South Dakota to allow agency captives

South Dakota has recently signed into law House Bill 1180, allowing the formation and regulation of agency captive insurance companies in South Dakota.

The bill defines an agency captive as either: i) an insurance company that is owned, controlled or under common ownership or control by an insurance agency, brokerage, or reinsurance intermediary that only insures the risks of insurance or annuity contracts placed by or through the agency, brokerage or reinsurance intermediary.

Alternatively an agency captive can be owned or controlled by a producer of service contracts or warranties that only reinsures the contractual liability arising out of service contracts or warranties sold through such producer.

In South Dakota, this type of captive may be formed as in the same manner as a pure captive insurance company.