The Nonadmitted and Reinsurance Reform Act's Questionable Applicability to Captive Insurance Companies

Since Congress’s enactment of the Nonadmitted and Reinsurance Reform Act (NRRA) as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act,1 questions about the NRRA’s applicability to captive insurance companies have been a hot topic within the captive insurance industry.

The fact that the NRRA’s arrival coincided with an upswing in attention being paid to self-procurement taxes only increased the attention being paid to the NRRA by regulators, risk managers, captive managers, and board members of captive insurance companies across the United States.

For the past year, professionals working on captive insurance matters have been asking: ‘‘What does the NRRA mean for me?’’ Unfortunately, the answer is rather dissatisfying: ‘‘It depends.’’

It depends on who you are and what your stake is; on where you are domiciled and who your regulators are; on the fact patterns of the disputes over the NRRA that may arise regarding the application of the NRRA to captives—and the various courts that eventually will resolve those disputes. And of course, it depends on whether clarifying legislation is proposed and enacted.