NC Lawmakers Ratify Bill That Trims Taxes on Captives, Risk-Retention Groups

North Carolina, already ranked among the top states for captive insurance firms, could soon become a little more attractive for captives and risk-retention groups if the governor signs Senate Bill 319.

State lawmakers this week unanimously approved the bill, which would trim premium taxes on RRGs and captives but also would require retention groups to pay for financial examinations by the North Carolina Department of Insurance.

Specifically, the bill, sponsored by state Sen. Todd Johnson and others, would:

• Forego the gross-premiums tax for two years for out-of-state captives that relocate or become domiciled in North Carolina.
• Reduce the tax rate on gross premiums paid to risk-retention groups that are chartered in other states. The tax, known as a “retaliatory tax,” would drop from 5% to 1.85%, the bill notes.
• Authorize the state insurance commissioner to conduct financial examinations of RRGs domiciled in North Carolina and to collect the cost from the retention group under scrutiny.

The bill was sent to the governor on Wednesday. He has 10 days to sign it or allow it to become law without his signature.

A fiscal analysis of the bill estimates that gross premiums paid to foreign risk-retention groups was about $44 million in 2022, growing at a rate of 5% per year. Gross premium taxes paid by all captive insurance companies in the state is less than $3 million per year.

North Carolina now ranks as the third-largest captive domicile, behind only Vermont and Utah, with more than 300 captive entities, the NC DOI reported in April.

Topics Legislation North Carolina