Kipper’s Back as Nevada Insurance Commissioner

The second-time commissioner has captives on his mind at the center of a plan to make Nevada more business, and insurance, friendly.

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Scott Kipper has returned to his role as Nevada’s insurance commissioner, and now that he’s back he says that fostering a business environment that helps insurance companies grow and brings new ones to the state is among his top priorities.

Among his plans to bolster the state’s insurance business, and the business environment in general, are making the state more attractive to captives and encouraging the growth of those captives now in the state through captive-friendly legislation.

The emphasis on captives in Nevada comes from above. It goes up the state’s leadership ladder via a mandate handed down by Terry Johnson, Nevada’s director of business and industry, whose stated mission is to help diversify Nevada’s economy by building up industries like insurance so that the state is less reliant on tourism and gaming.

Kipper, who was named to the post by Johnson, officially took office on Oct. 24. He replaces former insurance commissioner Brett Barratt, who resigned in August citing personal reasons. Barratt returned to his home state of Utah and is now that state’s deputy commissioner of insurance.

Kipper previously served as Nevada’s insurance commissioner from December 2008 to June 2010. He has made his rounds from one side of the country to the other in various regulatory roles. After leaving his post as the state’s insurance commissioner, Kipper landed a role as deputy commissioner of the Office of Health Insurance for the Louisiana Department of Insurance. In April 2011, he accepted a position as CEO of the State of Louisiana Office of Group Benefits. He also previously served as Oregon’s insurance administrator.

Nevada’s Insurance Industry

In his newish role, Kipper will be the chief regulator of Nevada’s insurance industry, an industry that generates roughly $235 million in premium tax revenue for Nevada. The total premium dollar amount of all lines of insurance in Nevada for 2010 was $10.67 billion, which has been declining slightly but steadily since 2007, and there are roughly 2,187 admitted carriers in the state – of those, 184 are domestic to Nevada.

“Nevada has previously experienced good steady growth in the insurance industry. The recent decrease in producer licenses and total premium dollar amount reflects the tough economic climate in Nevada,” Kipper said. “The good news is that the number of admitted carriers and domestics in the states has continued to increase.”

In fact, the number of Nevada’s admitted carriers has nearly tripled since 2005, when there were 68 admitted carriers in the state. The number has risen steadily each year.

Kipper, who offered little explanation why he left as the state’s insurance commissioner in 2010, offering only, “Well, it was a kind of a difference of opinion with some of the administration,” was keen to talk about his plans and priorities.

“My priorities are many,” he said. “You know, we are faced with health care reform and implementing all the stages of health care reform. My background has primarily been in health insurance regulation. So I think that’s going to certainly be a challenge and one of our priorities.”

Aside from that particular issue, one of Kipper’s other top goals is to be a business-friendly insurance commissioner, who helps to grow the industry, he said.

“Helping make sure that the economy in Nevada bounces back is a huge priority,” he said, adding that having gone to Louisiana in the long-lasting recovery years following Hurricane Katrina as a regulator drove home for Kipper the value of the insurance industry.

“The lesson that I learned is that in order for the economy to bounce back – or in that case, a devastated community to bounce back, it’s important to have a good insurance foundation, so that those who want to come in here and do business can find a way to manage and take care of the risks through insurance in an affordable but an efficient way,” he said.” So we want to make sure that to any extent possible that the insurance marketplace here is as efficient and as effective as possible at a very fair price.”

Captives

One way he plans to do this is to foster business growth by expanding the number of captives in the state, something he believes will create additional employment in the state and generate additional premium taxes.

He declined to speculate on how many jobs or much tax income could be created by adding more captives in Nevada, but Kipper said he plans to tap a now resurrected captive advisory committee to address the issues and concerns of the state’s captive industry to smooth the way for such expansion.

“Nevada has been home to a very strong captive insurance program for years, and we want to make sure we continue to expand on our captive programs,” he said. “As companies grow and as the economy bounces back, there are entities, and we are one of them, that want to make sure that we look at alternative ways to manage and take care of risk. And to the end that Nevada can become a state that is known for alternative risk management, like our captive programs or the domiciliary state for risk retention groups and reinsurers. We would like to explore those avenues.”

And Kipper’s boss Johnson said he believes the state has the political will to do just that.

“We need to look for ways in Nevada to diversify the economy,” he said. “We’re looking to be competitive with some of the other jurisdictions in recruiting and retaining companies to do business here, especially in the area of captives, which is why I’ve asked (Kipper) to reinstitute the captives work group.”

In fact some groundwork to make the state more captive attractive has already been laid. This past legislative session Gov. Brian Sandoval signed Assembly Bill 74, a bill aimed at reducing filing requirements that captives are required to undergo, as well as the number of audits they are subjected to give captives added flexibility.

But it’s not just about getting as many captives to the state as they can, Johnson added. “We don’t want to simply lower the cost of their doing business here and everybody’s going to get into sort of downward bidding match.”

Instead, Johnson wants to look at the quality of the captives by examining their assets under management, looking at their potential impact on the state in an effort to “develop an index that we can use the gauge the quality of the captives that do business here and compare that to some of the neighboring jurisdictions and position ourselves so we can compete and do more business in this area.”

Working toward an end goal of adding captives, Johnson said the insurance department will be taking a hard look at the state’s regulations, and asking “is this a requirement we need to maintain? Is it serving the public’s interest?”

In attempting to answer those questions Johnson said the department will take a look at examination fees, the examination process, required regulatory filings placed on captive insurance companies, what information such firms are required to submit and how often they have to submit it.

“The objective is to compete with the Vermonts, to compete with the Utahs,” he said. “We do want to be competitive and if our regulatory structure inhibits our competitiveness, yes, we will look at removing those barriers.”

Robert Vogel, vice president of operations for Pro Group Management, a planned administrator and captive manager that has a large share of the state’s workers’ compensation and captive action, said he believes in Kipper and Johnson’s promise to remove barriers and bring in more captives.

There are roughly 120 licensed captives in Nevada, and Pro Group deals with nearly half of those.

“The governor has stated his interest in bringing that kind of company into Nevada,” Vogel said. “It’s job creation and economic development. The governor, through Terry Johnson, and now though Scott Kipper, have shown they are committed to that.”

The first steps in making Nevada more captive-friendly were taken during Kipper’s first go-around as the commissioner, by putting in place a staff that has remained and beefing up the number of staff who deal with captives.

“Doing insurance in the state has been very good since Scott came on to the scene the first time,” Vogel said of Kipper, referring to him as a “new but old commissioner.”

Kipper’s Goals

While fostering a good business environment is one of the two primary functions of Kipper’s office, he said, consumer protection won’t go by the wayside.

“We are really the consumer protection agency for insurance issues,” Kipper said.

According to a preliminary report from the Consumer Services Section of the Nevada Division of Insurance, the department has netted $6.3 million in recovered money for Nevadans so far in 2011.

A recovery is the amount of monetary compensation or relief received by a consumer as a result of a filed consumer complaint with the insurance department. In 2010 the total amount recovered for the year was $3.4 million. The records of annual recoveries date back to 2006, and 2011 is the highest year the state has on record.

“The second role that I see that the department has is to foster a good business environment,” Kipper said.

Beside an easier regulatory environment, Kipper believes one of Nevada’s greatest assets is its vast amount of developable space and an eager workforce – at a rate of 13.4 percent, Nevada maintained the highest unemployment rate for the 16th straight month in the most recent figures issued by the Labor Department.

“We’ve had some good fortune in the state over last several years of some carries expanding their service centers into Nevada,” he said. “We believe that the economy in Nevada, the amount of office space, and the number of people that would be willing to go to work in those types of facilities just make it a natural for places like Las Vegas or Reno.”

While the insurance commissioner can’t directly provide tax breaks or extend business incentives to draw companies to Nevada, there is one thing that office can do, Kipper said.

“We can provide to them a fair, consistent, and predictable regulatory environment in which to work,” Kipper said. “And we think that that’s worth quite a bit when companies want to come and kick the tire on Nevada and see if this is a place where they want to expand their business.”

Topics Legislation Louisiana Market Nevada