Two proposed amendments to the District of Columbia captive law, intended to make the District one of the most attractive domiciles in the captive industry, were approved in 2006.
Introduced by Councilmember Jim Graham (D-Ward 1), the two bills, Special Purpose Financial Captives and Protected Cell Captive Insurers, streamline and add new features to DC captive laws.
The Special Purpose Financial Captives bill will provide securitization of risk and allow access to capital markets through special purpose captives. The insurance publication Best’s has predicted that hundreds of millions of dollars will flow to this form of capitalization in the near future.
DISB’s Associate Commissioner Dana Sheppard of the Risk Finance Bureau stated, “The enactment of these two bills will enhance the District’s reputation as a forward-thinking domicile, and will create many new and exciting opportunities for organizations looking for creative risk financing solutions.”
The Special Purpose Financial Captives bill will make the District’s captive laws more compact and easier to use.
In addition to securitization, the main features of the law are:
- Self contained
- May use segregated accounts
- Minimum capital = $100,000
- Minimum surplus = $150,000
- May use letter of credit
- Commissioner has flexibility with regard to acceptable assets
- Streamlined application and review process
The Protected Cell Captive Insurers bill will advance the segregated cell structure by authorizing cells to be separately incorporated entities, permitting transactions between cells and allowing transfers of cells between captives, all of which would provide new, attractive options in alternative risk transfer.
This bill closely resembles new laws that took effect this year in the British island domiciles of Jersey and Guernsey and a similar law is expected to be enacted by the Isle of Man domicile shortly.
Key features of the bill were listed as:
- Cell established as a separate incorporated entity
- Provides added security to the firewall/ring fence
- Enables cells to contract with each other
- Captives may convert to protected cell captives
- Transfers of protected cells between captives
- Incorporation of a protected cell as a captive
The new law could enable such applications as creation of super-cat or risk-pooling cells, securitizations and enhanced rent-a-captive facilities.