Utah has introduced a new bill to make changes to the Administrative Services Code, Independent Entities Code, and Independent State Entities relating to risk management, which will authorise the state risk manager to create one or more captive insurance companies.
The new bill, House Bill (HB) 50, will require the Utah risk manager to coordinate and cooperate with any covered entity having responsibility for risk control and safety of school districts and charter schools.
If passed, the bill will authorise school districts, charter schools, the Utah Communications Authority, and the Utah State Fair Corporation to participate in any captive insurance company created by the state’s risk manager.
The bill is sponsored by representatives Jim Dunnigan and Senator Curt Bramble.
The Business and Labor Committee have already reported a favourable recommendation on HB 50.
HB 50 was signed by the house speaker and sent for enrolling on 8 February 2021.
The committee states that the risk manager will manage the risk management fund and any captive insurance company in accordance with economically and actuarially sound principles to produce adequate reserves for the payment of contingencies, including unpaid and unreported claims and may purchase any insurance or reinsurance considered necessary to accomplish this objective.
It also states that as part of this the risk manager should inform the covered entity's governing body and the governor when any covered entity fails or refuses to comply with reasonable risk control recommendations made by the risk manager.
The bill highlights that the risk manager can enter into contracts to form one or more captive insurance companies authorised under Title 31A, Chapter 37, Captive Insurance Companies Act.
The changes will allow the risk manager to purchase (re)insurance, adjust, settle and pay claims as well as pay expenses and costs.
However, the Business and Labor Committee outlined that a captive insurance company should not be used to purchase workers’ compensation insurance, health insurance or life insurance.
The bill notes that upon approval by the state risk manager and the State Board of Education, a public school district and a state public education foundation may participate in any captive insurance company created by the risk manager.
A charter school established under the authority of Title 53G, Chapter 5, Charter Schools, may participate in any captive insurance company created by the risk manager upon the approval of the state risk manager and the governing body of the charter school, according to HB 50.
If an independent entity that receives coverage under any captive insurance company created by the risk manager is involved in a commercial activity, the bill states that the state risk manager may require that the entity; procure commercial insurance coverage or provide proof of vendor's insurance coverage for the commercial activity; and comply with loss prevention measures specified by the state risk manager.
In April 2020, Utah governor Gary Herbert signed HB 27, an insurance amendment bill into law, which includes amendments for captive insurance companies within the state.
