North Carolina Governor Signs Law Waiving Premium Taxes for Relocating Captives

The battle for the captives continues.

Not long after Tennessee regulators this year bragged about the number of captive insurers domiciled in the state, the jurisdiction next door has taken steps to encourage more captives to relocate there. North Carolina Gov. Roy Cooper this week signed into law Senate Bill 347, which waives premium taxes for two years for captives that move to the Tar Heel State.

A captive insurance company formed under the laws of another state and which redomesticates to North Carolina before the end of this year “is exempted from premium taxes imposed by this section for the year in which the redomestication occurs and the premium taxes imposed by this section for the calendar year following the redomestication,” the law reads. “This subsection expires for taxable years beginning on or after January 1, 2024.”

The North Carolina Senate approved the measure in 2021, followed by the House in February of this year. But the clerk of the House ruled that the chamber had waited too late under the rules of the General Assembly, according to industry news reports. The bill was re-adopted in early June and sent to the governor.

The plan clarifies some issues in the statute on captives’ governing boards, and allows companies to request a waiver from the annual audit requirement.

“Upon written request by any captive insurance company, the (insurance) commissioner may grant an exemption from compliance with any or all provisions of this section if the commissioner finds that compliance would cause the insurer a financial or organizational hardship,” the bill reads.

But it also grants the insurance commissioner the authority to conduct “financial analyses” of captives. Companies would not have to pay for the cost of the analyses.

Captives would not be able to provide surety for bail bonds, under the new law.

North Carolina Insurance Commissioner Mike Causey praised the new law.

“We are grateful to all parties involved in getting this law over the line,” Causey said in a statement Friday. “Each of those who participated were committed to making North Carolina a great home for captive insurance companies.”

North Carolina ranks 4^th in the nation for the most captive insurers domiciled there in 2021, with 257, according to the Insurance Information Institute. Tennessee ranks eighth, with 153. The top three states are Vermont, with 620, followed by Utah and Delaware, with more than 300 each.

Vermont may have started the push for captive domiciles, with the passage of favorable laws in the 1980s. Since then, more states have joined the fray. North Carolina adopted a law in 2013, Causey explained.

Topics North Carolina