Reinsurance Focus

On March 27th and April 24th, respectively, Oregon and Florida became the latest states to enact legislation providing for the formation of captive insurers, including captive reinsurers, for various types of insurance. Among other things, the new legislation sets out standards for captive formation, capitalization requirements, permissible types of coverage, and reporting. The two laws vary, however, in several respects.

Oregon’s new law (SB 1547) requires minimum policyholder surplus of between $250,000 and $750,000, depending on whether the captive is formed as a “pure” captive, “association” captive, or captive reinsurer, all of which (among others) are defined in the law. Florida’s law (HB 1101), in contrast, requires minimum surplus of between $250,000 and $500,000, depending on whether the captive is formed as a “pure” captive, or an “industrial insured” captive, as defined therein.

The new laws also differ with respect to fees and taxes. Oregon requires $5,000 for the initial application fee and $5,000 for each annual renewal, whereas Florida requires $1,500 as an application fee and $1,000 for annual renewal. With respect to premium taxes, Oregon’s law contains none, as opposed to Florida’s law which sets a premium tax rate of 1.75% on gross premium receipts. Both laws provide various financial requirements relating to the maintenance of reserves and liquidity.

Captives licensed in Oregon or Florida are required to have at least one board meeting each year in their respective states. Both states also require captives to maintain their respective principal places of business in-state (with one exception in Oregon’s law for “branch” captives). Approximately 31 jurisdictions have now enacted captive insurance laws over the past decade. Both the Oregon and Florida laws will take effect July 1, 2012.

This post written by Michael Wolgin.

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