Connecticut Governor Ned Lamont, has signed into law Public Act 23-15, An Act Concerning Captive Insurance Companies, a groundbreaking piece of legislation aimed at bolstering the captive insurance industry in the state, the state said in a news release.
The bill, championed by Commissioner Andrew Mais of the Connecticut Insurance Department (CID), marks a significant milestone in advancing a business-friendly regulatory environment that encourages innovation and supports the growth of captives to provide more options for businesses to manage their risk.
Public Act 23-15 introduces several key changes to Connecticut’s captive insurance laws, offering increased support and flexibility for captives, owners, and service providers.
The legislation, which will become effective on October 1, 2023, introduces the following significant provisions:
Risk Management and Unprecedented Coverage: The newly enacted legislation revolutionizes risk management by allowing captives to accept and transfer risks through parametric contracts. This innovative approach offers businesses coverage for unique and hard-to-place risks. Parametric insurance contracts offer certainty for planning purposes as they will pay out a predetermined amount based on the intensity or occurrence of a specific event. This concept provides businesses with a more efficient and customized method to mitigate risks that are uncommon or challenging to insure through the traditional commercial market.
Streamlined Operations for Sponsored Captives: P.A. 23-15 provides greater flexibility to sponsored captive protected cells enabling them to establish separate accounts to effectively address businesses’ specific insurance needs. This enhanced structure provides a comprehensive solution that aligns with the unique risk management needs of cell participants, while ensuring the protection of assets and liabilities within each account.
Dormancy Benefits for Captive Owners: This law provides benefits for owners of dormant captives. Captives that have stopped doing business and have no remaining liabilities can apply for a certificate of dormancy, resulting in exemption from paying Connecticut’s minimum premium tax. This exemption not only reduces the financial burden during inactive periods but also allows captives to be easily reactivated when market conditions or insurance needs change.
P.A. 23-15 builds upon previous legislative achievements from 2022, when the state implemented many other pro-captive laws, providing innovative solutions and increased flexibility for captives. These continued efforts have further positioned Connecticut as a leading domicile for captive insurance.
Connecticut’s achievements in the captive sector have garnered notable recognition through recent awards:
- Captive Review named Connecticut the Captive Domicile of the Year 2022 for written premiums under $5 billion.
- In its World Domicile Update for 2020 and 2021, Captive Review acknowledged Connecticut as the fastest-growing captive domicile.
- Connecticut experienced a 31% increase in captives in 2022 and is expected to maintain its position as leading domicile.
- Connecticut was honored as the 2022 Domicile of the Year by Captive International.
- Fenhua Liu, Captive Division Director, was featured on Captive Review’s Power 50 list in 2023, recognizing her influential role in the captive insurance sector.
Under Commissioner Andrew Mais’ and Assistant Deputy Commissioner Fenhua Liu’s leadership, CID has played a pivotal role in driving the success of Connecticut’s captive industry. The state has seen the emergence of four highly innovative InsurTechs/Managed General Agents (MGAs) forming captives in Connecticut, utilizing advanced technologies such as AI and blockchain to transfer risks or insure risks through parametric contracts.
“With the signing of P.A. 23-15 Connecticut reaffirms its commitment to maintaining a supportive and competitive captive insurance landscape. The new legislation, combined with the state’s recognized expertise, competence, and innovation, solidifies Connecticut’s position as a premier domicile for captives.” said Commissioner Mais.