South Dakota has amended Chapter 56-46 of its insurance code to allow the formation and regulation of agency captive insurance companies in the state.
House Bill 1180 defines an agency captive insurance company is either: an insurance company that is owned, controlled or under common ownership or control by an insurance agency, brokerage, or reinsurance intermediary “that only insures the risks of insurance or annuity contracts placed by or through the agency, brokerage or reinsurance intermediary”.
Similarly, an agency captive can also be one owned or controlled by a producer of service contracts or warranties that only reinsures the contractual liability “arising out of service contracts or warranties sold through such producer”.
An agency captive in South Dakota may be formed as in the same manner as a pure captive—incorporated as a stock corporation, a nonstock corporation, a nonprofit corporation, or may be formed as a limited liability company, business trust under, or other form of legal entity as approved by the insurance director.
An agency captive formed in the state will be required to submit annually, no later than six months after the close of its financial year, to the director a report of its financial condition using statutory accounting principles certified under oath by two of its officers.
Each captive will also have to provide a report of its financial condition audited by an independent certified public accountant every five years if it has annual direct premiums written of less than $2.5 million.
Anything exceeding that $2.5 million will have to provide a report every three years.
