Two proposed amendments designed to streamline and add new features to the District of Columbia's captive law have been signed by outgoing Mayor Tony Williams.
Arthur Perschetz, an attorney who helped draft the legislation, said he expects Congress will ratify the changes within 30 days.
In the works for a year, the two bills--Special Purpose Financial Captives and Protected Cell Captive Insurers--were introduced by Councilman Jim Graham.
Mr. Perschetz, with Muldoon Murphy & Aguggia, in Washington, D.C., which contributed to crafting the bills' language, told National Underwriter that he is confident the captive legislation will be passed, as "Congress has never rejected a [D.C] law." He added that the captive community has shown much interest in the proposed bill.
Mr. Perschetz, who is also a member of the board of the Captive Insurance Council of the District of Columbia (CIC-DC), explained that D.C.'s original sponsored cell law specified that a cell captive had to be sponsored by an insurer.
A second iteration, which was "still more flexible than most," gave more leeway to who could start a segregated cell captive. The newest version, he said, goes even further, making the walls between cell captives "higher and thicker," alleviating uncertainties about legal issues such as taxation.
The Special Purpose Financial Captives bill would provide securitization of risk and allow access to capital markets through special purpose captives. It also is designed to make D.C.'s captive laws more compact and easier to use, the CIC-DC said.
The bill allows minimum capital of $100,000 and minimum surplus of $150,000. It streamlines the domicile's application and review process, allows use of a letter of credit, and gives the commissioner flexibility with regard to acceptable assets.
The Protected Cell Captive Insurers bill advances the segregated cell structure by authorizing cells to be separately incorporated entities, permitting transactions between cells and allowing transfers of cells between captives, all of which will provide new options in alternative risk transfer.
Similar laws took effect this year in the United Kingdom island domiciles of Jersey and Guernsey, and one is expected to be enacted by the Isle of Man domicile, according to the CIC-DC.
Mr. Perschetz and his colleague Aaron Kaslow, who also helped draft the bill, said in a statement that the bill "provides the convenience of a prepackaged facility with the flexibility and protection of incorporated cells."
Key features of the Protected Cell bill:
o Allows a cell to be established as a separate incorporated entity.
o Adds security to the firewall/ring fence.
o Enables cells to contract with each other.
o Allows captives to convert to protected cell captives.
o Allows transfers of protected cells between captives.
o Allows for incorporation of a protected cell as a captive.
The new law could enable such applications as creation of risk-pooling cells, securitizations and enhanced rent-a-captive facilities, according to the CIC-DC.
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