Stephanie Lefkowski
Chief analyst, Arizona Department of Insurance
In 2008, Arizona was the sixth-largest captive domicile in the US. It
has seen steady growth in captive numbers since it began promoting itself as a potential domicile in the 1970s. But in the worst economic environment that most US citizens can remember, it is sure to face challenges to maintain its global relevance. US Captive asked the captive division’s chief analyst, Stephanie Lefkowski, about the Department of Insurance’s plans.
Why should captives choose Arizona?
The Arizona Department of Insurance (ADOI) has a stable, cohesive
team of captive insurance professionals and is known in the industry to have a competent regulatory programme. Arizona’s pro-business environment includes an efficient, cost-effective application process, audit and actuarial exemptions, no premium taxes and excellent captive advantages.
How many new captives did Arizona license in 2009?
ADOI licensed seven captive insurance companies in 2009.
How many captives are currently licensed in Arizona?
As of March 8, 2010, 99 captive insurance companies maintain
active Arizona licences, ranking us among the top six largest domiciles in the United States.
We have already licensed one RRG (risk retention group) in 2010
and have four quality applications pending, which will likely obtain their licences before the end of the first quarter 2010. The parent companies for these four applicants are impressive: one ranks on the Fortune 100 list, one on the Fortune 1000 list, another on the Forbes Global 2000 list and the fourth ranks on the Forbes Largest Private Companies list.
How does your no premium tax structure increase the attractiveness of your domicile, and what types of companies and coverages does it attract?
Arizona’s no premium tax structure provides significant savings to captive insurers, especially those with a higher premium volume. Over the past few years, we have had about half a dozen captives with premium ranging from $100 million to $600 million, and another
handful of captives with premium volume approaching $100 million. But all captives benefit from the no premium tax structure regardless of premium volume, because more premium dollars stay in the captive to pay claims and provide other financial support.
How will the ADOI maintain its commitment to regulation, economic development and service for the Arizona captive insurance industry in an environment of budget austerity and even budget reduction?
We are mitigating the impacts of agency budget cuts by:
(1) improving communication with the captive community to help the industry better understand the regulatory process, so that they can anticipate and plan their approval requests earlier in order to give ADOI ample time to research and evaluate the necessary details to make informed regulatory decisions; (2) promoting quality over quantity—regulating a quality captive requires far less time and energy, and allows us to adequately and appropriately distribute our attention among all captives; and (3) increasing our efforts to train and educate the captive community. For instance, we recently co-ordinated ADOI training events to further educate captives on how to prepare their annual reports and Schedule P filings.
What is Arizona’s commitment to the captive community?
Arizona is unequivocally committed to a high-quality professional
environment for Arizona captive insurers, licensing quality captives with sound business plans, adequate pricing, reserving and capital, and good corporate governance standards.
What is your long-term vision for Arizona’s captive insurance programme?
Our goal is to set a standard of excellence that other domiciles
will strive to achieve and to continue improving the quality of the programme. Our captive insurance companies have weathered the recent economic storm and speak to the success of Arizona’s programme.
We are proud that 18 percent of our captives’ parents are Fortune
1000 companies, 16 percent are Fortune 500 companies and nine percent are in the top 100. In addition, 11 percent of our captives’ parents are ranked on the Forbes Global 2000 list and three percent are on the Forbes Largest Private Companies list.
US Captive . April 2010 41
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