The National Association of Insurance Commissioners (“NAIC”) has charged its Financial Condition Committee with investigating how insurers are using captives to transfer third party insurance risks in connection with state laws and regulations.  If the investigation reveals reasons for concern, the committee will consider recommendations to amend the relevant existing model NAIC laws or create a new model law.

The charge for investigation follows an article in the New York Times, which notes that certain states, including Vermont, Utah, South Carolina, Delaware and Hawaii, are aggressively marketing their states as favorable regulatory environments for certain complex private insurance transactions typically done offshore.  The article, available here, says that this trend is creating a “shadow insurance industry.”

We will monitor news relating to this investigation and will provide any updates here on nsureReinsure.com.