John Carney, the governor of Delaware, has signed into law a new captive insurance bill that enhances the flexibility of the state’s offering to captive insurance companies.
Senate Substitute 1 for Senate Bill 36 (SB1SB36) allows captives to be classified as registered series, offers clarity to provisions regarding insuring a parent company, and allows for a captive to enter dormancy after 12 consecutive months of inactivity. Captives were previously required to be inactive for a calendar year before they could enter dormancy. A captive that stopped writing business mid-year would therefore have to wait 18 months to file for dormancy, paying premium taxes and submitting statements throughout that time.
“Prior to this change, it may have been easier for captives to dissolve than elect dormancy and later return to the market,” explained Insurance Commissioner Trinidad Navarro.
Navarro said the legal change is the latest example of Delaware’s efforts to streamline processes and maintain its position as one of the most attractive domiciles for captives.
SB1SB36 was sponsored by Senator Trey Paradee and Representative Bill Bush. It is the result of a multi-year effort, after legislation did not proceed during 2020’s truncated session due to COVID-19.
The Department of Insurance developed its legislative proposals in consultation with stakeholder groups including the Delaware Captive Insurance Association (DCIA).
Joanne Shaver, president of the DCIA, said: “The DCIA believes these changes are beneficial to captive owners, especially with respect to Delaware’s dormancy statute. The change to a continuous 12-month period allows a captive to enter dormancy status sooner than it would have been able to previously. This change will make it more favorable for captive owners to elect dormancy status over dissolution of the captive, especially when the owner isn’t 100 percent sure they want to dissolve their captive immediately.”
In 2020, captives contributed $2.9 million to Delaware’s General Fund and $1 million to the City of Wilmington. The division licensed 70 new captives in 2020.
Delaware is the world’s fifth largest captive domicile, and the third largest in the US, with 783 active captives and $5.4 billion in gross written premiums.
John Carney, Delaware, Trinidad Navarro, Delaware Captive Insurance Association, DCIA, Joanne Shaver