Nevada reviews captive insurance budget amid tax revenue concerns and IRS changes

The Assembly Ways and Means and Senate Finance Subcommittee on General Government convened on March 19, 2025, to discuss the budget for captive insurance and boards and commissions in Nevada. The meeting focused on the financial health and operational challenges faced by the captive insurance sector, as well as the administrative needs of various boards and commissions.

The discussion began with an overview of the captive insurance budget, identified as budget 38 18, which includes two positions under the supervision of the deputy commissioner. Captive insurance, a specialized form of risk management, allows entities, particularly in the gaming industry, to have greater control over their risk. Nevada is recognized as a pioneer in this field and currently ranks as the seventh largest domicile for captive insurance in the United States, with approximately 145 captives registered.

However, the sector has faced significant challenges recently, particularly due to a change in IRS regulations affecting captives formed under section 831(b). This change has reclassified these entities from insurance companies to investment vehicles, leading to a loss of over 50 smaller captives in recent months. This decline has directly impacted the premium tax revenue, which is a primary source of funding for the captive insurance budget, currently estimated at $375,000 to $380,000 annually, with a cap of $500,000.

Assembly member Watts raised concerns regarding the projected reserve levels, emphasizing the need for proactive measures to avoid running into financial deficits by the end of the biennium. He urged the agency to explore potential adjustments to fees and assessments, as well as the possibility of merging the captive budget with the broader insurance regulation budget to enhance fiscal stability.

In response, Scott Kipper, representing the agency, acknowledged the importance of these discussions and indicated ongoing collaboration with fiscal staff to identify viable solutions. He expressed a commitment to ensuring that the agency does not face financial difficulties in the upcoming biennium.

The meeting then transitioned to the budget for boards and commissions, presented by Chris Sanchez. He highlighted the contributions of approximately 308 staff members and 247 appointees who serve on various boards and commissions, recognizing their dedication to balancing professional responsibilities with public service.

Sanchez emphasized the importance of aligning the budget with policy objectives, noting that the agency has conducted extensive research to inform its proposals. This segment of the meeting aimed to provide a clearer understanding of the operational needs and strategic direction for boards and commissions in Nevada.

In conclusion, the meeting underscored the critical financial challenges facing the captive insurance sector and the administrative needs of boards and commissions. The discussions highlighted the urgency for legislative action to ensure fiscal stability and effective governance as the state approaches the end of the biennium. Further collaboration among stakeholders will be essential to address these issues before the budget is finalized.