Quiet Ariz. Makes Noise With Captives

"I think were the quiet domicile," Mr. Marshall said. "Every domicile has to have some type of identity. We plod along. We dont make a lot of noise."

Captive legislation was adopted during the summer of 2002 and an amended law went into effect Sept. 18, 2002.

The new law permits agency captives, protected-cell captives and direct-writer workers compensation captives. Group captives include risk retention and purchasing groups. The expanded law also includes several reinsurance options, including personal lines that were not part of the original act.

Michael R. Mead, director of the newly formed Arizona Captive Insurance Association and president of Crusader Captive Services, LLC in Chicago, which recently opened an office in Arizona, said the direct-writer legislation exempts captive insurers writing workers comp from the acts requirement to have a fronting company if the covered workers are employed in Arizona.

The exemption will be welcome news to employers looking to form captives for their workers comp risks because fronting companies are scarce, he said. However, under the terms of the act, "its really only going to be helpful for the companies that have a big Arizona payroll," Mr. Mead said.

Mr. Mead noted that his organization decided to locate an office in Arizona because "we think that it is going to be a high-growth domicile."

He also cited convenience because many clients chief executive officers have homes in Scottsdale. "A lot of people, certainly in the Midwest, go to Scottsdale in the winter time," he noted.

The domicile, he said, is well organized and provides for a "wide variety of structures."

"So far its gotten less attention than it should, simply because Marsh and Willis have so much money and infrastructure in Bermuda and Vermont, but that will change," he predicted.

An attraction that Mr. Marshall said "hasnt caught on yet" is the fact that there is no premium tax in the domicile.

He said the domicile recently approved a captive of a company listed on the New York Stock Exchange, which he declined to identify.

Mr. Marshall said Arizona strives to work closely with clients. Within two days of receiving an application, he said, "we go back to them" with questions. Generally a captive is approved within a week if paperwork is in order, he noted.

Marc Lapointe, president of Captive Insurance Solutions and the manager of a new captive licensed in Arizona, said in a statement: "Our client felt that Arizona offered the right blend of service providers along with a captive-friendly regulatory environment. The lack of premium taxes was a definite additional bonus."

Mr. Lapointe, who also serves as president of the Arizona Captive Insurance Association, stressed the importance of having a strong association to give the Arizona captive community a networking and educational support system.

AzCIA Executive Director Judie Harrington-Carlisle said the association now has about 25 members and plans to focus on education about "Arizona as a captive domicile." She added that the association also will concentrate on "educating people about captives in general. This is like virgin territory for a lot of the people in Arizona."

Ms. Harrington-Carlisle said the group is discussing outreach seminars in the state and eventually in other parts of the country. The first priority is to boost membership so the group has the "financial wherewithal to be able to do that," she said.

Now that the association has been established, she said dates have been set for its first conferencewhich will coincide with the annual conference of the Captive Insurance Companies Association. CICAs meeting is in Scottsdale, March 14-16, 2004. AzCIAs conference dates are March 16-17, she said.

For information about the group, contact Ms. Harrington-Carlisle at 1-800-423-4134 or by e-mail at info@azcia.org.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, December 19, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.