Aug. 19, 2008 — A bill aiming to bring specialized captive insurance and reinsurance companies to the territory with tax incentives, and to reorganize and revamp the territory's approach to these specialized insurance products, passed forward Tuesday out of the Committee on Economic Development and Agriculture.
Captive insurance is when a large company insures itself by setting up its own insurance subsidiary. Rather than insuring through a separate company, it insures itself and doesn't have to pay premiums. The territory has had a law allowing tax benefits to bring in captive insurance companies, but despite general growth in the field, the V.I. program is moribund and has been shrinking.
The territory would generate some revenues from annual licensing fees, but, like the finance companies attracted to the territory by its Economic Development Authority's tax benefit program, the captive insurance companies would pay no local taxes on the potentially billions of dollars in insurance company funds flowing through the territory.
Testifiers from the government and from companies involved with captive insurance raised the same concerns about the bill's details while endorsing the idea of working to bring more captive insurance and reinsurance companies to the territory.
"For jurisdictions with vibrant captive markets, the economic benefits can be substantial," said Glendina Matthew, legal counsel at the Office of the Lieutenant Governor. "It is for this reason the market is attractive for the U.S. Virgin Islands."
Once firmly established, which will take at least five years, these markets can bring in substantial sums to the treasury, she said. But the bill creates a supervisor of alternative markets (SAM) whose powers overlap with those of the commissioner of insurance, a title conferred upon the lieutenant governor by dint of his office.
The bill's sponsor, Sen. Louis Hill, introduced an extensive amendment clarifying the powers and role of the SAM and responding to several other objections brought to his attention before Tuesday's hearing. The amendment passed and then the bill was forwarded for consideration by the Committee on Rules and Judiciary.
Voting yea were Hill and Sens. Norman Jn Baptiste, Basil Ottley, Ronald Russell and James Weber III. Sen. Usie Richards abstained, and Sen. Terrence "Positive" Nelson was absent.
The committee voted to hold a bill making not-for-profit corporations eligible for loans from the Government Development Bank. Nonprofits awaiting the release of federal grant money would be able to get a loan secured with the proceeds of the pending grant. Hill, the bill's sponsor, moved to hold the bill in committee for further amendment.
Voting yea were Hill, Baptiste, Russell and Weber. Absent were Nelson, Ottley and Richards.
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