Ariz. Governor Napolitano signs captive insurance law

Arizona Governor Janet Napolitano has signed HB2294, Captive Insurer Amendments, updating Arizona’s captive insurance law. The amendments will be effective 90 days after the legislative session adjourns.

The amendments:

• Allow the establishment of branch captives to provide employee benefits.
• Define “deductible reimbursement” business, and clarifying that deductible reimbursement business is permitted on a direct basis.
• Re-define “industry group captive insurer” to eliminate group member eligibility requirements of a third-party insurance consultant and a threshold amount of annual premium expenditure, and substitute a simple homogenous risk standard.
• Allow group captives to cover “controlled unaffiliated business”.
• Eliminate remaining restrictions against writing commercial motor vehicle business on a direct basis.
• Eliminate an Arizona residency requirement for captive managers, and require that captive managers do business at location in Arizona.
• Reduce the minimum capital requirement for a protected cell captive from $1 million to $500,000.
• Allow any surplus note interest rate approved by the director.
• Allow a reinsurance captive to securitize its risk portfolio through contracts that allow the purchase of interests on a nonrecourse basis.
• Allow pure captives to be formed as a LLC.
• Allow group captives to have as few as three directors, and up to as many directors as it has members.
• Coordinate the effective date of corporate re-domestication to Arizona and the effective date of the new Arizona certificate of authority.
• Clarify that audit reports are due within six months after the end of the captive’s fiscal year.
• Clarify the requirement for prior approval of changes to captive business plans.
• Clarify the confidential treatment of all information related to captive insurers, except for name, type, date licensed, license status, and business of owners.
• Authorize the director to expend monies in the captive insurance regulatory and supervision fund to pay the costs of administering the captive insurance law and to promote the state’s captive insurance industry pursuant to guidelines that she adopts.