What are the minimum capital requirements for a captive in Tennessee?
The statutory minimum depends on the type, and it is a floor not a target
Mark Wiedeman gives the figures by captive type. A standard pure captive is $250,000. In a sponsored cell program the core is responsible for $100,000 of minimum capital, and he says Tennessee has no statutory minimum for the individual cells. For a risk retention group he says, hedged, that he believes it is half a million, $500,000. He then makes the point that matters more than any single number: these are baseline statutory minimums, and where a feasibility study indicates a program should hold more because of its nature, the department will hold the captive to that higher amount. Michael Schulz adds a structural clarification, that an RRG in Tennessee is regulated by the traditional side of the department rather than through the captive office.
The headline number for most first time owners is the pure captive figure of $250,000. That is the statutory floor for the single parent structure most companies form first.
The cell numbers are the more interesting ones. Wiedeman puts the core of a sponsored cell program at $100,000 and says there is no statutory minimum for the individual cells themselves, so a cell sits inside a core that is already capitalized.
Key takeaways
A standard pure captive in Tennessee carries a $250,000 statutory minimum; the core of a sponsored cell program carries $100,000.
Wiedeman says there is no statutory minimum for the individual cells inside a sponsored cell program.
These are floors: where a feasibility study indicates a program needs more capital, the department holds the captive to the higher amount.
On the risk retention group figure he hedges, saying he believes it is half a million, and the hedge is worth preserving rather than reading past. He is speaking from memory in an interview, and the statute is the authority.
Schulz then adds the point an RRG sponsor actually needs: in Tennessee an RRG is regulated by the traditional side of the department, not through the captive office. The captive group works closely with that division because of the nature of RRGs, but the traditional side takes the lead.
From the conversation
Mark Wiedeman
Director, Captive Insurance Section, Tennessee Department of Commerce and Insurance
“We do not have any statutory minimum for the individual cells”
Transcript
Read the full transcript 4 turns
HostThat makes sense. Basically, what is the reason that the insured is looking to form a captive? Is it the right reason? Are they adequately, do they have a plan in place? Do they have the capital in place? Speaking of that, what are the minimum capital and collateral requirements to form a captive in the state of Tennessee
Mark Wiedeman? It depends on the type of captive that they form. So, for a standard pure captive, it's $250,000. For our sponsored cell programs, the core is responsible for $100,000 minimum capital. We do not have any statutory minimum for the individual cells. If you do a risk retention group, I believe it's a half a million
Mark Wiedeman, $500,000. And then, and that's just our baseline stats toward minimum. Now, if a program, if a feasibility study applies at a program should have a higher level of capitalization because of the nature of their program, then we would hold the captive to financing to that higher amount
Michael Schulz. And, Vidur, one, just one more point of clarification, the RRG aspects. So, if anybody was to want to form an RRG in the state of Tennessee, that is, that is regulated by the traditional side. That's not regulated through the captive office. So, it's a division that the captives groups work closely with because of the nature of the RRGs. However, the traditional side takes the lead on that. That makes
Citations
Sources
- Captive Insurance Section, Tennessee Department of Commerce and Insurancehttps://www.tn.gov/commerce/insurance/captive-insurance.html
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