States seek captive insurers (WSJ)

A captive insurer is an insurance company that serves its parent company or organization, providing self-insurance, in effect. In "States compete to capture 'captive' insurers," the Wall Street Journal (Aug. 9, 2005, C1), reports on states' eagerness to have captive insurers based in their jurisdictions. They gain revenue from taxes on insurance premiums, from tourism dollars because owners are required to meet in the domicile state once a year, and from the ripple effect of legal, accounting, and management firms expanding to serve captives. Of the top five states with captive insurers, Vermont leads with 736 registered companies, Hawaii is 2nd with 154, followed by South Carolina (122), Arizona (54), and Washington, D.C., (51). Captive insurance is growing because of skyrocketing property-casualty insurance rates and tougher policies post-9/11. Because states have varying regulatory requirements, and marketing strategies, companies can and do shop around. (WSJ is available in the Library)