Connecticut mulls legislative changes to increase appeal to captives
The State of Connecticut’s insurance department has made a number of proposals designed to make it a more desirable jurisdiction for captive insurance companies.
The proposals were developed in response to suggestions put forward by the Connecticut Captive Insurance Association. They have not yet been drafted into a bill by Connecticut’s legislature, but if they were to become law the insurance department believes they would encourage more captives to set up in the state.
The proposals would lower the capital and surplus requirements for pure and branch captives, and remove the requirement that captives hold at least one board meeting in the state each year. They would also reduce the requirement for financial examinations, meaning they were required once every five years, rather than once every three.
The proposed changes would also establish a three-year look-back and waiver of penalties on outstanding liabilities for Connecticut insureds that have not paid the independently procured insurance premium tax. The waiver would apply to insureds establishing a branch captive in the state, or redomiciling a foreign or alien captive to Connecticut before July 1, 2021.
The proposals would also give the insurance commissioner the authority to issue a conditional license, as well as the power to impose a higher level of capital and surplus for captives. The commissioner would also gain the right to waive the requirement that the captive be examined every five years.
The definition of “branch captive insurance company” would also be expanded to include foreign captives.
If the proposals do not make it into a bill and become law in the current legislative session they are likely to be resubmitted for consideration at a later date.
Connecticut collects an annual premium tax from each captive domiciled in the state, the size of which depends on the level of premium the captive writes, ranging from a minimum of $7,500 to a maximum of $200,000 annually. That tax is paid into the state’s general fund.