Montpelier, VT (PRWEB) February 07, 2013
U.S. Congressman Scott Garrett (R-NJ), the co-author and one of the principal sponsors of the Nonadmitted and Reinsurance Reform Act (NRRA) of the Dodd-Frank Act addressed the Speaker of the U.S. House of Representatives on January 6 to state unequivocally that the legislation was never intended to apply to captive insurance.
In addressing the Speaker, Congressman Garrett said, “Unfortunately, several states have indicated that they plan to interpret the NRRA to also apply to the captive insurance industry. This was not the intent of Congress. In drafting this legislation, it was never contemplated to have the captive industry fall under the NRRA”. He went on to state, “At no time was the legislation’s application to the captive industry addressed or suggested. Furthermore, in the bill’s summary, the intent of this legislation was clearly stated to impact only two specific industries – surplus lines and reinsurance.”
Congressman Garrett, a republican representing New Jersey’s 5th Congressional District has served on the House Financial Services Committee since his election in 2002. He also currently serves as the Chairman of the subcommittee on Capital Markets and Government-Sponsored Enterprises for the House Financial Services Committee.
NRRA, a sub-section of the Dodd-Frank legislation, has caused confusion over whether it is applicable to captive insurance, due to the misinterpretation of the current language. A coalition comprised of the captive insurance industry, the Coalition for Captive Insurance Clarity (CCIC) has been formed under the leadership of the Vermont Captive Insurance Association (VCIA) to push for clarity that may include legislative language that would reaffirm that the intent of the new federal NRRA was never intended to apply to captive insurance.
“This should send a clear message to any domicile that any information to the contrary can only be interpreted as a self-serving tactic that is neither accurate nor in the interest of clients and the industry,” said Daniel Towle, Vermont’s Director of Financial Services. “Congressman Garrett’s statement is further testimony that we have understood the purpose and intent of the passage of this law,” added Towle.
In his statement, New Jersey Representative Garrett stated, “At no point during the bill’s multi-year consideration was its application to the captive insurance industry ever discussed.” He went on to add, “Should regulators implement this faulty interpretation, captive insurance companies would be subject to additional taxation and regulation – the exact opposite intent of the underlying legislation.”
Richard Smith, president of the Vermont Captive Insurance Association expressed his thanks for the clarification from Representative Garrett. “We are grateful for further clarification that captive insurance is not part of the NRRA. It is our intent to work with Congress to craft a technical amendment to eliminate the inaccurate interpretation and the turmoil it is causing in the captive industry. We urge continued support for the Coalition and our efforts to enact clarifying language that will solidify Congressional intent once and for all.”
Congressman Garrett has pledged to work with his colleagues on the Financial Services Committee to ensure that the bill is implemented as the Congress intended.
This statement of record from Congressman Garrett reaffirms a recent letter from former chair of the subcommittee on insurance of the Committee on Financial Services in the House of Representatives who stated that the Nonadmitted and Reinsurance Reform Act (NRRA) of the Dodd-Frank Act was never intended to apply to captive insurance. In a letter to the new Chairman and Ranking Member, former Chair of the Insurance Subcommittee Representative Judy Biggert wrote, “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 full text of Congressman Garrett’s statement can be found at http://www.VermontCaptive.com/DoddFrank.
Captive insurance is a regulated form of self-insurance that has existed since the 1960’s, and has been a part of the Vermont insurance industry since 1981 when Vermont passed the Special Insurer Act. Captive insurance companies are formed by companies or groups of companies as a form of alternative insurance to better manage their own risk. Captives are typically used for corporate lines of insurance such as property, general liability, products liability, or professional liability. Growth sectors of the captive insurance industry include professional medical malpractice coverage for doctors and hospitals, and the continued trend of small and mid-sized companies forming captive insurance companies.
VCIA is the largest trade association in the world for captive insurance. Established in 1985, the association has grown to provide programs that support the captive insurance industry on both the state and federal levels for its 450-plus member companies.
For more information on the Coalition for Captive Insurance Clarity or to join contact Richard Smith at the Vermont Captive Insurance Association at 802-658-8242 or email smith(at)vcia(dot)com. To learn more about how this issue and captive insurance visit: http://www.VermontCaptive/DoddFrank.