CNMI Establishes Captive Insurance Law, Expanding Regional Domicile Options

The Commonwealth of the Northern Mariana Islands (CNMI) has enacted Public Law 24-03, creating the Captive Insurance Act of 2025 and setting the stage for the development of a regulated captive insurance industry in the jurisdiction. Signed by Governor Arnold I. Palacios on June 12, 2025, the law authorizes a broad range of captive structures and outlines licensing, governance, and operational requirements.

The law permits the formation of pure captives, group captives (stock or mutual), industrial insured captives, risk retention groups, rent-a-captives, protected cell companies, agency captives, affiliated reinsurers, and special purpose financial insurance companies. Minimum capital requirements start at $50,000 for pure captives, $100,000 for group captives incorporated as stock insurers, $150,000 for industrial insured captives, and $500,000 for risk retention groups. Protected cell and rent-a-captive structures must hold at least $150,000 for the first client or cell, increasing in $150,000 increments up to $750,000.

Surplus requirements are similarly scaled: Pure captives must maintain at least $100,000 in surplus, group captives $150,000 to $200,000 depending on structure, and rent-a-captives at least $250,000. Capital and surplus may include cash or approved letters of credit.

Captive insurers must be incorporated in CNMI, maintain their principal place of business there, and have at least one resident board member. A CNMI-licensed registered agent is also required. Applications are reviewed by both the commissioner of insurance and a newly formed CNMI Captive Insurance Advisory Committee, with the committee providing recommendations on financial strength, governance, and operational plans.

Protected cell companies are allowed under the Act, with detailed provisions for asset segregation, funding, and creditor protections. Cells must be fully funded, and non-indemnity triggered securitizations are not permitted unless further regulatory standards are issued. The law includes safeguards to ensure protected cell assets are insulated from general account liabilities and other cells' exposures.

The law imposes a 2 percent tax on premium or other insurance income of CNMI-based captive insurers and exempts captives from participation in guaranty funds, compulsory pools, or ratings organizations. Investment flexibility is provided, though the commissioner may restrict investments that pose solvency or liquidity risks.

Captives are subject to regular reporting and examination requirements. Pure captives must file Generally Accepted Accounting Principles-basis audited financial statements within 6 months of fiscal year-end, while other captives must submit National Association of Insurance Commissioners-formatted annual statements by March 1 and independent audits by June 1. Regulatory examinations will occur at least every 3 years, or up to every 5 years if the captive undergoes comprehensive annual audits.

With the adoption of Public Law 24-03, CNMI becomes one of the few domiciles in the Micronesian region offering a formal captive insurance framework. The Federated States of Micronesia (FSM), which established its captive insurance regime in 2006, has since developed a regulated industry that serves more than 20 Japanese-owned captive insurance companies, according to the FSM Captive Insurance Council. CNMI's entry provides an additional option in the Western Pacific for organizations exploring captive solutions for alternative risk financing.