The Texas Captive Insurance Association (TxCIA) is to expand the provisions of SB 734 that passed in 2013 authorising captive insurance in Texas for the first time.
Firstly, the new bill it will add reinsurance pooling as an option for risk sharing to allow captives to introduce third party risk to insure deductibility of premium.
It will also provide discretion to insurance regulators, such as the Texas Department of Insurance (TDI), in determining when credit for reinsurance will be granted.
Finally, the bill will require notice be given to TDI when a captive declares stockholder dividends.
Currently the law allows for policyholder dividends and, while in many cases the policyholders and shareholders are the same entity, amending the law to recognise shareholder dividends also recognises the ownership rights and expectations of shareholder’s return on investment.
The TxCIA is also writing bill language on two other issues of interest in Texas.
The first would authorise the TDI to “incorporate” captive insurers as it does other insurers.
The process currently involves both the TDI and the Texas Secretary of State.
The TxCIA stated: “Given current statutes, this consolidation would be lengthy and more complex than the three initiatives outlined in the bill.”
“Amending the original bill to include this provision will depend on whether acceptable language can be written and the approval of the two agencies.”
The other issue would authorise a captive to be formed as a reciprocal insurer.
These issues would most likely be introduced as committee amendments to the filed bill, assuming consensus from regulators and stakeholders.
The Texas Legislative Session began in Austin on 13 January 2015 and will adjourn on 1 June 2015.
Representative John Smithee, the sponsor of SB 734 in 2013, has agreed to introduce the bill in the House.
It is anticipated that he will file the bill sometime in February, accordint to the TxCIA.
Like other bills, the captive bill will need to be heard and approved in public meetings in both houses and then pass both the full House and Senate before going to the governor for signature.
