Arizona HB 2193 Adds Dormant Captive Status, Lowers Cell Capital, Updates Governance

Arizona has enacted House Bill 2193, revising several provisions of its captive insurance statutes. The bill introduces a definition for dormant captive insurers, adjusts capital requirements for protected cell structures, and clarifies language around governance and license renewal timing.

Definition of Dormant Captive Insurer

HB 2193 adds a statutory definition for "dormant captive insurer." Under the new provision, the term applies to a captive insurer that

• has ceased transacting the business of insurance, including issuing insurance policies, and
• either has no outstanding liabilities associated with the business of insurance or has not issued any insurance policy before filing an application for a certificate of dormancy.

The statute also specifies that a dormant captive insurer does not include a captive risk retention group.

Dormant status may be granted through a certificate of dormancy issued by the Arizona Department of Insurance and Financial Institutions. The certificate is valid for 5 years and may be renewed. Dormant captives are required to maintain a minimum of $125,000 in capital and surplus and must continue to meet reporting and renewal obligations.

Protected Cell Surplus Requirement Reduced

The bill lowers the minimum capital and surplus requirement for protected cell captive insurers from $500,000 to $250,000, as amended in A.R.S. § 20–1098.05.

Annual License Renewal Window Defined

HB 2193 establishes that license renewal applications must be filed not earlier than July 1 and not later than September 1 in each year following the initial year of licensure.

Governance Provisions Updated

HB 2193 updates statutory language to reflect the different governance structures used by captive insurers. In addition to existing references to boards of directors (for corporations) and subscribers' advisory committees (for reciprocals), the bill adds "board of managers" to explicitly include captives organized as limited liability companies (LLCs).

Each captive insurer is required to hold at least one meeting of its governing body—whether a board of directors, board of managers, or subscribers' advisory committee—in Arizona each year.