makes it crystal clear — captive insurance is not and never was intended to be included in Dodd-Frank.”
In the same statement, Daniel D. Towle, director of financial services in the Vermont Department of Economic Development, said, “A few domiciliary states and opportunistic service providers are clearly exploiting the present situation which is not in the best interest of their clients or the industry as a whole.”
Ms. Biggert's letter suggested a technical amendment might be necessary to reinforce the original congressional intent of the legislation, and she encouraged Reps. Hensarling and Waters to consider such an amendment.