6 June 2013Law & regulation

Texas passes captive legislation

Texas governor Rick Perry has signed Senate Bill 734—which will allow pure captives to operate in the state of Texas—into law.

The bill, which was originally submitted in February, will allow a pure captive insurance company to be formed and operated by any type of business except risk retention groups and general partnerships. Captive established in Texas would only be permitted to cover the company’s affiliates and the risks of a controlled unaffiliated business.

Captives in Texas will be prohibited from writing any line of business required by the State, including worker’s compensation and automobile insurance. Captives may reinsurer some prohibited lines, however, if certain conditions are met.

Companies will pay an annual tax rate of 0.5 percent of their taxable premium. The annual minimum tax to be paid by a captive under the bill is $7,500, with maximum tax payment capped at $200,000.

The bill goes into effect in September.