On February 5th, Connecticut Governor Ned Lamont delivered a series of proposals to legislators, including an act concerning captive insurance companies that aims to expand the captive insurance industry, incentivizing captives to relocate to Connecticut.
In hopes of attracting firms to Connecticut, the Governor’s initiative seeks to lower capital and surplus requirements for pure captives, from not less than $250,000 to $50,000, unless the Commissioner determines that a higher minimum amount is required for such captive in order to meet its policy obligations. Additionally, capital and surplus may be in the form of any asset approved by the Commissioner.
The proposal also includes a three-year look-back for the payment of taxes owed plus interest in addition to a waiver of penalties on outstanding liabilities for Connecticut insureds who establish a branch captive in Connecticut or re-domicile a foreign or alien captive to Connecticut prior to July 1, 2021. Each new captive insurance company established in Connecticut generates annual premium tax, ranging from a minimum of $7,500 to a max of $200,000 a year. By easing regulatory constraints and offering incentives, the Governor estimates that the proposal will generate $7.5 million in FY 2021.
The Governor’s proposed initiative does request additional funding, which would be provided to allow the department to grow regulatory and service provider expertise through staff development, access to industry specific journals and guides, and section advisory panel support. Additional proposed changes include, the frequency of financial examinations for captives decreasing to at least one every five years instead of every three years, the Commissioner may waive the necessity to conduct a financial exam on pure captives every five years, and captives are not required to hold an annual board of directors meeting within the state.