Utah Captive Insurer Dormancy Provisions Go into Effect this Month
May 01, 2019
A new Utah law that takes effect May 24 will allow captive insurance companies licensed in the state to move into dormant status, freeing up both time and money for the captives and their parents.
The captive dormancy provisions are part of a broader bill, H.B. 55, that the Utah legislature approved in March and Governor Gary Herbert signed almost immediately after passage.
Under the measure, captives that want to move into dormancy would file an application with the state insurance commissioner.
By moving into dormancy, captives would be subject to much smaller capital and surplus requirements. For example, a single-parent captive would only have to maintain $25,000 in capital and surplus, a fraction of the $250,000 that is normally required under Utah's captive statute.
In addition, a dormant captive would not be required to submit an annual audit or hold an annual meeting in the state. Dormant captives would have to pay a $2,500 annual renewal fee, half of what most other captives are required to pay.
The new law allowing captives to move into dormancy is a "very positive development," notes Victoria Fimea, senior vice president, legal counsel, and head of the regulatory department for North America for Artex Risk Solutions in Mesa, Arizona.
For example, a parent may have no current need for its captive because of favorable conditions in the traditional market.
But that could change quickly. By having a captive in dormant status rather than terminating it, the parent could quickly restart it when market conditions change "rather than go through all the time, expense, and effort" of forming a new captive, Ms. Fimea said.
Other domiciles that also allow captives to move into dormant status include Vermont and Montana.
May 01, 2019