With an aim to bring in new revenues from license fees, the V.I. Legislature approved a bill restructuring the territory’s captive insurance industry licensing, regulation, fees and tax incentives.
The bill [30-0049] was requested by Gov. John deJongh Jr., who is expected to sign it into law.
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 has not had much growth, while other jurisdictions have been more successful in attracting this business.
Attorney David Bornn, who helped draft the bill, testified in committee that the territory has allowed captive insurance since 1984, and that its rules were revised in 1993, in 2008 and again in 2010. At its high point, the territory had a dozen captive insurers, Bornn said, noting that there are now five. (See related links below)
The territory will generate 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 will receive very substantial breaks on V.I. and federal taxes on the potentially billions of dollars in insurance company funds flowing through the territory.
As written, the bill would have offered 100 percent exemption from any and all V.I. taxes.
Sen. Nereida "Nellie" Rivera-O’Reilly offered – and the Legislature adopted – an amendment changing the income tax exemption so that businesses on St. Thomas would receive 90 percent exemptions and those on St. Croix 100 percent.
O’Reilly said the closure of Hovensa, high unemployment, lower tourism and a lack of hotel development were reasons that island needed more of a boost.
The bill will create within the Office of the Lieutenant Governor a division of alternative markets and international reinsurance, which will be supervised by a superintendent of alternative markets, appointed by the commissioner of insurance with the advice and consent of the governor.
Voting in favor of the bill were O’Reilly, Sens. Craig Barshinger, Judi Buckley, Donald Cole, Clifford Graham, Myron Jackson, Shawn-Michael Malone, Clarence Payne, Tregenza Roach, Sammuel Sanes and Janette Millin Young. Sen. Terrence "Positive" Nelson voted no.
The Senate also passed legislation:
– creating a regulatory framework for selling insurance protection for portable consumer electronics like cell phones, at the request of the governor [Bill 30-0243];
– increasing the homestead exemption protecting private homes from judgment from $30,000 to $300,000 to better reflect the actual cost of a home, sponsored by Nelson, Jackson and Cole [Bill 30-0093];
– clarifying existing law to give federally qualified clinics, like Frederiksted Health Care, statutory authorization to provide emergency surgery, dentistry, family planning and behavioral services to minors, sponsored by Sanes [Bill 30-0096];
– and setting a minimum penalty for defrauding the territory’s unemployment insurance program of 15 percent of the amount defrauded, to meet new federal requirements [Bill 30-0242].
Other legislation, nominees, zoning amendments and resolutions approved by the Legislature Tuesday are discussed elsewhere in the Source. (See related links below)