The Lone Parent State

February 22, 2019. Andrew Marson, Director of Strategic Risk Solutions with responsibility for our Texas operations, shares his insights on Texas as a captive domicile in an interview with Captive Insurance Times.

The Texas captive market is still in its infancy but already has a defined character based around its bespoke regulations on captive structure and parent location.

They say everything is big in Texas and captive insurance companies in the state are no different.

While the market is still in its infancy and is not huge in number of total captives, boasting 42 at year-end 2018, it produces more than $4.5 billion dollars in captive premium (at year-end 2017, when market size was 38 captives), making it the largest US domicile with less than 100 captives in terms of captive premium.

The Lone Star State is, perhaps more than anywhere, a domicile defined by the decisions it has made over its captive law. The law, which was established in 2014, only permits single-parent captive structures and specifically precludes companies from outside the state, or without a significant interest or operation in the state from forming a captive in Texas.

2018

Due to the legislation, Texas’ captive market is tightly linked to its economy, but it still appears to have experienced a similar slowdown in captive growth as many other domiciles. Four new captives were licensed in the state last year, marking another year of reduced growth (following eight new captives in 2017, and fourteen new captives in 2016), but in contrast to many of the other domiciles, there were no licences lost, closed or dissolved.

“Last year was fairly quiet,” says Andrew Marson, director at Strategic Risk Solutions and Texas Captive Insurance Association (TxCIA) board member, “but I think that would jive with a lot of the
other states as well.”

Diane Walker, partner at Johnson Lambert and TxCIA treasurer and board member, however, says the market has is still seeing formations and continued to grow at a “steady rate as expected,
given how the Texas legislation is written, its purpose and the types of captives it is set up to accommodate”.

The market

Texas’ two self-imposed limitations, over captive structure and location of parent, define the state’s market and Walker says they are evidence that the market is designed for a key purpose, “to
support and serve Texas companies”.

Marson says that the limitations are a “very unique” part of the law and prove that it is “designed for Texas captive companies and not looking to attract business from other states, which is
obviously quite the opposite of states like Vermont”.

He explains: “The single-parent captive structure is very much designed for the state’s target market, large Texas-based organisations, which can obviously work within the constraints of the law that exists today.”

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