Ports Insurance Company — Crossing the River and Leaving Transparency Behind
Through Captive of the Week we peek into the shadowy world of onshore captives and how they use the federal Terrorism Risk Insurance Program to shift risks off of their balance sheets and on to yours.
Our captive this week is Ports Insurance Company, a wholly owned subsidiary of Ports America — the largest marine terminal operator in the U.S. Watch the 4 minute video.
We can find some information about the early years Ports Insurance Company from the New York Department of Financial Services. Like many other onshore captives, Ports Insurance Company issued its corporate parent hundreds of millions of dollars in terrorism insurance while moving the bulk of the risk onto other policyholders through the Terrorism Risk Insurance Program.
In 2012, Ports America relocated its captive insurer from comparative transparency of New York into nearly impenetrable confidentiality shield afforded captives under New Jersey law. Even though Ports America presumably still uses the Terrorism Risk Insurance Program to shift its risks onto the backs of small businesses, churches, school districts and other commercial policyholders, New Jersey law forbids the Department of Insurance from releasing any information about Ports Insurance Company to the public or U.S. Treasury.
That’s right. Under the laws of New Jersey and most other states that aggressively market to captives, the insurance regulator is prohibited from sharing any information with U.S. Treasury about individual captives. This is an outrageous nose-thumbing of Congress who charged Treasury to oversee a $100 billion program through which up to 95% of any payouts would go to captives.
This is not an inadvertent oversight by state legislatures or an improbable hypothetical. Right now, the IRS (a unit of Treasury) is suing the Delaware Commissioner of Insurance for a refusal to honor a federal subpoena into the use of onshore captives for federal tax abuse.
Through the proposed Pandemic Risk Insurance Act, Congress would make available another $750 billion for captives to quietly funnel to their corporate parents under the protection of state secrecy laws. Given their conduct under TRIA, captives must be prohibited from participating in PRIA. At the very least, Congress should require a public registry of all participants in TRIA and PRIA (including the identity of their corporate owners and how much they stand to gain from the programs) so those with their hands out for hundred of millions and often billions of program dollars can be held accountable by Treasury, Congress and the public.
