Maryland Advances Review of Captive Insurance Premium Tax Rules

The Maryland Insurance Administration (MIA) held a public meeting on October 7 to gather input on the use, regulation, and taxation of captive insurance companies by entities operating in the state. The review follows legislation enacted earlier this year directing the agency to study captive insurance arrangements, including those used by nonprofit hospitals.

The meeting is part of a broader examination required under Senate Bill 890, which took effect July 1, 2026. The legislation requires the MIA to assess existing regulatory and taxation frameworks and submit findings and recommendations to the governor and legislative committees by January 1, 2027.

The review follows questions about whether Maryland nonprofit hospitals using offshore captive insurance companies, including those domiciled in the Cayman Islands, are subject to the state's premium receipts tax.

The October 7 meeting included presentations from Insurance Commissioner Marie Grant, representatives of the Maryland Hospital Association, and Jason Schupp, founder and managing member of the Centers for Better Insurance.

The Maryland Hospital Association addressed the role of captives in hospital risk management. Hospitals use captive insurance arrangements to finance exposures such as medical malpractice and other liabilities. The association has maintained that these arrangements involve funds set aside to cover hospital risks and has disputed the applicability of the state's premium tax to certain captive insurance transactions.

Under Senate Bill 890, the MIA must examine captive insurance use by both nonprofit and for-profit organizations, review how other states regulate and tax captive arrangements, and evaluate the feasibility of establishing a state registry for captives domiciled in other jurisdictions.

The study will also consider whether a registry could improve regulatory transparency and provide an alternative mechanism for funding oversight operations.

As previously reported by Captive.com, earlier versions of Senate Bill 890 included provisions that would have temporarily suspended premium tax collection while the state examined the issue. Those provisions were removed before the legislation was enacted, leaving the study requirement in place.

The MIA's findings and recommendations, due January 1, 2027, could inform future legislative or regulatory action concerning captive insurance taxation and oversight in Maryland.