Committee hears experts on captive insurance bill aimed at attracting captives to Kansas; no vote

The Kansas Senate Committee on Financial Institutions and Insurance held an extended hearing on House Bill 2,334 to update the state's captive insurance statutes, hear expert testimony and take questions; the committee closed the hearing without acting on the bill.

Representative Tarwater, the bill sponsor, asked the committee to consider changes intended to make Kansas a more attractive domicile for captive insurance companies, and called on industry experts to explain how the statute changes would work in practice. Ryan Ralston, president of Elevate Risk Solutions, testified by WebEx that modern captive rules could keep premium volume and related jobs in Kansas rather than pushing captives to other states.

Ralston said captives are regulated insurance entities that allow companies to fund and manage their own risks. "Captives have grown. They've been in place for 50 years, plus. There's probably 6,000 captives. About $30,000,000,000 today goes into captive insurance. It's projected to grow 20% over the next 10 years," Ralston told the committee.

Representative Tarwater and Ralston described several changes in the draft bill intended to encourage domiciles: authorizing "cell" captives (smaller segregated cells under a larger captive umbrella), explicitly allowing workers' compensation to be written in a captive in some cases, and adjusting premium tax treatment to be competitive with neighboring states. Tarwater told the committee some states have used temporary premium‑tax incentives — for example waiving the first year's premium tax for a departing captive that relocates back to the state — to attract domicle changes.

Senators asked questions about mechanics and risks. Senator Gossage noted similarities between captives and large employers' self‑funded programs and asked about cells and tax parity with neighboring states. Senator Fagg asked about data in the committee packet comparing state captive counts and whether regulatory or tax enforcement (the Internal Revenue Service has targeted certain captives in the past) affected counts in other domiciles; Ralston said the IRS has at times scrutinized captives that did not meet tax rules and that contributed to changes in some states' counts.

Eric (Department of Insurance staff) told the committee the department had reviewed the bill and that it appears to fit within the framework of Chapter 40 of the Kansas insurance statutes, but that his team had identified a concern they were still investigating, likely related to the workers' compensation language. Representative Tarwater recommended changing the bill's effective date if the committee moves the bill so the Department of Insurance has time to resolve the question or so the concern can be handled in conference.

Committee members discussed potential next steps: several senators encouraged including cells, workers' comp and tax adjustments as the primary changes for now and returning later if additional refinements are needed. The committee did not take a vote; the sponsor said staff and the department would continue to work on technical details and any needed amendments before the committee would formally work the bill.

Less urgent details: The sponsor noted the state currently contains few captive domicles and that a recently chartered property and casualty captive will make two by the end of the reporting period; committee members were reminded the next meeting could consider amendments after the Department of Insurance completes its review.