Committee hears proposal to allow captives to write workers’ compensation; sponsors propose safeguards, insurers urge caution

CARSON CITY — The Assembly Commerce and Labor Committee on March 21 took testimony on Assembly Bill 318, a bill sponsored by Assemblywoman Melissa Hardy to authorize captive insurance companies to directly underwrite workers’ compensation coverage for their parent and affiliated companies, subject to regulatory thresholds and possible participation in the state guarantee fund.

Assemblywoman Melissa Hardy said the bill would "provide Nevada businesses with an additional optional pathway for securing workers' compensation coverage through captive insurers," and framed it as a competitiveness measure; Nevada is a well‑established captive domicile, she said. Elena Martinez, a compliance and regulatory manager with captive experience, told the committee a captive is a separate insurance company formed to provide coverage for its parent and affiliates and that captives are already subject to oversight under Nevada law (NRS 694C). Matt Morris, an insurance attorney, described a proposed conceptual amendment that would require a $250,000 deposit and authorize the Division of Insurance to impose a higher initial capital requirement when a captive applies to directly write workers’ compensation.

Supporters — including the Vegas Chamber, employers and several businesses that testified — said allowing captives to write workers’ compensation directly would give employers another option to manage risk, lower overhead and improve loss control tailored to homogeneous groups of employees. Multiple business witnesses said captives can better align claims handling and return‑to‑work programs with employer safety goals.

Opposition testimony came from the American Property Casualty Insurance Association (APCIA) and other insurers who warned that adding captives to the Nevada guarantee fund could pose financial risk if a captive became insolvent; APCIA asked the committee to proceed cautiously and highlighted differences in regulatory treatment and solvency protections between admitted carriers and captives. APCIA’s witness said captives operate under different capital and reporting regimes and urged careful analysis of what a direct‑writing captive would contribute to assessment pools.

Committee questions addressed potential conflicts of interest and administration of claims. Witnesses said Nevada law requires use of a third‑party administrator (TPA) for claims handling in many captive structures; the bill’s presentation clarified that the TPA requirement would remain and that regulators could impose higher thresholds for captives seeking to write workers’ compensation directly. Proponents provided a list of other jurisdictions that allow captives to write some form of workers’ compensation and framed AB 318 as enabling and discretionary for regulators — not a mandate to insurers or employers.

The committee did not take a final vote on AB 318 at this hearing. The sponsor asked for support and proponents and opponents recommended technical safeguards. If advanced, the bill would require coordination between the Division of Insurance and the Labor Commissioner to align regulatory criteria for captives that elect to write workers’ compensation.