Utah has introduced a bill which will amend the insurance code, including “significant” changes for captive insurance to ensure the state remains competitive.
The first change in HB 54 will propose a reduction in the minimum un-impaired capitalisation requirements for sponsored captive structures. Proposal will reduce the minimum to $500,000 total with at least $200,000 from the sponsor/core itself; down from $1,000,000 and $350,000 respectively.
The second significant change is to allow captive coverages for punitive damages; however, no pure third-party direct or indirect coverages for punitive damages, and the coverage may not arise out of a criminal act, which is defined as "an act for which a person receives a verdict or finding of guilt after a criminal trial or plea of guilty or nolo contendere to a criminal charge”.
It will also see changes to the definition of a captive insurance company.
The bill is sponsored by representatives Jim Dunnigan and Senator Curt Bramble as part of Utah’s 2021 General Session.
On 17 February 2021, the bill was introduced to Utah’s Senate for its first reading.
Travis Wegkamp, captive insurance director of the Utah Insurance Department says HB 54 will pass and states that these changes will go into effect mid-May.
In addition, Wegkamp states that in a process done through rule and not legislative code, an increase in license fees has been proposed and passed through a public hearing.
He notes that it will now be reviewed as part of the state's annual budget and may be accepted as proposed, rejected altogether, or modified anywhere in between.
“If any changes are accepted they will go into effect on the state's new fiscal year of 1 July 2021,” he adds.
In addition, Utah has also 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.
