Connecticut has amended its captive law pursuant to Public Act No. 11-1 (the “Act”).  The Act creates three new subgroups of Connecticut-domiciled captives: sponsored, branch, and special purpose financial captives.  Sponsored captives are formed and operated by one or more sponsors approved by the Connecticut Insurance Department and fund their liability to each participant insured through protected cells with segregated assets.  Branch captives are alien captives licensed to transact business in Connecticut through a business unit with a principal place of business located in the state.  Finally, special purpose financial captives are reinsurance captives that fund their obligations through insurance securitizations.  Significantly, the Act also expands the types of coverage that may be insured through Connecticut-domiciled captives.  Please click here for a copy of the Act.

The Act makes the following additional changes: (1) establishes a reinsurance premium tax requirement (under current law, Connecticut only taxes captives’ direct written premiums); (2) establishes a $7,500 nonrefundable tax credit for a captive’s first taxable year; and (3) authorizes the Connecticut Insurance Commissioner to adopt implementing regulations.

The relevant sections of the Act take effect July 1, 2012, and the premium tax provisions apply to calendar years beginning on or after January 1, 2012.