Tennessee captive law now allows for insurance securitization entities

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The Tennessee legislative and Governor Bill Haslem have implemented and signed into law a new bill designed to make the state a more attractive place for captive insurer formation. Amongst various changes to the way captives are governed in Tennessee of most interest to us is the introduction of a new class of captive insurer suitable for insurance securitization.

The new law allows for protected cell captives, changes the laws for workers compensation captives and allows a new class of captive which they call a Special Purpose Financial Captive (SPFC). These SPFC’s are designed to allow for securtization of insurance risk as a means of accessing the capital markets. That means that technically insurance-linked securities and catastrophe bond special purpose vehicles could now domicile in Tennessee.

It will be interesting to see if anyone explores this option of using Tennessee as a home for a cat bond.

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