Nevada officials are stepping up their efforts to woo captive insurance companies to the state, a step that could bring new work to law firms, actuaries, accountants and other professionals.
The state won a major coup a couple of weeks ago when NV Energy, the state's largest utility, created a captive insurance company based in Nevada.
At the start of this year, 130 captive insurance companies were domiciled in the state, the Nevada Division of Insurance expected to approve 10 more during January, and an additional 17 captives were in the pipeline for approval.
The growth, state officials say, comes as companies in a wide range of industries look to captive insurance companies as a cost-savings measure.
Captives represent a regulated form of self-insurance. Companies create a captive insurer wholly owned by themselves to fund their risks, allowing them better control over their expenses and some tax advantages.
NV Energy, for instance, views its newly created captive insurer as "a powerful resource," says Kirk Cresto, director of risk control for NV Energy and president of its captive, NVE Insurance Co. Inc.
Cresto says the captive provides flexibility, better claims management and reduced insurance costs for the utility.
Mike Lynch, deputy commissioner of the Nevada Division of Insurance, says the state currently ranks fourth in the number of captive insurance companies headquartered in the state. (Vermont, South Carolina and Hawaii hold the top three spots.)
Out-of-state companies that choose Nevada as the domicile for their captive insurer are required to conduct a yearly meeting in the state a potential modest boost for the state's tourism business.
The larger benefit to Nevada, Lynch says, comes as captives use professional services ranging from actuaries to claims managers and lawyers from Nevada firms.
In fact, State Insurance Commissioner Scott Kipper says the value of captive insurers to the state comes largely from the economic development they'll generate.
Lynch estimates that a single small captive insurance company needs the equivalent of one fulltime professional in Nevada.
Companies that have chosen Nevada for their captive insurance operations range from big companies such as NV Energy to family-owned manufacturing and agricultural companies.
Industries represented among the state's captive insurers range from hospitality to construction to financial services.
Last year, captive insurers generated more than $1 million for the state government's general fund through premium taxes and fees.
While that's welcome revenue in tough times, Lynch says other states also have figured out that captive insurers are a potential source of tax revenues. Utah and Montana, for instance, have stepped up their recruitment.
"The pressure is on," Lynch says.
Nevada's pitch to captive insurers is based on the state's attractive tax climate and an even-handed regulatory environment.
On one hand, Lynch says, the Division of Insurance wants to provide excellent customer service to captive insurance companies in the state. It's possible, he says, to get a well-organized, well-documented captive insurer into business in Nevada in as little as 48 hours. Most take a few weeks.
At the same time, Nevada regulators present themselves as proactive and helpful to captive companies.
"We know how to keep them out of trouble," Kipper says.
While the recruitment effort is low-key, relying mostly on word-of-mouth referrals and visits at industry events, Kipper says Nevada officials are serious about winning more captives for the state.
"We're bullish on the captives market here," he says. "We think this is a real opportunity for growth in the state."
