Some states are making some of their financial regulation laws look something like those in the Caribbean, according to the New York Times. It reports that Delaware, Hawaii, South Carolina, and Vermont, among other states, have changed their laws to allow for something called a “captive,” which is a subsidiary company that provides insurance to its parent company.
The Times reports that a number of large companies have taken advantage of this, including Hartford Financial Services, Aetna, and MetLife. This has allowed the companies to release money that is normally tied up in reserves.
Critics say there are number of problems with this type of transaction. Potential problems cited include a lack of reserve capital and a lack of public oversight since audited financial records are confidential instead of public.
