The State of Connecticut Insurance Department has made several amendments to its existing captive insurance legislation, all of which will come into effect on 1 July.
Contained in the lengthy House Bill 5506, the legislative changes include modifications to several definitions. For example, “branch captive insurance company” now includes foreign captives, while “controlled unaffiliated business” includes sponsored captive insurers.
In addition, the bill adds in the definition of “foreign captive insurance company” to be any insurance company formed to write insurance business for its parent and affiliated companies and licensed pursuant to the laws of a foreign jurisdiction that imposes statutory or regulatory standards.
The changes also establish a three-year look-back and waiver of penalties on outstanding liabilities for Connecticut insureds that have not paid the non-admitted insurance premium tax, and that establish a branch captive in Connecticut, or redomicile a foreign captive to the state, before 30 June 2023.
Other administrative amendments in the bill now require financial examinations at least once every five years rather than every three years, while the renewal period for a certificate of dormancy is now every five years rather than two.
In addition, the changes lower the amount of capital and surplus a dormant captive insurer must maintain from $25,000 to $15,000.
Crucially, the legislative changes lower the capital and surplus requirements for the majority of types of captives. Association, industrial and agency captives, as well as sponsored captives licensed as a special purpose insurer, are reduced from $500,000 to $250,000, while pure and branch captives are reduced from $250,000 to $50,000.
However, the bill also gives authority to the commissioner to impose a higher level of capital and surplus if necessary to meet policy obligations.
It also contains technical changes to the commissioner’s authority to adopt regulations based on the type, volume and nature of insurance business transacted.
