Florida has become about the 30th state that has passed or enhanced legislation to attract U.S. domiciled captive insurers, at least tabulated with a Captive Insurance Companies Association (CICA) map and an NAIC state-by-state chart.
Governor Rick Scott signed legislation that adds to existing provisions by further setting standards for the formation, incorporation, coverage, capital, surplus, reporting and reinsurance of captive insurers.
The law becomes effective July 1. 2012.
Under existing law, the state legislature had already created provisions authorizing the creation of U.S. domiciled captive insurers by establishing operational criteria and standards. House Bill 1101 augments these provisions, first and foremost with a provision for captives’ formation in the state.
“We welcome captive insurers to Florida’s insurance marketplace,” said Kevin McCarty, Florida’s insurance commissioner and current NAIC president. “The new law will encourage the formation of new captive insurers, which will promote increased investment in our insurance marketplace. I thank Governor Scott for signing this bill and the Florida Legislature for passing this important piece of legislation.”
Under the Florida law, captives must only pay an annual fee of $1,000, obtain a Florida insurance license, hold one board meeting a year in the state and maintain its principal place of business in this state.
There are also financial and other business requirements to ensure adequate reserves and solvency, and of course, they pay taxes in the state unless there is no such provision.
Captives have been a growing business for states in the past 10 or so years.
Vermont, one of the original states in the captive business, has a specific tax provision for premiums collected while Tennessee has a flat rate of 1% on the gross amount of all premiums collected. In South Dakota, each captive insurer shall pay a tax of 25% on gross premiums collected during the preceding year ending on 12/31, according to a state chart provided by the NAIC chart.