September 8, 2004 |
2004-R-0678 | |
ESTABLISHING CONNECTICUT AS A CAPTIVE DOMICILE | ||
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By: Janet L. Kaminski, Associate Legislative Attorney | ||
You asked for information on (1) what is needed to permit a captive insurance company to domicile in Connecticut and (2) captive statutes in Vermont, South Carolina, District of Columbia, and Arizona.
SUMMARY
Connecticut needs to enact legislation to permit captive insurance companies to domicile in Connecticut. Such legislation was introduced in 1996, but it died in committee (sSB 466, copy enclosed).
As of December 31, 2003, Vermont had 674 domiciled captives, the largest number of any on-shore jurisdiction that permits captives. As a result, Vermont is often held out as the model for other states wanting to introduce captive legislation. Captive laws in Vermont, South Carolina, District of Columbia, and Arizona share many similarities. Captive laws generally include provisions on licensing, minimum capital and surplus, premium taxes, financial statements, investments, regulatory funds, and other requirements. For a detailed background on captive insurance companies, refer to OLR Report 2004-R-408 (copy enclosed).
CAPTIVE LEGISLATION
The General Assembly’s Commerce Committee introduced legislation in 1996 that would have permitted captive insurance companies to domicile in Connecticut (sSB 466). The Commerce Committee reported the bill favorably and the Senate referred it to the Insurance and Real Estate Committee, where no action was taken on it.
The bill was similar to captive legislation in other jurisdictions, including Vermont, South Carolina, District of Columbia, and Arizona. Each of these requires a captive to obtain a license, maintain certain minimum capital and surplus, file annual financial reports, and submit to insurance department examinations. Each prohibits captives from participating in or benefiting from compulsory pools and associations (e. g. , guaranty funds). Each establishes a fund used for the regulation and promotion of captives. Each, except Arizona, requires payment of premium taxes.
Although these jurisdictions follow a similar framework, they vary in some of the details. Table 1 compares fees and local office requirements. Table 2 compares capital and surplus and regulatory fund requirements. Copies of each law are enclosed.
Table 1: Captive Fees and Local Requirements
State |
License Fees |
Local Office Requirements |
Connecticut sSB 466, 1996 Reg. Sess. |
$ 200 application fee; reasonable application review fee; $ 300 first year license; $ 300 annual renewal fee |
Principal place of business; Resident agent for service of process; One board meeting per year; At least two resident incorporators or organizers. |
Vermont Vt. Stat. Ann. tit. 8, § 6001 et seq. |
$ 200 application fee; reasonable application review fee (currently $ 3,200); $ 300 first year license; $ 300 annual renewal fee |
Principal place of business; Resident agent for service of process; One board meeting per year; At least one resident incorporator or organizer; One resident board member. |
South Carolina S. C. Code Ann. § 38-90-10 et seq. |
$ 200 application fee; reasonable application review fee (currently $ 2,400); $ 300 first year license; $ 500 annual renewal fee |
Principal place of business; Resident agent for service of process; One board meeting per year; At least two resident incorporators or organizers; One resident board member. |
District of Columbia D. C. Stat. 31-3901 et seq. |
$ 500 application fee; reasonable application review fee; $ 300 first year certificate; $ 300 annual renewal fee |
Principal place of business; Resident agent for service of process; One board meeting per year. |
Arizona Ariz. Rev. Stat. § 20-1098 et seq. and Ariz. Admin. Code R20-6-2002 |
$ 1,000 application fee; $ 5,500 annual certificate of authority renewal fee |
Principal place of business; Resident agent for service of process; One board meeting per year; Resident manager. |
Table 2: Captive Capital-Surplus and Fund Requirements
State |
Capital and Surplus Requirements by Captive Type |
Regulatory Fund |
Connecticut sSB 466, 1996 Reg. Sess. |
Unimpaired paid-in capital of: -Pure: $ 100,000 -Association (stock): $ 400,000 -Industrial insured (stock): $ 200,000 Free surplus of: -Pure: $ 150,000 -Association (stock): $ 350,000 -Association (mutual): $ 750,000 -Industrial insured (stock): $ 300,000 -Industrial insured (mutual): $ 500,000 |
Fees, assessments, and 10% of premium taxes collected from captives are credited to this account. Not more than 2% of premium taxes may be used for promotional expenses. Any balance over $ 100,000 is transferred to the general fund at fiscal year end. |
Vermont Vt. Stat. Ann. tit. 8, § 6001 et seq. |
Unimpaired paid-in capital and surplus of: -Pure: $ 250,000 -Association: $ 750,000 -Industrial insured: $ 500,000 -Risk retention group: $ 1,000,000 -Sponsored: $ 500,000 |
Fees, assessments, and 10% of premium taxes collected from captives are credited to this account. Not more than 2% of premium taxes may be used for promotional expenses. Any balance over $ 250,000 is transferred to the general fund at fiscal year end. |
South Carolina S. C. Code Ann. § 38-90-10 et seq. |
Unimpaired paid-in capital of: -Pure: $ 100,000 -Association (stock): $ 400,000 -Industrial insured (stock): $ 200,000 -Sponsored: $ 500,000 Free surplus of: -Pure: $ 150,000 -Association (stock): $ 350,000 -Association (mutual): $ 750,000 -Industrial insured (stock): $ 300,000 -Industrial insured (mutual): $ 500,000 -Sponsored: $ 500,000 |
Fees, assessments, and 10% of premium taxes collected from captives are credited to this account. |
District of Columbia D. C. Stat. 31-3901 et seq. |
Unimpaired paid-in capital of: -Pure: $ 100,000 -Association (stock): $ 200,000 -Agency: $ 300,000 -Rental: $ 300,000 -Sponsored: $ 300,000 Unencumbered surplus of: -Pure: $ 150,000 -Association (stock): $ 300,000 -Association (mutual): $ 500,000 -Agency: $ 300,000 -Rental: $ 300,000 -Sponsored: $ 300,000 |
Fees, assessments, and 10% of premium taxes collected from captives are credited to this account. Not more than 2% of premium taxes collected can be used for promotional expenses. Any balance at fiscal year end is applied against the ensuing budget year. |
Arizona Ariz. Rev. Stat. § 20-1098 et seq. |
Unimpaired paid-in capital and surplus of: -Pure: $ 250,000 -Group: $ 500,000 -Agency: $ 500,000 -Protected cell: $ 1,000,000 -Reciprocal: $ 500,000 -Reinsurance only: ½ the above amount |
Application and certificate of authority renewal fees are credited to this account. Any balance over $ 100,000 is transferred to the general fund at fiscal year-end. No general fund appropriation will be made to the fund in any fiscal year in which at least 25 captives held active certificates of authority as of the preceding calendar year end. |