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Georgia Revises Captive Insurance Law

Much like Texas, the state of Georgia has recently made significant changes to its legislation regarding captive insurance companies. Georgia’s bill Georgia S.B. 173 entered into effect on July 1st, and its purpose was to amend previous captive formation requirements as well as amending the structure of captives and risks that could be reinsured by captives, expediting the process of granting certificates of authority to newer captives, and more.

Before this recent bill, captive formation in Georgia was under the jurisdiction of the formation requirements statutes for mutual and domestic stock insurers, while S.B. 173 rearranges these requirements into the Georgia Captive Insurance Company Act, which will prevent these captives from being subjected to potential future requirement changes that would be applicable to traditional insurers. The new requirements for formation include a formation fee of $100 and that the captive submit documents to the state, which the state will review, according to the bill, “to determine whether such documents will enable the captive insurance company to comply with the applicable insurance laws of [the] state.” Now, captive insurance companies can be formed as manager-managed limited liability companies rather than just as the stock and mutual insurers mentioned above.

In regards to the certificate issuance process, the new bill simplifies the process by calling upon the Insurance Commissioner to “promptly issue” a certificate of authority to a captive once it has been found that all necessary documents have been filed properly. Previously, captives were required to provide additional resources that documented their capital or surplus as well as a certified financial statement. The Commissioner is still able to follow the older procedure, but the new procedure (which has been deemed the “default” procedure) allows the captive to receive its certificate before being required to provide said additional documentation.

There are a few additional restrictions placed upon “agency captive insurance companies”; they are restricted from reinsuring insurance risks or annuity contracts placed by the entity that owns the captive as well as contractual liabilities that have emerged as a result of service contracts or warranties sold by the owning entity. A captive must also receive prior written permission from the Commissioner prior to reinsuring selected risks.

The bill also introduced tax-related changes; under S.B. 173 risk retention group captive insurers now only pay direct premiums taxes for in-state coverage.

Finally, the law also added definitions for “formation documents”, “mutual insurer”, and “stock insurer” and amended the definitions for the following terms:

  • Affiliate
  • Agency captive insurance company
  • Association captive insurance company
  • Controlled unaffiliated business
  • Industrial insured captive insurance company
  • Parent
  • Risk retention group captive insurance company

About Caitlin Morgan

Caitlin Morgan provides a broad range of captive insurance solutions which we are happy to review with you in detail, and we are happy to help you determine whether a captive is right for your organization. Give us a call at (317) 575-4440 to learn more about our solutions.

Sources: Reinsurance Focus, Bloomberg