Utah amends captive regulations
The Utah Insurance Department has unveiled a series of changes to captive legislation in the state.
Travis Wegkamp, captive insurance director at the Utah Insurance Department, told Captive International that some of the changes are a result of feedback the Department received from interested parties that have discussed with it the difficulties of finding affordable coverages and/or solutions to their risk financing approach in the ongoing hard market conditions.
Firstly, association captives are now allowed to provide direct homeowners' coverage to their members. Wegkamp said that like many, he has been hearing horror stories of late about the drastic increase in rates for homeowners' insurance due to current market conditions, or no options for coverage at all for some planned communities; for example, in mountainous forested areas with a potential high risk of wildfires. In response to this, Utah felt it appropriate to allow these communities, or other defined groups, to explore the creation of an association type captive as a possible avenue to meet their insurance needs in this regard.
Utah is also lowering the minimum capitalisation of sponsored captive programs to $250,000 in total with a minimum of $50,000 from the sponsor/core at all times. This is down from $500,000 and $200,000 respectively. Wegkamp said that the captive industry has seen a lot of growth in the cell captive arena for the past few years, also likely in response to the hard market conditions. However, he said that he felt that Utah hasn't seen that same amount of growth in its sponsored programs. Discussions with interested parties suggested Utah’s minimum capitalisation requirements were no longer as competitive as they once were.
“So we engaged in discussions with our Insurance Commissioner, and taking into account the now 13 plus years of experience we have with sponsors in our domicile, it was determined we would be comfortable reducing those capital requirements,” Wegkamp said.
The final key legislative change was introduced more so for the captive code to reflect real world practice when it comes to captive examinations.
The mandatory five-year examination period has been removed, and Utah will instead call examinations as deemed necessary. With the previous requirement of a five-year examination Utah’s code also allowed for it to accept an annual independent audit in lieu of that examination. So in reality the vast majority of Utah’s captives due for an examination, after an in-depth review and consideration, the State would determine to accept the audit-in-lieu and waive the examination, Wegkamp explained. As such, in order to save everyone involved some time and to increase efficiency, Utah has transitioned to this "call as needed" approach.
“These three key changes to our Captive Insurance Code that passed in the most recently concluded legislative session, are set to go into effect on May 1, 2024,” Wegkamp told Captive International. “In Utah we pride ourselves in being a captive domicile that is innovative, proactive, and responsive to current industry concerns and feedback. I believe these new updates will do much to keep Utah a popular and competitive captive jurisdiction for some time to come.”
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