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Senate File 424 - IntroducedA Bill ForAn Act 1relating to captive insurance companies, and including
2applicability provisions.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 432.1A Tax on premiums — captive
2insurance companies.
31. a. Each captive company under chapter 521J shall pay
4on or before March 1 of each year a tax on the direct premiums
5collected or contracted for on policies or contracts of
6insurance written by the captive company during the immediately
7preceding calendar year, after deducting from the direct
8premiums the amounts paid to policyholders as return premiums,
9including dividends on unabsorbed premiums or premium deposits
10returned or credited to policyholders.
11b. The tax due under paragraph “a” on direct premiums
12collected or contracted for by a captive company shall be
13calculated as follows:
14(1) Four-tenths percent on the first twenty million dollars
15of direct premiums.
16(2) Three-tenths percent on each dollar of direct premiums
17after the first twenty million dollars collected under
18subparagraph (1).
192. a. Each captive company under chapter 521J shall pay
20on or before March 1 of each year a tax on assumed reinsurance
21premiums. A reinsurance tax shall not apply to premiums for
22risks or portions of risks that are subject to taxation on a
23direct basis pursuant to subsection 1.
24b. A reinsurance premium tax shall not be payable by a
25captive company in connection with the receipt by the captive
26company of assets in exchange for the assumption of loss
27reserves and other liabilities of another insurer under common
28ownership and control if the transaction is part of a plan
29to discontinue the operations of the other insurer, and if
30the intent of the parties to the transaction is to renew or
31maintain the other insurer’s business with the captive company.
32c. The amount of reinsurance tax due from a captive company
33under paragraph “a” shall be calculated as follows:
34(1) Two hundred twenty-five ten-thousandths percent on the
35first twenty million dollars of assumed reinsurance premiums.
-1- 1(2) Fifteen-hundredths percent on the twenty million
2dollars of assumed reinsurance premiums collected after the
3first twenty million dollars of assumed reinsurance premiums
4collected under subparagraph (1).
5(3) Five percent on each dollar of assumed reinsurance
6premiums collected after the twenty millions dollars collected
7under subparagraph (1) and the twenty million dollars collected
8under subparagraph (2).
93. a. (1) Except as provided in subparagraphs (2) and
10(3), if the aggregate taxes as calculated under subsections
111 and 2 that are payable by a captive company are less than
12five thousand dollars for any one tax year, the captive company
13shall pay five thousand dollars in tax for that tax year.
14(2) If a captive company is subject to the minimum tax under
15subparagraph (1) in the calendar year in which the company is
16first granted a certificate of authority under section 521J.2,
17the tax shall be prorated as follows:
18(a) If a certificate of authority is first granted in the
19first quarter of the calendar year, the tax shall be five
20thousand dollars.
21(b) If a certificate of authority is first granted in the
22second quarter of the calendar year, the tax shall be three
23thousand seven hundred fifty dollars.
24(c) If a certificate of authority is first granted in
25the third quarter of the calendar year, the tax shall be two
26thousand five hundred dollars.
27(d) If a certificate of authority is first granted in the
28fourth quarter of the calendar year, the tax shall be one
29thousand five hundred dollars.
30(3) If a captive company that is subject to the minimum tax
31under subparagraph (1) surrenders the company’s certificate of
32authority in the year that the captive company is subject to
33the minimum tax, the tax shall be prorated on a quarterly basis
34as follows:
35(a) If the certificate of authority is surrendered in
-2-1the first quarter of the calendar year, the tax shall be one
2thousand dollars.
3(b) If the certificate of authority is surrendered in the
4second quarter of the calendar year, the tax shall be two
5thousand five hundred dollars.
6(c) If the certificate of authority is surrendered in the
7third quarter of the calendar year, the tax shall be three
8thousand seven hundred fifty dollars.
9(d) If the certificate of authority is surrendered in the
10fourth quarter of the calendar year, the tax shall be five
11thousand dollars.
12b. Each protected cell in a protected cell captive company
13shall be considered separately in determining the aggregate
14tax to be paid by the protected cell captive company. If the
15protected cell captive company insures any risks in addition
16to the protected cells, the determination of the aggregate tax
17shall, in addition to the protected cells, also include the
18premium on all insured risks.
19c. Each series of members of a limited liability company
20formed as a special purpose captive company shall be considered
21separately under this section, except that the minimum tax as
22described in paragraph “a” shall be considered in the aggregate.
234. Under this section, a captive company, other than a
24protected cell captive company, shall not be required to pay
25aggregate taxes that exceed one hundred thousand dollars in any
26one tax year.
275. Two or more captive companies under common ownership
28and control shall be taxed as a single captive company. For
29the purposes of this subsection, “common ownership and control”
30means either of the following:
31a. In the case of a stock corporation, the direct or
32indirect ownership of eighty percent or more of the outstanding
33voting stock of two or more corporations by the same
34shareholder or shareholders.
35b. In the case of a mutual insurer, the direct or indirect
-3-1ownership of eighty percent or more of the surplus, and the
2voting power of two or more insurers, by the same member or
3members.
46. Only the branch business of a branch captive company
5shall be subject to taxation under this section.
67. The tax provided for in this section shall be calculated
7on an annual basis notwithstanding a policy or a contract
8of insurance, or a contract of reinsurance, that is issued
9on a multiyear basis. In the case of a multiyear policy or
10a multiyear contract, the premium shall be prorated for the
11purpose of calculating the appropriate tax.
12 Sec. 2. Section 507C.3, Code 2023, is amended by adding the
13following new subsection:
14 NEW SUBSECTION. 8. Captive companies under chapter 521J.
15 Sec. 3. NEW SECTION. 521J.1 Definitions.
16As used in this chapter, unless the context otherwise
17requires:
181. “Affiliated company” means a company that is in the
19same corporate system as a parent, an industrial insured, or
20a member based on common ownership, control, operation, or
21management.
222. “Association” means a legal entity comprised of sole
23proprietorships or of business entities that has been in
24continuous existence for a minimum of one consecutive year,
25unless the one-year requirement is waived by the commissioner,
26and all of the members collectively, or the legal entity
27itself, meets either of the following requirements:
28a. Owns, controls, or holds with power to vote all of
29the outstanding voting securities of an association captive
30company incorporated as a stock insurer; or has complete voting
31control over an association captive company incorporated as a
32mutual insurer; or constitutes all of the subscribers of an
33association captive company formed as a reciprocal insurer.
34b. Owns, controls, or holds with power to vote all of the
35outstanding ownership interests of an association captive
-4-1company organized as a limited liability company.
23. “Association captive company” means an insurance company
3that insures risks of the association’s members and the risks
4of the association’s affiliated companies of members.
54. “Branch business” means any insurance business transacted
6by a branch captive company in this state.
75. “Branch captive company” means a foreign captive company
8authorized by the commissioner by rule to transact the business
9of insurance in this state through a business entity with a
10principal place of business in this state.
116. “Branch operations” means any business operations of a
12branch captive company.
137. “Business entity” means a corporation, a limited
14liability company, or other legal entity formed by an
15organizational document. “Business entity” does not include a
16sole proprietor.
178. “Captive company” means any pure insurance company,
18association captive company, protected cell captive company,
19special purpose captive company, or industrial insured captive
20company formed or authorized under this chapter.
219. “Captive reinsurance company” means a captive insurance
22company in this state, as authorized by the commissioner by
23rule, that reinsures the risk ceded by any other insurer.
2410. “Captive risk retention group” means a captive insurance
25risk retention group formed under this chapter and that is
26subject to chapter 515E.
2711. “Cash equivalent” means any short-term, highly liquid
28investment with an original maturity of three months or less
29that is all of the following:
30a. Readily convertible to known amounts of cash.
31b. Close enough to maturity that the investment presents
32insignificant risk of change in value if interest rates
33fluctuate.
3412. “Commissioner” means the commissioner of insurance.
3513. “Controlled unaffiliated business entity” means a
-5-1business entity or sole proprietorship that meets all of the
2following requirements:
3a. The business entity or sole proprietorship is not in a
4parent’s corporate system that consists of the parent and any
5affiliated companies.
6b. The business entity or sole proprietorship has an
7existing, controlling contractual relationship with the parent
8or an affiliated company.
9c. The business entity’s or sole proprietorship’s risks are
10managed by a pure captive insurance company.
1114. “Excess workers’ compensation insurance” means, for
12an employer that has insured or self-insured the employer’s
13workers’ compensation risks in accordance with applicable state
14or federal law, insurance in excess of a specified per-incident
15or aggregate limit as established by the commissioner by rule.
1615. “Foreign captive company” means a captive insurance
17company formed under the laws of a jurisdiction other than this
18state.
1916. “Industrial insured” means an insured that meets all of
20the following requirements:
21a. The insured procures the insurance of any risk by use
22of the services of a full-time employee acting as an insurance
23manager or buyer.
24b. The insured’s aggregate annual premiums for insurance on
25all risks are at least twenty-five thousand dollars.
26c. The insured employs a minimum of twenty-five full-time
27employees.
2817. “Industrial insured captive company” means an insurance
29company that insures the risks of the industrial insureds that
30is comprised of the industrial insured group and the industrial
31insured group’s affiliated companies.
3218. “Industrial insured group” means a group that meets
33either of the following requirements:
34a. The group collectively owns, controls, or holds with
35the power to vote all of the outstanding voting securities of
-6-1an industrial insured captive company incorporated as a stock
2insurer; or has complete voting control over an industrial
3insured captive company incorporated as a mutual insurer.
4b. The group is a captive risk retention group.
519. “Member” means a sole proprietorship or a business
6entity that belongs to an association.
720. “Mutual insurer” means a business entity that does not
8have capital stock, and that has a governing body elected by
9the insurer’s policyholders.
1021. “Organizational document” means articles of
11incorporation, articles of organization, a subscribers’
12agreement, a charter, or any other document that can legally
13establish a business entity in this state.
1422. “Parent” means a sole proprietorship, a business entity,
15or an individual that directly or indirectly owns, controls,
16or holds with power to vote more than fifty percent of the
17outstanding voting securities of a captive company.
1823. “Participant” means a sole proprietorship or a business
19entity and any affiliates that are insured by a protected cell
20captive company and whose losses are limited by a participant
21contract.
2224. “Participant contract” means a contract by which
23a protected cell captive company insures the risks of a
24participant and limits the losses of each participant in the
25contract to the participant’s share of the assets of one or
26more protected cells as identified in the participant contract.
2725. “Protected cell” means a separate account established
28by a protected cell captive company formed or authorized
29under this chapter, in which an identified pool of assets
30and liabilities are segregated and insulated, as provided in
31section 521J.17, from the remainder of the protected cell
32captive company’s assets and liabilities in accordance with
33the terms of one or more participant contracts to fund the
34liability of the protected cell captive company with respect to
35the participants.
-7- 126. “Protected cell assets” means all assets, contract
2rights, and general intangibles identified and attributable to
3a specific protected cell of a protected cell captive company.
427. “Protected cell captive company” means a captive company
5that meets all of the following requirements:
6a. The minimum legally required capital and surplus of the
7company is provided by one or more sponsors.
8b. The company is formed or authorized under this chapter.
9c. The company insures the risks of separate participants
10through participant contracts.
11d. The company funds the company’s liability to each
12participant through one or more protected cells, and segregates
13the assets of each protected cell from the assets of other
14protected cells, and from the assets of the protected cell
15captive company’s general account.
16e. The company is incorporated or formed as a limited
17liability company.
1828. “Protected cell liabilities” means all liabilities
19and other obligations identified with and attributable to a
20specific protected cell of a protected cell captive company.
2129. “Public records” means the same as defined in section
2222.1.
2330. “Pure captive company” means an insurance company that
24insures the risks of the company’s parent and the parent’s
25affiliated companies, and the risks of controlled unaffiliated
26business entities.
2731. “Series of members” means a group or collection of
28members of a limited liability company who share interests
29and who have separate rights, powers, or duties with respect
30to property, obligations, or profits and losses associated
31with property or obligations and who are specified in the
32articles of organization or operating agreement of the limited
33liability company, or that are specified by one or more members
34or managers of the limited liability company or other persons
35as provided in the articles of organization or operating
-8-1agreement.
232. “Sole proprietorship” means an individual who does
3business in a noncorporate form.
433. “Special purpose captive company” means a captive
5company that is formed or authorized under this chapter that
6does not meet the definition of any other type of captive
7company as defined in this section, or that is formed by, on
8behalf of, or for the benefit of a political subdivision of
9this state.
1034. “Sponsor” means an entity that meets the requirements
11of sections 521J.17 and 521J.18, and that is approved by the
12commissioner to do all of the following:
13a. Provide all or part of the capital and surplus required
14of a protected cell captive company by applicable law.
15b. Organize and operate a protected cell captive company.
16 Sec. 4. NEW SECTION. 521J.2 Certificate of authority.
171. If permitted by its organizational document, a captive
18company may apply to the commissioner for a certificate of
19authority to provide property insurance, casualty insurance,
20life insurance, disability income insurance, surety insurance,
21marine insurance, health insurance, or a group health plan,
22with the following exceptions:
23a. A pure captive company shall not insure any risks other
24than those of the company’s parent and affiliated companies,
25and of the company’s controlled unaffiliated business entities.
26b. An industrial insured captive company shall only insure
27risks of the industrial insured company, comprised of the
28industrial insured group and the industrial insured group’s
29affiliated companies.
30c. An association captive company shall not insure any risks
31other than those of the members or affiliated companies of
32members.
33d. A special purpose captive company shall not provide
34insurance or reinsurance for risks unless approved by the
35commissioner.
-9- 1e. A captive company or a branch captive company shall not
2do any of the following:
3(1) Provide personal lines of insurance, including but not
4limited to motor vehicle insurance, homeowner’s insurance,
5or any component of motor vehicle insurance or homeowner’s
6insurance.
7(2) Accept or cede reinsurance except as established by the
8commissioner by rule.
9(3) Provide health insurance coverage or a group health
10plan unless the captive company or the branch captive company
11is providing the health insurance coverage or the group health
12plan only for the parent company and the parent company’s
13affiliated companies.
14(4) Write workers’ compensation insurance on a direct
15basis.
16f. A protected cell captive company shall not insure any
17risks other than those of the protected cell captive company’s
18participants.
192. A captive company shall not write any insurance business
20unless the captive company complies with all of the following:
21a. The captive company first obtains a certificate of
22authority from the commissioner.
23b. The captive company’s board of directors, board of
24managing members, or a reciprocal insurer’s subscribers’
25advisory committee holds at least one annual meeting in this
26state.
27c. The captive company maintains its principal place of
28business in this state.
29d. The captive company designates a registered agent
30to accept service of process, files the name and contact
31information and any subsequent changes regarding the
32registered agent with the commissioner, and agrees that if the
33registered agent cannot be found with reasonable diligence,
34the commissioner may act as an agent of the captive company
35with respect to any action or proceeding and may be served in
-10-1accordance with section 505.30.
23. a. Prior to receiving a certificate of authority, a
3captive company formed as a business entity shall do all of the
4following:
5(1) File with the commissioner a certified copy of the
6business entity’s organizational documents, a statement under
7oath of an officer of the business entity showing the business
8entity’s financial condition, and any other statement or
9document required by the commissioner as established by rule.
10(2) Submit a description of coverages, deductibles,
11coverage limits, and rates to the commissioner for approval.
12(3) Provide a statement to the commissioner that describes
13all of the following:
14(a) The character, reputation, and financial standing of
15the organizers of the business entity.
16(b) The character, reputation, financial responsibility,
17insurance experience, and business qualifications of all
18officers, directors, and managing members of the business
19entity.
20(c) Any other information required by the commissioner as
21established by rule.
22b. If there is a subsequent material change in the
23information provided to the commissioner under paragraph
24“a”, the captive company shall submit appropriate supporting
25documentation to the commissioner for approval. The captive
26company shall not offer any additional lines of insurance until
27on or after the date on which the commissioner approves the
28supporting documentation. The captive company shall inform the
29commissioner of any change in rates within thirty calendar days
30of the captive company’s adoption of a change in rate.
31c. In addition to the information required under paragraphs
32“a” and “b”, each applicant captive company shall file with the
33commissioner evidence of all of the following:
34(1) The amount and liquidity of the captive company’s assets
35relative to the risks to be assumed by the captive company.
-11- 1(2) The adequacy of the expertise, experience, and
2character of the persons who will manage the captive company.
3(3) The overall soundness of the captive company’s plan of
4operation.
5(4) The adequacy of the loss prevention program of the
6captive company’s parent, members, or industrial insureds, as
7applicable.
8(5) Any other factors deemed relevant as established by
9the commissioner by rule to ascertain if the proposed captive
10company will be able to meet the company’s policy obligations.
11d. In addition to the information required under paragraph
12“a”, each applicant that is a protected cell captive company
13shall file with the commissioner all of the following:
14(1) A business plan that demonstrates at a level of detail
15deemed sufficient by the commissioner how the applicant will
16account for the loss and expense experience of each protected
17cell, and how the applicant will report the loss and expense
18experience to the commissioner.
19(2) A statement that acknowledges that all financial
20records of the protected cell captive company, including
21records pertaining to any protected cells, shall be made
22available, upon request, for inspection or examination by the
23commissioner or the commissioner’s designated agent.
24(3) A copy of each participant contract.
25(4) Evidence that expenses shall be allocated to each
26protected cell in a fair and equitable manner.
27e. In addition to the requirements of paragraph “a”, a
28captive company formed as a reciprocal insurer shall file with
29the commissioner a certified copy of the power of attorney of
30the reciprocal insurer’s attorney-in-fact, a certified copy of
31the reciprocal insurer’s subscribers’ agreement, a statement
32under oath of the reciprocal insurer’s attorney-in-fact that
33shows the reciprocal insurer’s financial condition, and any
34other statements or documents required by the commissioner as
35established by rule.
-12- 1f. All documents and information submitted pursuant to this
2subsection shall be confidential and shall not be made public
3without the advance written consent of the submitting company,
4with the following exceptions:
5(1) The documents and information shall be discoverable by
6a party in a civil action or in a contested case to which the
7captive company that submitted the information is a party upon
8a showing by the party seeking to discover the information that
9the information sought is relevant to, and necessary for, the
10furtherance of the action or case; the information sought is
11unavailable from other nonconfidential sources; and a subpoena
12issued by a judicial or an administrative officer has been
13submitted to the commissioner.
14(2) The commissioner may, in the commissioner’s discretion,
15disclose the documents and information to a public official
16having jurisdiction over the regulation of insurance in another
17state, or to a public official of the federal government,
18provided that the public official agrees in writing to maintain
19the confidentiality of the information, and that the laws of
20the state in which the public official serves require that the
21information remain confidential.
224. a. Each captive company, individual series of members
23of a limited liability company, and protected cell shall pay
24to the commissioner a nonrefundable fee of two hundred dollars
25for the examination, investigation, and processing of its
26application for a certificate of authority. The commissioner
27shall be authorized to retain legal, financial, and examination
28services from outside the department as necessary for review of
29the application, the reasonable cost of which may be charged
30to the applicant.
31b. (1) Chapter 507 shall apply to examinations conducted
32under this chapter.
33(2) Each captive insurance company, each individual series
34of members of a limited liability company, and each protected
35cell shall pay an initial registration fee, and an annual
-13-1renewal registration fee, of three hundred dollars.
25. If the commissioner is satisfied with the documents
3and statements that an applicant captive company has filed in
4compliance with this chapter, and the applicable provisions of
5Title XII, subtitle 1, the commissioner may grant a certificate
6of authority to the captive company that permits the company to
7do the business of insurance in this state. The certificate of
8authority may be renewed if the applicant is in compliance with
9this chapter and the certificate must be renewed annually.
10 Sec. 5. NEW SECTION. 521J.3 Captive companies — names.
11A captive company shall not adopt a name that is the same,
12deceptively similar, or likely to be confused with or mistaken
13for any other existing business name already registered in this
14state.
15 Sec. 6. NEW SECTION. 521J.4 Minimum capital and surplus
16requirements.
171. The commissioner shall not issue a certificate of
18authority to a captive company unless the captive company
19possesses and maintains unimpaired paid-in capital and surplus
20that meets the following requirements:
21a. Is not less than two hundred fifty thousand dollars for
22a pure captive company.
23b. Is not less than five hundred thousand dollars for an
24industrial insured captive company, including a captive risk
25retention group.
26c. Is not less than five hundred thousand dollars for an
27association captive company.
28d. Is an amount as determined by the commissioner after
29giving due consideration to the company’s business plan,
30feasibility study, and pro forma documents, including the
31nature of the risks to be insured, for a special purpose
32captive company.
33e. Is not less than five hundred thousand dollars for a
34protected cell captive company. If, however, the protected
35cell captive company does not assume any risks, the risks
-14-1insured by the protected cells are homogenous, and if there are
2not more than ten cells, the commissioner may reduce the amount
3to an amount not less than two hundred fifty thousand dollars.
4f. Is not less than the applicable amount of capital and
5surplus required in paragraphs “a” through “e”, as determined
6based upon the organizational form of the foreign captive
7company, for a branch captive company. The minimum capital
8and surplus shall be jointly held by the commissioner and the
9branch captive company in a bank of the federal reserve system
10as approved by the commissioner by rule.
11g. Is not less than fifty percent of the capital required
12for that type of captive company for a captive reinsurance
13company.
142. The commissioner may require additional capital and
15surplus for a captive company under subsection 1 based upon the
16type, volume, and nature of the insurance business transacted
17by the captive company.
183. The capital and surplus required under subsection 1 and
19subsection 2, if applicable, shall be in the form of cash,
20cash equivalent, or an irrevocable letter of credit on a form
21as prescribed by the commissioner by rule and as issued by
22a bank chartered by the state of Iowa, a member bank of the
23federal reserve system, or a bank chartered by another state if
24approved by the commissioner.
25 Sec. 7. NEW SECTION. 521J.5 Captive companies — formation.
261. A captive company must be formed or organized as a
27business entity as provided under this chapter.
282. An association captive company, or an industrial insured
29captive company, shall be formed or organized in one of the
30following ways:
31a. Incorporated as a stock insurer with the stock insurer’s
32capital divided into shares and held by the stockholders.
33b. Incorporated as a mutual insurer without capital stock,
34the governing body of which is elected by the members of the
35mutual insurer’s association or associations.
-15- 1c. Organized as a reciprocal insurer as permitted by the
2commissioner by rule.
3d. Organized as a manager-managed limited liability company.
43. A captive company incorporated or organized in this state
5shall be incorporated or organized by at least one incorporator
6or organizer who is a resident of this state.
74. The capital stock of a captive company incorporated as a
8stock insurer may be authorized with no par value.
95. a. At least one of the members of the board of directors
10of a captive company shall be a resident of this state. A
11captive risk retention group shall have a minimum of five
12directors.
13b. A captive company formed as a limited liability company
14shall have at least one manager who is a resident of the state.
15A captive risk retention group formed as a limited liability
16company shall not be required to have a manager who is a
17resident of this state; however, the company shall maintain a
18board of directors of which at least one board member shall be
19a resident of this state.
20c. A reciprocal insurer shall have at least one member
21of the subscribers’ advisory committee who is a resident
22of this state. A captive risk retention group formed as a
23reciprocal insurer shall have a minimum of five members of
24the subscribers’ advisory committee who are residents of this
25state.
266. a. A captive company formed as a corporation or another
27business entity shall have the privileges of, and shall be
28subject to, state laws governing corporations or other business
29entities, and the applicable provisions of this chapter.
30b. In the event of a conflict between a state law governing
31corporations or other business entities and this chapter, this
32chapter shall control.
337. a. A subscribers’ agreement, or other organizing
34document of a captive company formed as a reciprocal insurer,
35shall authorize a quorum of a subscribers’ advisory committee
-16-1to consist of at least one-third of the number of members on
2the advisory committee.
3b. In addition to this chapter, a captive risk retention
4group shall be subject to chapter 515E. In the event of a
5conflict between chapter 515E and this chapter, this chapter
6shall prevail.
78. Except as provided in section 521J.11, applicable
8provisions of chapter 508B shall apply to a merger,
9consolidation, conversion, mutualization, or voluntary
10dissolution by a captive company.
119. a. A foreign captive company must apply to the secretary
12of state for a certificate of authority for the foreign captive
13company’s branch captive company to transact business in this
14state.
15b. A branch captive company established under this chapter
16to write, in this state, only insurance or reinsurance of the
17employee benefit business of the branch captive company’s
18parent and affiliated companies shall be subject to the federal
19Employee Retirement Income Security Act of 1974, 29 U.S.C.
20§1001, et seq.
21c. A branch captive company shall not do any insurance
22business in this state unless the branch captive company
23maintains the principal place of business for the company’s
24branch operations in this state.
25 Sec. 8. NEW SECTION. 521J.6 Dividends.
261. A captive company shall not pay a dividend out of, or
27other distribution with respect to, the minimum capital or
28surplus required under section 521J.4 without the prior written
29approval of the commissioner.
302. The commissioner’s approval of an ongoing plan for
31the payment of dividends or other distributions shall be
32conditioned upon retention, at the time of each payment, of
33capital surplus in excess of the amounts specified by, or
34determined in accordance with, a formula as approved by the
35commissioner by rule.
-17-1 Sec. 9. NEW SECTION. 521J.7 Reports.
21. A captive company shall be required to file an annual
3report with the commissioner under the following circumstances:
4a. Except as provided in paragraph “b”, on or before April
51 of each year, each captive company and each captive risk
6retention group shall submit to the commissioner a report on
7the company’s financial condition, in a form and manner as
8prescribed by the commissioner by rule, and as verified by oath
9of two of the company’s or group’s executive officers.
10b. A captive company, other than a captive risk retention
11group, may apply to the commissioner to file the report
12required under paragraph “a” on a fiscal year-end basis. If
13the commissioner grants the captive company an alternative
14reporting date, the company shall comply with all of the
15following requirements:
16(1) Subject to subparagraph (2), the report shall be filed
17no later than ninety calendar days after the close of the
18company’s fiscal year.
19(2) A report covering the immediately preceding calendar
20year shall be filed with the commissioner prior to April 1 of
21each year to provide sufficient information to support the
22captive company’s premium tax return under section 432.1A.
23c. Each captive company shall use generally accepted
24accounting principles, unless the commissioner requires the use
25of statutory accounting principles, for the company’s report.
26The report may include letters of credit that are established,
27issued, or confirmed by a bank chartered in this state, a
28member of the federal reserve system, or a bank chartered by
29another state if acceptable to the commissioner.
30d. On or before April 1 of each year, each branch captive
31company shall submit to the commissioner a copy of all reports
32required to be filed under the laws of the branch captive
33company’s domiciliary jurisdiction, and as verified by oath of
34two of the branch captive company’s executive officers. If the
35commissioner is satisfied that the annual report filed by the
-18-1foreign branch captive company in the company’s domiciliary
2jurisdiction provides adequate information concerning the
3financial condition of the branch captive company, the
4commissioner may waive the requirement for completion of
5the branch captive insurance company’s annual statement for
6business written in the foreign jurisdiction.
72. All reports filed pursuant to this section shall be
8considered confidential and shall not be a public record under
9chapter 22.
10 Sec. 10. NEW SECTION. 521J.8 Examinations.
111. a. Except for captive risk retention groups as provided
12under paragraph “b”, the commissioner may examine the affairs,
13transactions, accounts, records, and assets of each captive
14company as the commissioner deems necessary.
15b. The commissioner shall examine the affairs, transactions,
16accounts, records, and assets of each captive risk retention
17group as the commissioner deems necessary, but no less
18frequently than every five calendar years.
192. A report produced pursuant to the examination of a
20captive risk retention group under this section shall be a
21public record.
223. Except as provided in subsection 4, this section shall
23apply to all business written by a captive company.
244. A branch captive company examination shall only be
25conducted on the branch business and branch operations if
26the branch captive company has satisfied the requirements
27of section 521J.7, subsection 1, paragraph “d”, to the
28satisfaction of the commissioner.
295. As a condition of authorization of a branch captive
30company, the foreign captive company shall grant authority to
31the commissioner for examination of the affairs of the foreign
32captive company in the foreign captive company’s domiciliary
33jurisdiction.
346. The applicable provisions of chapter 507 shall apply to
35examinations conducted under this chapter.
-19-1 Sec. 11. NEW SECTION. 521J.9 Suspension or revocation.
21. A captive company’s certificate of authority to conduct
3the business of insurance in this state may be suspended by the
4commissioner for any of the following reasons:
5a. Insolvency or impairment of capital or surplus.
6b. Failure to meet and maintain the minimum capital and
7surplus requirements under section 521J.4.
8c. Refusal or failure to submit an annual report pursuant
9to section 521J.7, or to submit any other report or statement
10required by law or by lawful order of the commissioner.
11d. Failure to comply with the captive company’s own charter,
12bylaws, or other organizational document.
13e. Failure to submit to an examination as required under
14section 521J.8.
15f. Use of methods that render the captive company’s
16operation detrimental, or the company’s condition unsound, with
17respect to the public or to the company’s policyholders.
18g. Failure to pay tax on premiums as required under chapter
19432.1A.
20h. Failure to comply with applicable laws of this state.
212. a. If the commissioner finds upon examination, hearing,
22or other review that a captive company has committed an
23act specified in subsection 1, the commissioner may suspend
24or revoke the company’s certificate of authority if the
25commissioner deems it in the best interest of the public or of
26the policyholders of the captive company.
27b. If the commissioner does not revoke a captive company’s
28certificate of authority during a suspension imposed by the
29commissioner under paragraph “a”, the company’s certificate of
30authority may be reinstated if the commissioner finds that the
31cause of the suspension has been rectified.
32 Sec. 12. NEW SECTION. 521J.10 Excess workers’ compensation
33insurance.
341. A captive company may provide excess workers’
35compensation insurance to the captive company’s parent and
-20-1affiliated companies unless the laws of the state that has
2jurisdiction over the transaction prohibits the captive company
3from providing excess workers’ compensation insurance.
42. A captive company may reinsure workers’ compensation of
5a qualified self-insured plan of the captive company’s parent
6and affiliated companies.
7 Sec. 13. NEW SECTION. 521J.11 Captive mergers.
81. A merger between captive stock insurers, or a merger
9between captive mutual insurers, shall meet the requirements
10of chapter 521 and section 521J.5, as applicable. The
11commissioner may, at the commissioner’s discretion, provide
12notice to the public of a proposed merger prior to approval or
13disapproval of a merger.
142. An association captive company, or an industrial insured
15group formed as a stock insurer or as a mutual insurer, may be
16converted to or merged with a reciprocal insurer under this
17section.
183. A plan for conversion or merger shall meet all of the
19following requirements:
20a. (1) The plan shall be fair and equitable to the
21shareholders in the case of a stock insurer, or to the
22policyholders in the case of a mutual insurer.
23(2) The plan shall provide for the purchase of the shares
24of any nonconsenting shareholder of a stock insurer, or of the
25policyholder interests of any nonconsenting policyholder of a
26mutual insurer.
27b. A plan for conversion to a reciprocal insurer must be
28approved by the commissioner. The commissioner shall not
29approve a plan unless the plan meets all of the following
30requirements:
31(1) The plan provides for a hearing upon notice to the
32insurer, directors, officers, and stockholders or policyholders
33who have the right to appear at the hearing, unless the
34commissioner waives or modifies the requirements for the
35hearing.
-21- 1(2) (a) In the case of a stock insurer, the plan provides
2for the conversion of the existing stockholder interests into
3subscriber interests in the resulting reciprocal insurer
4proportionate to the existing stockholder interests, and is
5approved by a majority of the shareholders who are entitled to
6vote and who are represented at a regular or special meeting at
7which a quorum is present either in person or by proxy.
8(b) In the case of a mutual insurer, the plan provides
9for the conversion of the existing policyholder interests
10into subscriber interests in the resulting reciprocal insurer
11proportionate to the existing policyholder interests, and
12is approved by a majority of the voting interests of the
13policyholders who are represented at a regular or special
14meeting at which a quorum is present either in person or by
15proxy.
16(3) The plan meets the applicable requirements of section
17521J.5.
18c. If the commissioner approves a plan of conversion, the
19certificate of authority for the converting insurer shall be
20amended to state that the converting insurer is a reciprocal
21insurer. The conversion shall be effective and the corporate
22existence of the converting entity shall cease to exist on the
23date on which the amended certificate of authority is issued to
24the attorney-in-fact for the reciprocal insurer. The resulting
25reciprocal insurer shall file the articles of merger or the
26articles of conversion with the secretary of state.
27 Sec. 14. NEW SECTION. 521J.12 Captive insurance regulatory
28and supervision account.
291. A captive insurance regulatory and supervision account
30is established in the state general fund under the control
31of the division and moneys in the account shall be used to
32provide the financial means for the division to administer
33this chapter, and for the reimbursement of reasonable expenses
34incurred by the division to promote captive insurance in this
35state.
-22- 12. All fees, assessments, fines, and administrative
2penalties collected under this chapter shall be deposited in
3the captive insurance regulatory and supervision account.
43. All payments from the captive insurance regulatory
5and supervision account that are made for the maintenance of
6staff and associated expenses, including necessary contractual
7services, shall only be disbursed from the state treasury
8upon a warrant issued by the commissioner, after receipt by
9the commissioner of proper documentation regarding services
10rendered and expenses incurred.
114. The balance in the captive insurance regulatory and
12supervision account at the end of each fiscal year shall revert
13to the general fund.
14 Sec. 15. NEW SECTION. 521J.13 Legal investments.
151. a. Industrial insured captive companies, association
16captive companies, and captive risk retention groups shall
17comply with investment requirements as established by the
18commissioner by rule. The commissioner may approve the use of
19alternative reliable methods of valuation and rating.
20b. If a captive company’s admitted assets total less
21than five million dollars, the commissioner may approve an
22investment of up to twenty percent of the captive company’s
23admitted assets in rated credit instruments in any one
24investment that meets the requirements as established by the
25commissioner by rule.
262. A pure captive company, or a protected cell captive
27company, shall not be subject to any restrictions on allowable
28investments, except that the commissioner may prohibit or limit
29any investment that threatens the solvency or liquidity of the
30pure captive company.
313. Any captive company may make loans to any of the captive
32company’s affiliates with prior written approval of the
33commissioner, and each loan must be evidenced by a note in a
34form as approved by the commissioner by rule. Loans made from
35minimum capital and surplus funds required by section 521J.4
-23-1are prohibited.
2 Sec. 16. NEW SECTION. 521J.14 Reinsurance.
31. Subject to the prior approval of the commissioner, a
4captive company may provide reinsurance on risks ceded by any
5other insurer.
62. Any captive company may take credit for reserves on
7risks, or portions of risks, ceded to reinsurers as provided
8under chapter 521B.
9 Sec. 17. NEW SECTION. 521J.15 Rating organizations.
10A captive company shall not be required to join a rating
11organization.
12 Sec. 18. NEW SECTION. 521J.16 Compulsory organizations.
13A captive company shall not join or contribute financially
14to any plan, pool, association, or guaranty or insolvency fund
15in this state; and a captive company, a captive company’s
16insureds, a captive company’s parent, any company affiliated
17with a captive company, and any member of an association shall
18not receive any benefit from a plan, pool, association, or
19guaranty or insolvency fund for claims arising out of the
20operations of the captive company.
21 Sec. 19. NEW SECTION. 521J.17 Protected cell captive
22companies.
231. One or more sponsors may form a protected cell captive
24company.
252. A protected cell captive company formed or authorized
26under this chapter shall be subject to all of the following
27requirements:
28a. (1) A protected cell captive company may establish one
29or more protected cells subject to the prior written approval
30of the commissioner of a plan of operation submitted by the
31protected cell captive company for each protected cell. The
32plan of operation shall include but is not limited to the
33specific business objectives and investment guidelines of the
34protected cell.
35(2) Upon the commissioner’s approval of the protected cell
-24-1captive company’s plan of operation, the company, in accordance
2with the approved plan of operation, may attribute insurance
3obligations with respect to its insurance business to the
4protected cell.
5(3) A protected cell captive company shall transfer
6all assets attributable to a protected cell to one or more
7separately established and separately identified protected cell
8accounts bearing the name or designation of that protected
9cell. Each protected cell shall have a distinct name or
10designation that must include the words “protected cell”.
11Protected cell assets shall be held in the protected cell
12accounts for the purpose of satisfying the obligations of the
13specific protected cell.
14(4) Each protected cell must be incorporated. An
15incorporated protected cell may be organized and operated
16in any form of business organization as authorized by the
17commissioner by rule. Each protected cell of a protected
18cell captive company shall be treated as a captive insurance
19company under this chapter, except that the limit on maximum
20yearly aggregate taxes paid under section 432.1A, subsection 4,
21shall not apply. Unless otherwise permitted by the articles of
22incorporation or other organizational document of a protected
23cell captive company, each protected cell of the protected cell
24captive company must have the same directors, secretary, and
25registered office as the protected cell captive company.
26b. All attributions of assets and liabilities between a
27protected cell and the protected cell captive company’s general
28account shall be in accordance with the plan of operation and
29the participant contracts as approved by the commissioner. No
30other attribution of assets and liabilities shall be made by
31a protected cell captive company between the protected cell
32captive company’s general account and the company’s protected
33cells. Any attribution of assets and liabilities between the
34general account and a protected cell shall be in cash or in
35readily marketable securities with established market values.
-25- 1c. The establishment of a protected cell shall create, with
2respect to that protected cell, a legal person separate from
3the protected cell captive company. Amounts attributed to a
4protected cell under this chapter, including assets transferred
5to a protected cell account, shall be owned by the protected
6cell and the protected cell captive company shall not be a
7trustee, or hold itself out to be a trustee, with respect
8to the protected cell assets of that protected cell account.
9A protected cell captive company may allow for a security
10interest to attach to protected cell assets or to a protected
11cell account if the security interest is in favor of a creditor
12of the protected cell and is otherwise allowed under applicable
13law.
14d. A protected cell captive company may contract with or
15arrange for an investment adviser, commodity trading adviser,
16or other third party to manage the protected cell assets of
17a protected cell if all remuneration, expenses, and other
18compensation of the third party are paid from the protected
19cell assets of that protected cell, and not from the protected
20cell assets of other protected cells or the assets of the
21protected cell captive company’s general account.
22e. (1) A protected cell captive company shall establish
23the administrative and accounting procedures necessary to
24properly identify each protected cell of the protected cell
25captive company, and the protected cell assets and protected
26cell liabilities attributable to each protected cell. The
27directors of a protected cell captive company shall do all of
28the following:
29(a) Maintain the assets and liabilities of protected cells
30separately, and separately identifiable, from the assets and
31liabilities of the protected cell captive company’s general
32account.
33(b) Maintain protected cell assets and protected cell
34liabilities attributable to one protected cell separate,
35and separately identifiable, from protected cell assets and
-26-1protected cell liabilities attributable to another protected
2cell.
3(2) If a protected cell captive company fails to comply with
4subparagraph (1), the remedy of tracing shall be applicable to
5protected cell assets commingled with protected cell assets of
6other protected cells, or commingled with the assets of the
7protected cell captive company’s general account. The remedy
8of tracing shall not be the exclusive remedy.
9f. When establishing a protected cell, a protected cell
10captive company shall attribute assets with a value at least
11equal to the reserves attributed to that protected cell to the
12protected cell.
133. Each protected cell shall be accounted for separately
14on the books and records of the protected cell captive company
15to reflect the financial condition and result of operations of
16the protected cell, including but not limited to the net income
17or loss, dividends or other distributions to participants, and
18any other factor provided in the participant contract or as
19required by the commissioner by rule.
204. The assets of a protected cell shall not be chargeable
21with liabilities arising from any other insurance business of
22the protected cell captive company.
235. A sale, exchange, or other transfer of assets shall
24not be made by a protected cell captive company among any
25of the company’s protected cells without the consent of the
26participants of each affected protected cell.
276. A sale, exchange, transfer of assets, dividend, or
28distribution shall not be made from a protected cell to a
29sponsor or to a participant without the commissioner’s prior
30written approval, which shall not be given if the sale,
31exchange, transfer, dividend, or distribution will result in
32the insolvency or impairment of the protected cell.
337. A protected cell captive company shall annually file
34with the commissioner any financial reports required by the
35commissioner as established by rule, and shall include, without
-27-1limitation, accounting statements detailing the finances of
2each protected cell.
38. A protected cell captive company shall notify the
4commissioner in writing within twenty business days from the
5date that a protected cell has become impaired or insolvent, or
6is otherwise unable to meet its claim or expense obligations.
79. A participant contract shall not take effect without the
8commissioner’s prior written approval.
910. An addition of any new protected cell, or the withdrawal
10of any participant of an existing protected cell, shall
11constitute a change in the business plan of the protected cell
12captive company and the change shall not become effective
13without the prior written approval of the commissioner.
1411. With respect to each protected cell, business written
15by a protected cell captive company shall be fronted by an
16insurance company authorized under the laws of any state, or as
17approved by the commissioner.
1812. If a protected cell captive company’s business is
19reinsured, with respect to each protected cell, the protected
20cell captive company shall comply with at least one of the
21following requirements:
22a. The business shall be reinsured by a reinsurer authorized
23or approved by the commissioner.
24b. The business shall be secured by a trust fund that is
25located in the United States for the benefit of policyholders
26and claimants, and which is funded by an irrevocable letter of
27credit or other asset that is acceptable to the commissioner,
28and that is subject to all of the following:
29(1) The amount of security provided by the trust fund shall
30not be less than the reserves associated with the liabilities
31that are not fronted or reinsured, including but not limited
32to reserves for losses that are allocated for loss adjustment
33expenses, incurred but not reported losses, and unearned
34premiums for business written through the participant’s
35protected cell.
-28- 1(2) The commissioner may require the protected cell captive
2company to increase the funding of any trust.
3(3) If the form of security in the trust is a letter of
4credit, the letter of credit shall be established, issued, or
5confirmed by a bank chartered in this state, a member of the
6federal reserve system, or a bank chartered by another state if
7the bank is approved by the commissioner.
8(4) The commissioner shall approve the form and terms of the
9trust and trust instrument.
10 Sec. 20. NEW SECTION. 521J.18 Sponsors — qualifications.
11A sponsor of a protected cell captive company must
12be an insurer authorized under the laws of any state, a
13reinsurer authorized under the laws of any state, a captive
14insurance company formed or authorized under this chapter, an
15insurance producer licensed in this state and approved by the
16commissioner, or any other person approved by the commissioner.
17 Sec. 21. NEW SECTION. 521J.19 Delinquency.
18If delinquency proceedings are initiated against a protected
19cell captive company, the assets of a protected cell shall
20not be used to pay any expenses other than those attributable
21to the protected cell, and the capital and surplus of the
22protected cell captive company shall be available at all times
23to pay expenses of, or claims against, the protected cell
24captive company.
25 Sec. 22. NEW SECTION. 521J.20 Participants.
26Individuals, business entities, and sponsors may be a
27participant in a protected cell captive company. A participant
28shall not be required to be a shareholder of a protected cell
29captive company or of the protected cell captive company’s
30affiliate.
31 Sec. 23. NEW SECTION. 521J.21 Investments — combined
32assets.
33The assets of two or more protected cells may be combined
34for the purpose of investment by a protected cell captive
35company, and combining the protected cells’ assets shall not
-29-1be construed as defeating the segregation of the assets for
2accounting or any other purpose.
3 Sec. 24. NEW SECTION. 521J.22 Dormant captive companies.
41. As used in this section, “dormant captive company” means
5a captive company, other than a captive risk retention group,
6that meets all of the following:
7a. The captive company has ceased transacting the business
8of insurance, including the issuance of insurance policies.
9b. The captive company does not have any remaining
10liabilities associated with its insurance business transactions
11or insurance policies issued prior to the captive company’s
12filing of an application for a certificate of dormancy under
13subsection 2.
142. Any captive company that is domiciled in this state and
15that complies with this section may apply to the commissioner
16for a certificate of dormancy. A certificate of dormancy shall
17be subject to expiration on or after five calendar years from
18the date that the certificate is issued, and the commissioner
19shall not renew a certificate of dormancy.
203. a. A captive company that has been issued a certificate
21of dormancy shall comply with all of the following:
22(1) The dormant captive company shall possess and maintain
23unimpaired, paid-in capital and surplus of not less than
24twenty-five thousand dollars.
25(2) Within ninety calendar days of the dormant captive
26company’s fiscal year end, the company shall annually submit to
27the commissioner a report on the company’s financial condition,
28verified by oath of two of the company’s executive officers, in
29the form and manner as established by the commissioner by rule.
30(3) The dormant captive company shall pay a one thousand
31dollar dormancy tax, due annually on or before March 1, if
32for any portion of the immediately preceding calendar year
33the captive company held a certificate of dormancy. Each
34series of members and each protected cell shall be considered
35separate for purposes of paying the annual dormancy tax under
-30-1a certificate of dormancy. A dormant captive company is not
2otherwise liable for any annual renewal as provided in section
3521J.2, subsection 4, paragraph “b”, subparagraph (2).
4b. A dormant captive insurance company that has been issued
5a certificate of dormancy shall not be subject to or liable
6for the payment of tax under section 432.1A, or be subject to
7examination under section 521J.8, from the date the certificate
8is issued through the date the certificate expires.
94. Prior to a dormant captive company issuing an
10insurance policy, the dormant captive company shall apply
11to the commissioner for approval to surrender the company’s
12certificate of dormancy and to resume conducting the business
13of insurance.
145. A dormant captive company’s certificate of dormancy
15shall be revoked if the company violates this section.
16 Sec. 25. NEW SECTION. 521J.23 Workers’ compensation —
17compliance with state and federal laws.
18This chapter shall not be construed to exempt a captive
19company, a captive company’s parent, or a captive company’s
20affiliated companies from compliance with applicable state and
21federal laws governing workers’ compensation insurance.
22 Sec. 26. NEW SECTION. 521J.24 Rules.
23The commissioner shall adopt rules pursuant to chapter 17A
24to implement and administer the provisions of this chapter.
25 Sec. 27. FUTURE REPEAL. Chapter 521G, Code 2023, is
26repealed effective January 1, 2025.
27 Sec. 28. APPLICABILITY. The following applies January 1,
282025, to protected cell captive companies formed, authorized,
29or continued on or after that date:
30The section of this Act enacting section 521J.17.
31EXPLANATION
32The inclusion of this explanation does not constitute agreement with
33the explanation’s substance by the members of the general assembly.
34This bill is related to captive insurance companies.
35“Captive company” is defined in the bill as any pure captive
-31-1insurance company, association captive insurance company,
2protected cell captive insurance company, special purpose
3captive insurance company, or industrial insured captive
4insurance company formed or authorized under the bill.
5The bill requires each captive company to pay on or before
6March 1 of each year a tax on the direct premiums collected or
7contracted for on policies or contracts of insurance written by
8the captive company during the immediately preceding calendar
9year, after making deductions from the direct premiums via
10methodology detailed in the bill to determine the appropriate
11tax that is due.
12The bill subjects captive companies to Code chapter 507C
13(insurers supervision, rehabilitation, and liquidation Act).
14The bill details the process for a captive company to
15apply to the commissioner of insurance (commissioner) for
16a certificate of authority to provide property insurance,
17casualty insurance, life insurance, disability income
18insurance, surety insurance, marine insurance, health
19insurance, or a group health plan, with exceptions as detailed
20in the bill.
21A captive company shall not adopt a name that is the same,
22deceptively similar, or likely to be confused with or mistaken
23for any other existing business name already registered in
24Iowa. A captive company is required to possess and maintain
25unimpaired paid-in capital and surplus that meets the
26requirements detailed in the bill.
27A captive company is required to be formed or organized
28as a business entity as provided under the bill. A captive
29company shall not pay a dividend out of, or other distribution
30with respect to, the minimum capital or surplus required to be
31maintained by the company without the prior written approval of
32the commissioner. Approval of an ongoing plan for the payment
33of dividends or other distributions shall be conditioned upon
34retention, at the time of each payment, of capital surplus in
35excess of the amounts specified by, or determined in accordance
-32-1with, a formula as approved by the commissioner.
2The bill requires a captive company to file an annual report
3with the commissioner in certain circumstances as detailed in
4the bill. Each captive company shall use generally accepted
5accounting principles, unless the commissioner requires the
6use of statutory accounting principles, for the company’s
7report. On or before April 1 of each year, each branch captive
8company shall submit to the commissioner a copy of all reports
9required to be filed under the laws of the foreign captive
10insurance company’s domiciliary jurisdiction, verified by oath
11of two of the foreign captive insurance company’s executive
12officers. All reports filed under the bill shall be considered
13confidential and shall not be a public record under Code
14chapter 22.
15The commissioner may examine the affairs, transactions,
16accounts, records, and assets of each captive company as
17detailed in the bill.
18A captive company’s certificate to conduct the business of
19insurance may be suspended by the commissioner for reasons as
20detailed in the bill.
21A captive company may provide excess workers’ compensation
22insurance to the captive company’s parent and affiliated
23companies, unless the laws of the state having jurisdiction
24over the transaction prohibit providing excess workers’
25compensation insurance. A captive company may reinsure
26workers’ compensation of a qualified self-insured plan of the
27captive insurance company’s parent and affiliated companies.
28A merger between captive stock insurers, or a merger
29between captive mutual insurers, must meet the applicable
30requirements of Code chapter 521 and of the bill, except that
31the commissioner may, at the commissioner’s discretion, provide
32notice to the public of the proposed merger prior to approval
33or disapproval of the merger.
34The bill establishes the captive insurance regulatory and
35supervision account (account) in the state general fund and
-33-1moneys in the account shall be used to provide the financial
2means for the insurance division to administer the bill, and
3for the reimbursement of reasonable expenses incurred by
4the insurance division to promote captive insurance in this
5state. All fees, assessments, fines, and administrative
6penalties collected under the bill shall be deposited in the
7account. All payments from the account that are made for
8the maintenance of staff and associated expenses, including
9necessary contractual services, shall only be disbursed from
10the state treasury upon a warrant issued by the commissioner.
11The balance in the account at the end of each fiscal year shall
12revert to the general fund.
13The bill requires that industrial insured captive companies,
14association captive companies, and captive risk retention
15groups comply with the investment requirements as established
16by the commissioner by rule. The commissioner may approve the
17use of alternative reliable methods of valuation and rating.
18If a captive company’s admitted assets total less than $5
19million the commissioner may approve an investment of up to
2020 percent of admitted assets in rated credit instruments in
21any one investment that meets the requirements as established
22by the commissioner by rule. A pure captive company, or a
23protected cell captive company, shall not be subject to any
24restrictions on allowable investments except as detailed in the
25bill.
26Subject to the prior approval of the commissioner, a captive
27company may provide reinsurance on risks ceded by any other
28insurer. Any captive company may take credit for reserves on
29risks or portions of risks ceded to reinsurers as provided
30under Code chapter 521B. A captive company shall not be
31required to join a rating organization. A captive company
32shall not join or contribute financially to any plan, pool,
33association, or guaranty or insolvency fund in this state.
34One or more sponsors may form a protected cell captive
35company and are subject to the requirements detailed in the
-34-1bill. A sponsor of a protected cell captive company shall be
2an insurer authorized under the laws of any state, a reinsurer
3authorized under the laws of any state, a captive company
4formed or authorized under the bill, an insurance producer
5licensed in this state and approved by the commissioner, or any
6other person approved by the commissioner.
7If delinquency proceedings have been initiated against a
8protected cell captive company, the assets of a protected
9cell shall not be used to pay any expenses other than those
10attributable to the protected cell, and the capital and surplus
11of the protected cell captive company shall be available at all
12times to pay expenses of, or claims against, the protected cell
13captive insurance company.
14Individuals, business entities, and sponsors may be
15participants in a protected cell captive company. A
16participant shall not be required to be a shareholder of
17a protected cell captive company or a shareholder of the
18protected cell captive company’s affiliate.
19The assets of two or more protected cells may be combined for
20the purposes of investment by a protected cell captive company
21and combining the assets shall not be construed as defeating
22the segregation of the protected cells’ assets for accounting
23or other purposes.
24The bill defines “dormant captive company” as a captive
25company, other than a captive risk retention group, that has
26ceased transacting the business of insurance, including the
27issuance of insurance policies, and that has no remaining
28liabilities associated with insurance business transactions or
29insurance policies issued prior to its filing of an application
30for a certificate of dormancy. The bill details the
31requirements for a captive company to apply for a certificate
32of dormancy.
33The bill shall not be construed to exempt a captive company,
34a captive company’s parent, or a captive company’s affiliated
35companies from compliance with applicable state and federal
-35-1laws governing workers’ compensation insurance.
2The commissioner shall adopt rules to implement and
3administer the bill.
4The bill repeals Code chapter 521G (protected cell
5companies) effective January 1, 2025.
6The section of the bill enacting Code section 521J.17
7applies to protected cell captive companies formed, authorized,
8or continued on or after January 1, 2025.
-36-ko/rn
2applicability provisions.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 432.1A Tax on premiums — captive
2insurance companies.
31. a. Each captive company under chapter 521J shall pay
4on or before March 1 of each year a tax on the direct premiums
5collected or contracted for on policies or contracts of
6insurance written by the captive company during the immediately
7preceding calendar year, after deducting from the direct
8premiums the amounts paid to policyholders as return premiums,
9including dividends on unabsorbed premiums or premium deposits
10returned or credited to policyholders.
11b. The tax due under paragraph “a” on direct premiums
12collected or contracted for by a captive company shall be
13calculated as follows:
14(1) Four-tenths percent on the first twenty million dollars
15of direct premiums.
16(2) Three-tenths percent on each dollar of direct premiums
17after the first twenty million dollars collected under
18subparagraph (1).
192. a. Each captive company under chapter 521J shall pay
20on or before March 1 of each year a tax on assumed reinsurance
21premiums. A reinsurance tax shall not apply to premiums for
22risks or portions of risks that are subject to taxation on a
23direct basis pursuant to subsection 1.
24b. A reinsurance premium tax shall not be payable by a
25captive company in connection with the receipt by the captive
26company of assets in exchange for the assumption of loss
27reserves and other liabilities of another insurer under common
28ownership and control if the transaction is part of a plan
29to discontinue the operations of the other insurer, and if
30the intent of the parties to the transaction is to renew or
31maintain the other insurer’s business with the captive company.
32c. The amount of reinsurance tax due from a captive company
33under paragraph “a” shall be calculated as follows:
34(1) Two hundred twenty-five ten-thousandths percent on the
35first twenty million dollars of assumed reinsurance premiums.
-1- 1(2) Fifteen-hundredths percent on the twenty million
2dollars of assumed reinsurance premiums collected after the
3first twenty million dollars of assumed reinsurance premiums
4collected under subparagraph (1).
5(3) Five percent on each dollar of assumed reinsurance
6premiums collected after the twenty millions dollars collected
7under subparagraph (1) and the twenty million dollars collected
8under subparagraph (2).
93. a. (1) Except as provided in subparagraphs (2) and
10(3), if the aggregate taxes as calculated under subsections
111 and 2 that are payable by a captive company are less than
12five thousand dollars for any one tax year, the captive company
13shall pay five thousand dollars in tax for that tax year.
14(2) If a captive company is subject to the minimum tax under
15subparagraph (1) in the calendar year in which the company is
16first granted a certificate of authority under section 521J.2,
17the tax shall be prorated as follows:
18(a) If a certificate of authority is first granted in the
19first quarter of the calendar year, the tax shall be five
20thousand dollars.
21(b) If a certificate of authority is first granted in the
22second quarter of the calendar year, the tax shall be three
23thousand seven hundred fifty dollars.
24(c) If a certificate of authority is first granted in
25the third quarter of the calendar year, the tax shall be two
26thousand five hundred dollars.
27(d) If a certificate of authority is first granted in the
28fourth quarter of the calendar year, the tax shall be one
29thousand five hundred dollars.
30(3) If a captive company that is subject to the minimum tax
31under subparagraph (1) surrenders the company’s certificate of
32authority in the year that the captive company is subject to
33the minimum tax, the tax shall be prorated on a quarterly basis
34as follows:
35(a) If the certificate of authority is surrendered in
-2-1the first quarter of the calendar year, the tax shall be one
2thousand dollars.
3(b) If the certificate of authority is surrendered in the
4second quarter of the calendar year, the tax shall be two
5thousand five hundred dollars.
6(c) If the certificate of authority is surrendered in the
7third quarter of the calendar year, the tax shall be three
8thousand seven hundred fifty dollars.
9(d) If the certificate of authority is surrendered in the
10fourth quarter of the calendar year, the tax shall be five
11thousand dollars.
12b. Each protected cell in a protected cell captive company
13shall be considered separately in determining the aggregate
14tax to be paid by the protected cell captive company. If the
15protected cell captive company insures any risks in addition
16to the protected cells, the determination of the aggregate tax
17shall, in addition to the protected cells, also include the
18premium on all insured risks.
19c. Each series of members of a limited liability company
20formed as a special purpose captive company shall be considered
21separately under this section, except that the minimum tax as
22described in paragraph “a” shall be considered in the aggregate.
234. Under this section, a captive company, other than a
24protected cell captive company, shall not be required to pay
25aggregate taxes that exceed one hundred thousand dollars in any
26one tax year.
275. Two or more captive companies under common ownership
28and control shall be taxed as a single captive company. For
29the purposes of this subsection, “common ownership and control”
30means either of the following:
31a. In the case of a stock corporation, the direct or
32indirect ownership of eighty percent or more of the outstanding
33voting stock of two or more corporations by the same
34shareholder or shareholders.
35b. In the case of a mutual insurer, the direct or indirect
-3-1ownership of eighty percent or more of the surplus, and the
2voting power of two or more insurers, by the same member or
3members.
46. Only the branch business of a branch captive company
5shall be subject to taxation under this section.
67. The tax provided for in this section shall be calculated
7on an annual basis notwithstanding a policy or a contract
8of insurance, or a contract of reinsurance, that is issued
9on a multiyear basis. In the case of a multiyear policy or
10a multiyear contract, the premium shall be prorated for the
11purpose of calculating the appropriate tax.
12 Sec. 2. Section 507C.3, Code 2023, is amended by adding the
13following new subsection:
14 NEW SUBSECTION. 8. Captive companies under chapter 521J.
15 Sec. 3. NEW SECTION. 521J.1 Definitions.
16As used in this chapter, unless the context otherwise
17requires:
181. “Affiliated company” means a company that is in the
19same corporate system as a parent, an industrial insured, or
20a member based on common ownership, control, operation, or
21management.
222. “Association” means a legal entity comprised of sole
23proprietorships or of business entities that has been in
24continuous existence for a minimum of one consecutive year,
25unless the one-year requirement is waived by the commissioner,
26and all of the members collectively, or the legal entity
27itself, meets either of the following requirements:
28a. Owns, controls, or holds with power to vote all of
29the outstanding voting securities of an association captive
30company incorporated as a stock insurer; or has complete voting
31control over an association captive company incorporated as a
32mutual insurer; or constitutes all of the subscribers of an
33association captive company formed as a reciprocal insurer.
34b. Owns, controls, or holds with power to vote all of the
35outstanding ownership interests of an association captive
-4-1company organized as a limited liability company.
23. “Association captive company” means an insurance company
3that insures risks of the association’s members and the risks
4of the association’s affiliated companies of members.
54. “Branch business” means any insurance business transacted
6by a branch captive company in this state.
75. “Branch captive company” means a foreign captive company
8authorized by the commissioner by rule to transact the business
9of insurance in this state through a business entity with a
10principal place of business in this state.
116. “Branch operations” means any business operations of a
12branch captive company.
137. “Business entity” means a corporation, a limited
14liability company, or other legal entity formed by an
15organizational document. “Business entity” does not include a
16sole proprietor.
178. “Captive company” means any pure insurance company,
18association captive company, protected cell captive company,
19special purpose captive company, or industrial insured captive
20company formed or authorized under this chapter.
219. “Captive reinsurance company” means a captive insurance
22company in this state, as authorized by the commissioner by
23rule, that reinsures the risk ceded by any other insurer.
2410. “Captive risk retention group” means a captive insurance
25risk retention group formed under this chapter and that is
26subject to chapter 515E.
2711. “Cash equivalent” means any short-term, highly liquid
28investment with an original maturity of three months or less
29that is all of the following:
30a. Readily convertible to known amounts of cash.
31b. Close enough to maturity that the investment presents
32insignificant risk of change in value if interest rates
33fluctuate.
3412. “Commissioner” means the commissioner of insurance.
3513. “Controlled unaffiliated business entity” means a
-5-1business entity or sole proprietorship that meets all of the
2following requirements:
3a. The business entity or sole proprietorship is not in a
4parent’s corporate system that consists of the parent and any
5affiliated companies.
6b. The business entity or sole proprietorship has an
7existing, controlling contractual relationship with the parent
8or an affiliated company.
9c. The business entity’s or sole proprietorship’s risks are
10managed by a pure captive insurance company.
1114. “Excess workers’ compensation insurance” means, for
12an employer that has insured or self-insured the employer’s
13workers’ compensation risks in accordance with applicable state
14or federal law, insurance in excess of a specified per-incident
15or aggregate limit as established by the commissioner by rule.
1615. “Foreign captive company” means a captive insurance
17company formed under the laws of a jurisdiction other than this
18state.
1916. “Industrial insured” means an insured that meets all of
20the following requirements:
21a. The insured procures the insurance of any risk by use
22of the services of a full-time employee acting as an insurance
23manager or buyer.
24b. The insured’s aggregate annual premiums for insurance on
25all risks are at least twenty-five thousand dollars.
26c. The insured employs a minimum of twenty-five full-time
27employees.
2817. “Industrial insured captive company” means an insurance
29company that insures the risks of the industrial insureds that
30is comprised of the industrial insured group and the industrial
31insured group’s affiliated companies.
3218. “Industrial insured group” means a group that meets
33either of the following requirements:
34a. The group collectively owns, controls, or holds with
35the power to vote all of the outstanding voting securities of
-6-1an industrial insured captive company incorporated as a stock
2insurer; or has complete voting control over an industrial
3insured captive company incorporated as a mutual insurer.
4b. The group is a captive risk retention group.
519. “Member” means a sole proprietorship or a business
6entity that belongs to an association.
720. “Mutual insurer” means a business entity that does not
8have capital stock, and that has a governing body elected by
9the insurer’s policyholders.
1021. “Organizational document” means articles of
11incorporation, articles of organization, a subscribers’
12agreement, a charter, or any other document that can legally
13establish a business entity in this state.
1422. “Parent” means a sole proprietorship, a business entity,
15or an individual that directly or indirectly owns, controls,
16or holds with power to vote more than fifty percent of the
17outstanding voting securities of a captive company.
1823. “Participant” means a sole proprietorship or a business
19entity and any affiliates that are insured by a protected cell
20captive company and whose losses are limited by a participant
21contract.
2224. “Participant contract” means a contract by which
23a protected cell captive company insures the risks of a
24participant and limits the losses of each participant in the
25contract to the participant’s share of the assets of one or
26more protected cells as identified in the participant contract.
2725. “Protected cell” means a separate account established
28by a protected cell captive company formed or authorized
29under this chapter, in which an identified pool of assets
30and liabilities are segregated and insulated, as provided in
31section 521J.17, from the remainder of the protected cell
32captive company’s assets and liabilities in accordance with
33the terms of one or more participant contracts to fund the
34liability of the protected cell captive company with respect to
35the participants.
-7- 126. “Protected cell assets” means all assets, contract
2rights, and general intangibles identified and attributable to
3a specific protected cell of a protected cell captive company.
427. “Protected cell captive company” means a captive company
5that meets all of the following requirements:
6a. The minimum legally required capital and surplus of the
7company is provided by one or more sponsors.
8b. The company is formed or authorized under this chapter.
9c. The company insures the risks of separate participants
10through participant contracts.
11d. The company funds the company’s liability to each
12participant through one or more protected cells, and segregates
13the assets of each protected cell from the assets of other
14protected cells, and from the assets of the protected cell
15captive company’s general account.
16e. The company is incorporated or formed as a limited
17liability company.
1828. “Protected cell liabilities” means all liabilities
19and other obligations identified with and attributable to a
20specific protected cell of a protected cell captive company.
2129. “Public records” means the same as defined in section
2222.1.
2330. “Pure captive company” means an insurance company that
24insures the risks of the company’s parent and the parent’s
25affiliated companies, and the risks of controlled unaffiliated
26business entities.
2731. “Series of members” means a group or collection of
28members of a limited liability company who share interests
29and who have separate rights, powers, or duties with respect
30to property, obligations, or profits and losses associated
31with property or obligations and who are specified in the
32articles of organization or operating agreement of the limited
33liability company, or that are specified by one or more members
34or managers of the limited liability company or other persons
35as provided in the articles of organization or operating
-8-1agreement.
232. “Sole proprietorship” means an individual who does
3business in a noncorporate form.
433. “Special purpose captive company” means a captive
5company that is formed or authorized under this chapter that
6does not meet the definition of any other type of captive
7company as defined in this section, or that is formed by, on
8behalf of, or for the benefit of a political subdivision of
9this state.
1034. “Sponsor” means an entity that meets the requirements
11of sections 521J.17 and 521J.18, and that is approved by the
12commissioner to do all of the following:
13a. Provide all or part of the capital and surplus required
14of a protected cell captive company by applicable law.
15b. Organize and operate a protected cell captive company.
16 Sec. 4. NEW SECTION. 521J.2 Certificate of authority.
171. If permitted by its organizational document, a captive
18company may apply to the commissioner for a certificate of
19authority to provide property insurance, casualty insurance,
20life insurance, disability income insurance, surety insurance,
21marine insurance, health insurance, or a group health plan,
22with the following exceptions:
23a. A pure captive company shall not insure any risks other
24than those of the company’s parent and affiliated companies,
25and of the company’s controlled unaffiliated business entities.
26b. An industrial insured captive company shall only insure
27risks of the industrial insured company, comprised of the
28industrial insured group and the industrial insured group’s
29affiliated companies.
30c. An association captive company shall not insure any risks
31other than those of the members or affiliated companies of
32members.
33d. A special purpose captive company shall not provide
34insurance or reinsurance for risks unless approved by the
35commissioner.
-9- 1e. A captive company or a branch captive company shall not
2do any of the following:
3(1) Provide personal lines of insurance, including but not
4limited to motor vehicle insurance, homeowner’s insurance,
5or any component of motor vehicle insurance or homeowner’s
6insurance.
7(2) Accept or cede reinsurance except as established by the
8commissioner by rule.
9(3) Provide health insurance coverage or a group health
10plan unless the captive company or the branch captive company
11is providing the health insurance coverage or the group health
12plan only for the parent company and the parent company’s
13affiliated companies.
14(4) Write workers’ compensation insurance on a direct
15basis.
16f. A protected cell captive company shall not insure any
17risks other than those of the protected cell captive company’s
18participants.
192. A captive company shall not write any insurance business
20unless the captive company complies with all of the following:
21a. The captive company first obtains a certificate of
22authority from the commissioner.
23b. The captive company’s board of directors, board of
24managing members, or a reciprocal insurer’s subscribers’
25advisory committee holds at least one annual meeting in this
26state.
27c. The captive company maintains its principal place of
28business in this state.
29d. The captive company designates a registered agent
30to accept service of process, files the name and contact
31information and any subsequent changes regarding the
32registered agent with the commissioner, and agrees that if the
33registered agent cannot be found with reasonable diligence,
34the commissioner may act as an agent of the captive company
35with respect to any action or proceeding and may be served in
-10-1accordance with section 505.30.
23. a. Prior to receiving a certificate of authority, a
3captive company formed as a business entity shall do all of the
4following:
5(1) File with the commissioner a certified copy of the
6business entity’s organizational documents, a statement under
7oath of an officer of the business entity showing the business
8entity’s financial condition, and any other statement or
9document required by the commissioner as established by rule.
10(2) Submit a description of coverages, deductibles,
11coverage limits, and rates to the commissioner for approval.
12(3) Provide a statement to the commissioner that describes
13all of the following:
14(a) The character, reputation, and financial standing of
15the organizers of the business entity.
16(b) The character, reputation, financial responsibility,
17insurance experience, and business qualifications of all
18officers, directors, and managing members of the business
19entity.
20(c) Any other information required by the commissioner as
21established by rule.
22b. If there is a subsequent material change in the
23information provided to the commissioner under paragraph
24“a”, the captive company shall submit appropriate supporting
25documentation to the commissioner for approval. The captive
26company shall not offer any additional lines of insurance until
27on or after the date on which the commissioner approves the
28supporting documentation. The captive company shall inform the
29commissioner of any change in rates within thirty calendar days
30of the captive company’s adoption of a change in rate.
31c. In addition to the information required under paragraphs
32“a” and “b”, each applicant captive company shall file with the
33commissioner evidence of all of the following:
34(1) The amount and liquidity of the captive company’s assets
35relative to the risks to be assumed by the captive company.
-11- 1(2) The adequacy of the expertise, experience, and
2character of the persons who will manage the captive company.
3(3) The overall soundness of the captive company’s plan of
4operation.
5(4) The adequacy of the loss prevention program of the
6captive company’s parent, members, or industrial insureds, as
7applicable.
8(5) Any other factors deemed relevant as established by
9the commissioner by rule to ascertain if the proposed captive
10company will be able to meet the company’s policy obligations.
11d. In addition to the information required under paragraph
12“a”, each applicant that is a protected cell captive company
13shall file with the commissioner all of the following:
14(1) A business plan that demonstrates at a level of detail
15deemed sufficient by the commissioner how the applicant will
16account for the loss and expense experience of each protected
17cell, and how the applicant will report the loss and expense
18experience to the commissioner.
19(2) A statement that acknowledges that all financial
20records of the protected cell captive company, including
21records pertaining to any protected cells, shall be made
22available, upon request, for inspection or examination by the
23commissioner or the commissioner’s designated agent.
24(3) A copy of each participant contract.
25(4) Evidence that expenses shall be allocated to each
26protected cell in a fair and equitable manner.
27e. In addition to the requirements of paragraph “a”, a
28captive company formed as a reciprocal insurer shall file with
29the commissioner a certified copy of the power of attorney of
30the reciprocal insurer’s attorney-in-fact, a certified copy of
31the reciprocal insurer’s subscribers’ agreement, a statement
32under oath of the reciprocal insurer’s attorney-in-fact that
33shows the reciprocal insurer’s financial condition, and any
34other statements or documents required by the commissioner as
35established by rule.
-12- 1f. All documents and information submitted pursuant to this
2subsection shall be confidential and shall not be made public
3without the advance written consent of the submitting company,
4with the following exceptions:
5(1) The documents and information shall be discoverable by
6a party in a civil action or in a contested case to which the
7captive company that submitted the information is a party upon
8a showing by the party seeking to discover the information that
9the information sought is relevant to, and necessary for, the
10furtherance of the action or case; the information sought is
11unavailable from other nonconfidential sources; and a subpoena
12issued by a judicial or an administrative officer has been
13submitted to the commissioner.
14(2) The commissioner may, in the commissioner’s discretion,
15disclose the documents and information to a public official
16having jurisdiction over the regulation of insurance in another
17state, or to a public official of the federal government,
18provided that the public official agrees in writing to maintain
19the confidentiality of the information, and that the laws of
20the state in which the public official serves require that the
21information remain confidential.
224. a. Each captive company, individual series of members
23of a limited liability company, and protected cell shall pay
24to the commissioner a nonrefundable fee of two hundred dollars
25for the examination, investigation, and processing of its
26application for a certificate of authority. The commissioner
27shall be authorized to retain legal, financial, and examination
28services from outside the department as necessary for review of
29the application, the reasonable cost of which may be charged
30to the applicant.
31b. (1) Chapter 507 shall apply to examinations conducted
32under this chapter.
33(2) Each captive insurance company, each individual series
34of members of a limited liability company, and each protected
35cell shall pay an initial registration fee, and an annual
-13-1renewal registration fee, of three hundred dollars.
25. If the commissioner is satisfied with the documents
3and statements that an applicant captive company has filed in
4compliance with this chapter, and the applicable provisions of
5Title XII, subtitle 1, the commissioner may grant a certificate
6of authority to the captive company that permits the company to
7do the business of insurance in this state. The certificate of
8authority may be renewed if the applicant is in compliance with
9this chapter and the certificate must be renewed annually.
10 Sec. 5. NEW SECTION. 521J.3 Captive companies — names.
11A captive company shall not adopt a name that is the same,
12deceptively similar, or likely to be confused with or mistaken
13for any other existing business name already registered in this
14state.
15 Sec. 6. NEW SECTION. 521J.4 Minimum capital and surplus
16requirements.
171. The commissioner shall not issue a certificate of
18authority to a captive company unless the captive company
19possesses and maintains unimpaired paid-in capital and surplus
20that meets the following requirements:
21a. Is not less than two hundred fifty thousand dollars for
22a pure captive company.
23b. Is not less than five hundred thousand dollars for an
24industrial insured captive company, including a captive risk
25retention group.
26c. Is not less than five hundred thousand dollars for an
27association captive company.
28d. Is an amount as determined by the commissioner after
29giving due consideration to the company’s business plan,
30feasibility study, and pro forma documents, including the
31nature of the risks to be insured, for a special purpose
32captive company.
33e. Is not less than five hundred thousand dollars for a
34protected cell captive company. If, however, the protected
35cell captive company does not assume any risks, the risks
-14-1insured by the protected cells are homogenous, and if there are
2not more than ten cells, the commissioner may reduce the amount
3to an amount not less than two hundred fifty thousand dollars.
4f. Is not less than the applicable amount of capital and
5surplus required in paragraphs “a” through “e”, as determined
6based upon the organizational form of the foreign captive
7company, for a branch captive company. The minimum capital
8and surplus shall be jointly held by the commissioner and the
9branch captive company in a bank of the federal reserve system
10as approved by the commissioner by rule.
11g. Is not less than fifty percent of the capital required
12for that type of captive company for a captive reinsurance
13company.
142. The commissioner may require additional capital and
15surplus for a captive company under subsection 1 based upon the
16type, volume, and nature of the insurance business transacted
17by the captive company.
183. The capital and surplus required under subsection 1 and
19subsection 2, if applicable, shall be in the form of cash,
20cash equivalent, or an irrevocable letter of credit on a form
21as prescribed by the commissioner by rule and as issued by
22a bank chartered by the state of Iowa, a member bank of the
23federal reserve system, or a bank chartered by another state if
24approved by the commissioner.
25 Sec. 7. NEW SECTION. 521J.5 Captive companies — formation.
261. A captive company must be formed or organized as a
27business entity as provided under this chapter.
282. An association captive company, or an industrial insured
29captive company, shall be formed or organized in one of the
30following ways:
31a. Incorporated as a stock insurer with the stock insurer’s
32capital divided into shares and held by the stockholders.
33b. Incorporated as a mutual insurer without capital stock,
34the governing body of which is elected by the members of the
35mutual insurer’s association or associations.
-15- 1c. Organized as a reciprocal insurer as permitted by the
2commissioner by rule.
3d. Organized as a manager-managed limited liability company.
43. A captive company incorporated or organized in this state
5shall be incorporated or organized by at least one incorporator
6or organizer who is a resident of this state.
74. The capital stock of a captive company incorporated as a
8stock insurer may be authorized with no par value.
95. a. At least one of the members of the board of directors
10of a captive company shall be a resident of this state. A
11captive risk retention group shall have a minimum of five
12directors.
13b. A captive company formed as a limited liability company
14shall have at least one manager who is a resident of the state.
15A captive risk retention group formed as a limited liability
16company shall not be required to have a manager who is a
17resident of this state; however, the company shall maintain a
18board of directors of which at least one board member shall be
19a resident of this state.
20c. A reciprocal insurer shall have at least one member
21of the subscribers’ advisory committee who is a resident
22of this state. A captive risk retention group formed as a
23reciprocal insurer shall have a minimum of five members of
24the subscribers’ advisory committee who are residents of this
25state.
266. a. A captive company formed as a corporation or another
27business entity shall have the privileges of, and shall be
28subject to, state laws governing corporations or other business
29entities, and the applicable provisions of this chapter.
30b. In the event of a conflict between a state law governing
31corporations or other business entities and this chapter, this
32chapter shall control.
337. a. A subscribers’ agreement, or other organizing
34document of a captive company formed as a reciprocal insurer,
35shall authorize a quorum of a subscribers’ advisory committee
-16-1to consist of at least one-third of the number of members on
2the advisory committee.
3b. In addition to this chapter, a captive risk retention
4group shall be subject to chapter 515E. In the event of a
5conflict between chapter 515E and this chapter, this chapter
6shall prevail.
78. Except as provided in section 521J.11, applicable
8provisions of chapter 508B shall apply to a merger,
9consolidation, conversion, mutualization, or voluntary
10dissolution by a captive company.
119. a. A foreign captive company must apply to the secretary
12of state for a certificate of authority for the foreign captive
13company’s branch captive company to transact business in this
14state.
15b. A branch captive company established under this chapter
16to write, in this state, only insurance or reinsurance of the
17employee benefit business of the branch captive company’s
18parent and affiliated companies shall be subject to the federal
19Employee Retirement Income Security Act of 1974, 29 U.S.C.
20§1001, et seq.
21c. A branch captive company shall not do any insurance
22business in this state unless the branch captive company
23maintains the principal place of business for the company’s
24branch operations in this state.
25 Sec. 8. NEW SECTION. 521J.6 Dividends.
261. A captive company shall not pay a dividend out of, or
27other distribution with respect to, the minimum capital or
28surplus required under section 521J.4 without the prior written
29approval of the commissioner.
302. The commissioner’s approval of an ongoing plan for
31the payment of dividends or other distributions shall be
32conditioned upon retention, at the time of each payment, of
33capital surplus in excess of the amounts specified by, or
34determined in accordance with, a formula as approved by the
35commissioner by rule.
-17-1 Sec. 9. NEW SECTION. 521J.7 Reports.
21. A captive company shall be required to file an annual
3report with the commissioner under the following circumstances:
4a. Except as provided in paragraph “b”, on or before April
51 of each year, each captive company and each captive risk
6retention group shall submit to the commissioner a report on
7the company’s financial condition, in a form and manner as
8prescribed by the commissioner by rule, and as verified by oath
9of two of the company’s or group’s executive officers.
10b. A captive company, other than a captive risk retention
11group, may apply to the commissioner to file the report
12required under paragraph “a” on a fiscal year-end basis. If
13the commissioner grants the captive company an alternative
14reporting date, the company shall comply with all of the
15following requirements:
16(1) Subject to subparagraph (2), the report shall be filed
17no later than ninety calendar days after the close of the
18company’s fiscal year.
19(2) A report covering the immediately preceding calendar
20year shall be filed with the commissioner prior to April 1 of
21each year to provide sufficient information to support the
22captive company’s premium tax return under section 432.1A.
23c. Each captive company shall use generally accepted
24accounting principles, unless the commissioner requires the use
25of statutory accounting principles, for the company’s report.
26The report may include letters of credit that are established,
27issued, or confirmed by a bank chartered in this state, a
28member of the federal reserve system, or a bank chartered by
29another state if acceptable to the commissioner.
30d. On or before April 1 of each year, each branch captive
31company shall submit to the commissioner a copy of all reports
32required to be filed under the laws of the branch captive
33company’s domiciliary jurisdiction, and as verified by oath of
34two of the branch captive company’s executive officers. If the
35commissioner is satisfied that the annual report filed by the
-18-1foreign branch captive company in the company’s domiciliary
2jurisdiction provides adequate information concerning the
3financial condition of the branch captive company, the
4commissioner may waive the requirement for completion of
5the branch captive insurance company’s annual statement for
6business written in the foreign jurisdiction.
72. All reports filed pursuant to this section shall be
8considered confidential and shall not be a public record under
9chapter 22.
10 Sec. 10. NEW SECTION. 521J.8 Examinations.
111. a. Except for captive risk retention groups as provided
12under paragraph “b”, the commissioner may examine the affairs,
13transactions, accounts, records, and assets of each captive
14company as the commissioner deems necessary.
15b. The commissioner shall examine the affairs, transactions,
16accounts, records, and assets of each captive risk retention
17group as the commissioner deems necessary, but no less
18frequently than every five calendar years.
192. A report produced pursuant to the examination of a
20captive risk retention group under this section shall be a
21public record.
223. Except as provided in subsection 4, this section shall
23apply to all business written by a captive company.
244. A branch captive company examination shall only be
25conducted on the branch business and branch operations if
26the branch captive company has satisfied the requirements
27of section 521J.7, subsection 1, paragraph “d”, to the
28satisfaction of the commissioner.
295. As a condition of authorization of a branch captive
30company, the foreign captive company shall grant authority to
31the commissioner for examination of the affairs of the foreign
32captive company in the foreign captive company’s domiciliary
33jurisdiction.
346. The applicable provisions of chapter 507 shall apply to
35examinations conducted under this chapter.
-19-1 Sec. 11. NEW SECTION. 521J.9 Suspension or revocation.
21. A captive company’s certificate of authority to conduct
3the business of insurance in this state may be suspended by the
4commissioner for any of the following reasons:
5a. Insolvency or impairment of capital or surplus.
6b. Failure to meet and maintain the minimum capital and
7surplus requirements under section 521J.4.
8c. Refusal or failure to submit an annual report pursuant
9to section 521J.7, or to submit any other report or statement
10required by law or by lawful order of the commissioner.
11d. Failure to comply with the captive company’s own charter,
12bylaws, or other organizational document.
13e. Failure to submit to an examination as required under
14section 521J.8.
15f. Use of methods that render the captive company’s
16operation detrimental, or the company’s condition unsound, with
17respect to the public or to the company’s policyholders.
18g. Failure to pay tax on premiums as required under chapter
19432.1A.
20h. Failure to comply with applicable laws of this state.
212. a. If the commissioner finds upon examination, hearing,
22or other review that a captive company has committed an
23act specified in subsection 1, the commissioner may suspend
24or revoke the company’s certificate of authority if the
25commissioner deems it in the best interest of the public or of
26the policyholders of the captive company.
27b. If the commissioner does not revoke a captive company’s
28certificate of authority during a suspension imposed by the
29commissioner under paragraph “a”, the company’s certificate of
30authority may be reinstated if the commissioner finds that the
31cause of the suspension has been rectified.
32 Sec. 12. NEW SECTION. 521J.10 Excess workers’ compensation
33insurance.
341. A captive company may provide excess workers’
35compensation insurance to the captive company’s parent and
-20-1affiliated companies unless the laws of the state that has
2jurisdiction over the transaction prohibits the captive company
3from providing excess workers’ compensation insurance.
42. A captive company may reinsure workers’ compensation of
5a qualified self-insured plan of the captive company’s parent
6and affiliated companies.
7 Sec. 13. NEW SECTION. 521J.11 Captive mergers.
81. A merger between captive stock insurers, or a merger
9between captive mutual insurers, shall meet the requirements
10of chapter 521 and section 521J.5, as applicable. The
11commissioner may, at the commissioner’s discretion, provide
12notice to the public of a proposed merger prior to approval or
13disapproval of a merger.
142. An association captive company, or an industrial insured
15group formed as a stock insurer or as a mutual insurer, may be
16converted to or merged with a reciprocal insurer under this
17section.
183. A plan for conversion or merger shall meet all of the
19following requirements:
20a. (1) The plan shall be fair and equitable to the
21shareholders in the case of a stock insurer, or to the
22policyholders in the case of a mutual insurer.
23(2) The plan shall provide for the purchase of the shares
24of any nonconsenting shareholder of a stock insurer, or of the
25policyholder interests of any nonconsenting policyholder of a
26mutual insurer.
27b. A plan for conversion to a reciprocal insurer must be
28approved by the commissioner. The commissioner shall not
29approve a plan unless the plan meets all of the following
30requirements:
31(1) The plan provides for a hearing upon notice to the
32insurer, directors, officers, and stockholders or policyholders
33who have the right to appear at the hearing, unless the
34commissioner waives or modifies the requirements for the
35hearing.
-21- 1(2) (a) In the case of a stock insurer, the plan provides
2for the conversion of the existing stockholder interests into
3subscriber interests in the resulting reciprocal insurer
4proportionate to the existing stockholder interests, and is
5approved by a majority of the shareholders who are entitled to
6vote and who are represented at a regular or special meeting at
7which a quorum is present either in person or by proxy.
8(b) In the case of a mutual insurer, the plan provides
9for the conversion of the existing policyholder interests
10into subscriber interests in the resulting reciprocal insurer
11proportionate to the existing policyholder interests, and
12is approved by a majority of the voting interests of the
13policyholders who are represented at a regular or special
14meeting at which a quorum is present either in person or by
15proxy.
16(3) The plan meets the applicable requirements of section
17521J.5.
18c. If the commissioner approves a plan of conversion, the
19certificate of authority for the converting insurer shall be
20amended to state that the converting insurer is a reciprocal
21insurer. The conversion shall be effective and the corporate
22existence of the converting entity shall cease to exist on the
23date on which the amended certificate of authority is issued to
24the attorney-in-fact for the reciprocal insurer. The resulting
25reciprocal insurer shall file the articles of merger or the
26articles of conversion with the secretary of state.
27 Sec. 14. NEW SECTION. 521J.12 Captive insurance regulatory
28and supervision account.
291. A captive insurance regulatory and supervision account
30is established in the state general fund under the control
31of the division and moneys in the account shall be used to
32provide the financial means for the division to administer
33this chapter, and for the reimbursement of reasonable expenses
34incurred by the division to promote captive insurance in this
35state.
-22- 12. All fees, assessments, fines, and administrative
2penalties collected under this chapter shall be deposited in
3the captive insurance regulatory and supervision account.
43. All payments from the captive insurance regulatory
5and supervision account that are made for the maintenance of
6staff and associated expenses, including necessary contractual
7services, shall only be disbursed from the state treasury
8upon a warrant issued by the commissioner, after receipt by
9the commissioner of proper documentation regarding services
10rendered and expenses incurred.
114. The balance in the captive insurance regulatory and
12supervision account at the end of each fiscal year shall revert
13to the general fund.
14 Sec. 15. NEW SECTION. 521J.13 Legal investments.
151. a. Industrial insured captive companies, association
16captive companies, and captive risk retention groups shall
17comply with investment requirements as established by the
18commissioner by rule. The commissioner may approve the use of
19alternative reliable methods of valuation and rating.
20b. If a captive company’s admitted assets total less
21than five million dollars, the commissioner may approve an
22investment of up to twenty percent of the captive company’s
23admitted assets in rated credit instruments in any one
24investment that meets the requirements as established by the
25commissioner by rule.
262. A pure captive company, or a protected cell captive
27company, shall not be subject to any restrictions on allowable
28investments, except that the commissioner may prohibit or limit
29any investment that threatens the solvency or liquidity of the
30pure captive company.
313. Any captive company may make loans to any of the captive
32company’s affiliates with prior written approval of the
33commissioner, and each loan must be evidenced by a note in a
34form as approved by the commissioner by rule. Loans made from
35minimum capital and surplus funds required by section 521J.4
-23-1are prohibited.
2 Sec. 16. NEW SECTION. 521J.14 Reinsurance.
31. Subject to the prior approval of the commissioner, a
4captive company may provide reinsurance on risks ceded by any
5other insurer.
62. Any captive company may take credit for reserves on
7risks, or portions of risks, ceded to reinsurers as provided
8under chapter 521B.
9 Sec. 17. NEW SECTION. 521J.15 Rating organizations.
10A captive company shall not be required to join a rating
11organization.
12 Sec. 18. NEW SECTION. 521J.16 Compulsory organizations.
13A captive company shall not join or contribute financially
14to any plan, pool, association, or guaranty or insolvency fund
15in this state; and a captive company, a captive company’s
16insureds, a captive company’s parent, any company affiliated
17with a captive company, and any member of an association shall
18not receive any benefit from a plan, pool, association, or
19guaranty or insolvency fund for claims arising out of the
20operations of the captive company.
21 Sec. 19. NEW SECTION. 521J.17 Protected cell captive
22companies.
231. One or more sponsors may form a protected cell captive
24company.
252. A protected cell captive company formed or authorized
26under this chapter shall be subject to all of the following
27requirements:
28a. (1) A protected cell captive company may establish one
29or more protected cells subject to the prior written approval
30of the commissioner of a plan of operation submitted by the
31protected cell captive company for each protected cell. The
32plan of operation shall include but is not limited to the
33specific business objectives and investment guidelines of the
34protected cell.
35(2) Upon the commissioner’s approval of the protected cell
-24-1captive company’s plan of operation, the company, in accordance
2with the approved plan of operation, may attribute insurance
3obligations with respect to its insurance business to the
4protected cell.
5(3) A protected cell captive company shall transfer
6all assets attributable to a protected cell to one or more
7separately established and separately identified protected cell
8accounts bearing the name or designation of that protected
9cell. Each protected cell shall have a distinct name or
10designation that must include the words “protected cell”.
11Protected cell assets shall be held in the protected cell
12accounts for the purpose of satisfying the obligations of the
13specific protected cell.
14(4) Each protected cell must be incorporated. An
15incorporated protected cell may be organized and operated
16in any form of business organization as authorized by the
17commissioner by rule. Each protected cell of a protected
18cell captive company shall be treated as a captive insurance
19company under this chapter, except that the limit on maximum
20yearly aggregate taxes paid under section 432.1A, subsection 4,
21shall not apply. Unless otherwise permitted by the articles of
22incorporation or other organizational document of a protected
23cell captive company, each protected cell of the protected cell
24captive company must have the same directors, secretary, and
25registered office as the protected cell captive company.
26b. All attributions of assets and liabilities between a
27protected cell and the protected cell captive company’s general
28account shall be in accordance with the plan of operation and
29the participant contracts as approved by the commissioner. No
30other attribution of assets and liabilities shall be made by
31a protected cell captive company between the protected cell
32captive company’s general account and the company’s protected
33cells. Any attribution of assets and liabilities between the
34general account and a protected cell shall be in cash or in
35readily marketable securities with established market values.
-25- 1c. The establishment of a protected cell shall create, with
2respect to that protected cell, a legal person separate from
3the protected cell captive company. Amounts attributed to a
4protected cell under this chapter, including assets transferred
5to a protected cell account, shall be owned by the protected
6cell and the protected cell captive company shall not be a
7trustee, or hold itself out to be a trustee, with respect
8to the protected cell assets of that protected cell account.
9A protected cell captive company may allow for a security
10interest to attach to protected cell assets or to a protected
11cell account if the security interest is in favor of a creditor
12of the protected cell and is otherwise allowed under applicable
13law.
14d. A protected cell captive company may contract with or
15arrange for an investment adviser, commodity trading adviser,
16or other third party to manage the protected cell assets of
17a protected cell if all remuneration, expenses, and other
18compensation of the third party are paid from the protected
19cell assets of that protected cell, and not from the protected
20cell assets of other protected cells or the assets of the
21protected cell captive company’s general account.
22e. (1) A protected cell captive company shall establish
23the administrative and accounting procedures necessary to
24properly identify each protected cell of the protected cell
25captive company, and the protected cell assets and protected
26cell liabilities attributable to each protected cell. The
27directors of a protected cell captive company shall do all of
28the following:
29(a) Maintain the assets and liabilities of protected cells
30separately, and separately identifiable, from the assets and
31liabilities of the protected cell captive company’s general
32account.
33(b) Maintain protected cell assets and protected cell
34liabilities attributable to one protected cell separate,
35and separately identifiable, from protected cell assets and
-26-1protected cell liabilities attributable to another protected
2cell.
3(2) If a protected cell captive company fails to comply with
4subparagraph (1), the remedy of tracing shall be applicable to
5protected cell assets commingled with protected cell assets of
6other protected cells, or commingled with the assets of the
7protected cell captive company’s general account. The remedy
8of tracing shall not be the exclusive remedy.
9f. When establishing a protected cell, a protected cell
10captive company shall attribute assets with a value at least
11equal to the reserves attributed to that protected cell to the
12protected cell.
133. Each protected cell shall be accounted for separately
14on the books and records of the protected cell captive company
15to reflect the financial condition and result of operations of
16the protected cell, including but not limited to the net income
17or loss, dividends or other distributions to participants, and
18any other factor provided in the participant contract or as
19required by the commissioner by rule.
204. The assets of a protected cell shall not be chargeable
21with liabilities arising from any other insurance business of
22the protected cell captive company.
235. A sale, exchange, or other transfer of assets shall
24not be made by a protected cell captive company among any
25of the company’s protected cells without the consent of the
26participants of each affected protected cell.
276. A sale, exchange, transfer of assets, dividend, or
28distribution shall not be made from a protected cell to a
29sponsor or to a participant without the commissioner’s prior
30written approval, which shall not be given if the sale,
31exchange, transfer, dividend, or distribution will result in
32the insolvency or impairment of the protected cell.
337. A protected cell captive company shall annually file
34with the commissioner any financial reports required by the
35commissioner as established by rule, and shall include, without
-27-1limitation, accounting statements detailing the finances of
2each protected cell.
38. A protected cell captive company shall notify the
4commissioner in writing within twenty business days from the
5date that a protected cell has become impaired or insolvent, or
6is otherwise unable to meet its claim or expense obligations.
79. A participant contract shall not take effect without the
8commissioner’s prior written approval.
910. An addition of any new protected cell, or the withdrawal
10of any participant of an existing protected cell, shall
11constitute a change in the business plan of the protected cell
12captive company and the change shall not become effective
13without the prior written approval of the commissioner.
1411. With respect to each protected cell, business written
15by a protected cell captive company shall be fronted by an
16insurance company authorized under the laws of any state, or as
17approved by the commissioner.
1812. If a protected cell captive company’s business is
19reinsured, with respect to each protected cell, the protected
20cell captive company shall comply with at least one of the
21following requirements:
22a. The business shall be reinsured by a reinsurer authorized
23or approved by the commissioner.
24b. The business shall be secured by a trust fund that is
25located in the United States for the benefit of policyholders
26and claimants, and which is funded by an irrevocable letter of
27credit or other asset that is acceptable to the commissioner,
28and that is subject to all of the following:
29(1) The amount of security provided by the trust fund shall
30not be less than the reserves associated with the liabilities
31that are not fronted or reinsured, including but not limited
32to reserves for losses that are allocated for loss adjustment
33expenses, incurred but not reported losses, and unearned
34premiums for business written through the participant’s
35protected cell.
-28- 1(2) The commissioner may require the protected cell captive
2company to increase the funding of any trust.
3(3) If the form of security in the trust is a letter of
4credit, the letter of credit shall be established, issued, or
5confirmed by a bank chartered in this state, a member of the
6federal reserve system, or a bank chartered by another state if
7the bank is approved by the commissioner.
8(4) The commissioner shall approve the form and terms of the
9trust and trust instrument.
10 Sec. 20. NEW SECTION. 521J.18 Sponsors — qualifications.
11A sponsor of a protected cell captive company must
12be an insurer authorized under the laws of any state, a
13reinsurer authorized under the laws of any state, a captive
14insurance company formed or authorized under this chapter, an
15insurance producer licensed in this state and approved by the
16commissioner, or any other person approved by the commissioner.
17 Sec. 21. NEW SECTION. 521J.19 Delinquency.
18If delinquency proceedings are initiated against a protected
19cell captive company, the assets of a protected cell shall
20not be used to pay any expenses other than those attributable
21to the protected cell, and the capital and surplus of the
22protected cell captive company shall be available at all times
23to pay expenses of, or claims against, the protected cell
24captive company.
25 Sec. 22. NEW SECTION. 521J.20 Participants.
26Individuals, business entities, and sponsors may be a
27participant in a protected cell captive company. A participant
28shall not be required to be a shareholder of a protected cell
29captive company or of the protected cell captive company’s
30affiliate.
31 Sec. 23. NEW SECTION. 521J.21 Investments — combined
32assets.
33The assets of two or more protected cells may be combined
34for the purpose of investment by a protected cell captive
35company, and combining the protected cells’ assets shall not
-29-1be construed as defeating the segregation of the assets for
2accounting or any other purpose.
3 Sec. 24. NEW SECTION. 521J.22 Dormant captive companies.
41. As used in this section, “dormant captive company” means
5a captive company, other than a captive risk retention group,
6that meets all of the following:
7a. The captive company has ceased transacting the business
8of insurance, including the issuance of insurance policies.
9b. The captive company does not have any remaining
10liabilities associated with its insurance business transactions
11or insurance policies issued prior to the captive company’s
12filing of an application for a certificate of dormancy under
13subsection 2.
142. Any captive company that is domiciled in this state and
15that complies with this section may apply to the commissioner
16for a certificate of dormancy. A certificate of dormancy shall
17be subject to expiration on or after five calendar years from
18the date that the certificate is issued, and the commissioner
19shall not renew a certificate of dormancy.
203. a. A captive company that has been issued a certificate
21of dormancy shall comply with all of the following:
22(1) The dormant captive company shall possess and maintain
23unimpaired, paid-in capital and surplus of not less than
24twenty-five thousand dollars.
25(2) Within ninety calendar days of the dormant captive
26company’s fiscal year end, the company shall annually submit to
27the commissioner a report on the company’s financial condition,
28verified by oath of two of the company’s executive officers, in
29the form and manner as established by the commissioner by rule.
30(3) The dormant captive company shall pay a one thousand
31dollar dormancy tax, due annually on or before March 1, if
32for any portion of the immediately preceding calendar year
33the captive company held a certificate of dormancy. Each
34series of members and each protected cell shall be considered
35separate for purposes of paying the annual dormancy tax under
-30-1a certificate of dormancy. A dormant captive company is not
2otherwise liable for any annual renewal as provided in section
3521J.2, subsection 4, paragraph “b”, subparagraph (2).
4b. A dormant captive insurance company that has been issued
5a certificate of dormancy shall not be subject to or liable
6for the payment of tax under section 432.1A, or be subject to
7examination under section 521J.8, from the date the certificate
8is issued through the date the certificate expires.
94. Prior to a dormant captive company issuing an
10insurance policy, the dormant captive company shall apply
11to the commissioner for approval to surrender the company’s
12certificate of dormancy and to resume conducting the business
13of insurance.
145. A dormant captive company’s certificate of dormancy
15shall be revoked if the company violates this section.
16 Sec. 25. NEW SECTION. 521J.23 Workers’ compensation —
17compliance with state and federal laws.
18This chapter shall not be construed to exempt a captive
19company, a captive company’s parent, or a captive company’s
20affiliated companies from compliance with applicable state and
21federal laws governing workers’ compensation insurance.
22 Sec. 26. NEW SECTION. 521J.24 Rules.
23The commissioner shall adopt rules pursuant to chapter 17A
24to implement and administer the provisions of this chapter.
25 Sec. 27. FUTURE REPEAL. Chapter 521G, Code 2023, is
26repealed effective January 1, 2025.
27 Sec. 28. APPLICABILITY. The following applies January 1,
282025, to protected cell captive companies formed, authorized,
29or continued on or after that date:
30The section of this Act enacting section 521J.17.
31EXPLANATION
32The inclusion of this explanation does not constitute agreement with
33the explanation’s substance by the members of the general assembly.
34This bill is related to captive insurance companies.
35“Captive company” is defined in the bill as any pure captive
-31-1insurance company, association captive insurance company,
2protected cell captive insurance company, special purpose
3captive insurance company, or industrial insured captive
4insurance company formed or authorized under the bill.
5The bill requires each captive company to pay on or before
6March 1 of each year a tax on the direct premiums collected or
7contracted for on policies or contracts of insurance written by
8the captive company during the immediately preceding calendar
9year, after making deductions from the direct premiums via
10methodology detailed in the bill to determine the appropriate
11tax that is due.
12The bill subjects captive companies to Code chapter 507C
13(insurers supervision, rehabilitation, and liquidation Act).
14The bill details the process for a captive company to
15apply to the commissioner of insurance (commissioner) for
16a certificate of authority to provide property insurance,
17casualty insurance, life insurance, disability income
18insurance, surety insurance, marine insurance, health
19insurance, or a group health plan, with exceptions as detailed
20in the bill.
21A captive company shall not adopt a name that is the same,
22deceptively similar, or likely to be confused with or mistaken
23for any other existing business name already registered in
24Iowa. A captive company is required to possess and maintain
25unimpaired paid-in capital and surplus that meets the
26requirements detailed in the bill.
27A captive company is required to be formed or organized
28as a business entity as provided under the bill. A captive
29company shall not pay a dividend out of, or other distribution
30with respect to, the minimum capital or surplus required to be
31maintained by the company without the prior written approval of
32the commissioner. Approval of an ongoing plan for the payment
33of dividends or other distributions shall be conditioned upon
34retention, at the time of each payment, of capital surplus in
35excess of the amounts specified by, or determined in accordance
-32-1with, a formula as approved by the commissioner.
2The bill requires a captive company to file an annual report
3with the commissioner in certain circumstances as detailed in
4the bill. Each captive company shall use generally accepted
5accounting principles, unless the commissioner requires the
6use of statutory accounting principles, for the company’s
7report. On or before April 1 of each year, each branch captive
8company shall submit to the commissioner a copy of all reports
9required to be filed under the laws of the foreign captive
10insurance company’s domiciliary jurisdiction, verified by oath
11of two of the foreign captive insurance company’s executive
12officers. All reports filed under the bill shall be considered
13confidential and shall not be a public record under Code
14chapter 22.
15The commissioner may examine the affairs, transactions,
16accounts, records, and assets of each captive company as
17detailed in the bill.
18A captive company’s certificate to conduct the business of
19insurance may be suspended by the commissioner for reasons as
20detailed in the bill.
21A captive company may provide excess workers’ compensation
22insurance to the captive company’s parent and affiliated
23companies, unless the laws of the state having jurisdiction
24over the transaction prohibit providing excess workers’
25compensation insurance. A captive company may reinsure
26workers’ compensation of a qualified self-insured plan of the
27captive insurance company’s parent and affiliated companies.
28A merger between captive stock insurers, or a merger
29between captive mutual insurers, must meet the applicable
30requirements of Code chapter 521 and of the bill, except that
31the commissioner may, at the commissioner’s discretion, provide
32notice to the public of the proposed merger prior to approval
33or disapproval of the merger.
34The bill establishes the captive insurance regulatory and
35supervision account (account) in the state general fund and
-33-1moneys in the account shall be used to provide the financial
2means for the insurance division to administer the bill, and
3for the reimbursement of reasonable expenses incurred by
4the insurance division to promote captive insurance in this
5state. All fees, assessments, fines, and administrative
6penalties collected under the bill shall be deposited in the
7account. All payments from the account that are made for
8the maintenance of staff and associated expenses, including
9necessary contractual services, shall only be disbursed from
10the state treasury upon a warrant issued by the commissioner.
11The balance in the account at the end of each fiscal year shall
12revert to the general fund.
13The bill requires that industrial insured captive companies,
14association captive companies, and captive risk retention
15groups comply with the investment requirements as established
16by the commissioner by rule. The commissioner may approve the
17use of alternative reliable methods of valuation and rating.
18If a captive company’s admitted assets total less than $5
19million the commissioner may approve an investment of up to
2020 percent of admitted assets in rated credit instruments in
21any one investment that meets the requirements as established
22by the commissioner by rule. A pure captive company, or a
23protected cell captive company, shall not be subject to any
24restrictions on allowable investments except as detailed in the
25bill.
26Subject to the prior approval of the commissioner, a captive
27company may provide reinsurance on risks ceded by any other
28insurer. Any captive company may take credit for reserves on
29risks or portions of risks ceded to reinsurers as provided
30under Code chapter 521B. A captive company shall not be
31required to join a rating organization. A captive company
32shall not join or contribute financially to any plan, pool,
33association, or guaranty or insolvency fund in this state.
34One or more sponsors may form a protected cell captive
35company and are subject to the requirements detailed in the
-34-1bill. A sponsor of a protected cell captive company shall be
2an insurer authorized under the laws of any state, a reinsurer
3authorized under the laws of any state, a captive company
4formed or authorized under the bill, an insurance producer
5licensed in this state and approved by the commissioner, or any
6other person approved by the commissioner.
7If delinquency proceedings have been initiated against a
8protected cell captive company, the assets of a protected
9cell shall not be used to pay any expenses other than those
10attributable to the protected cell, and the capital and surplus
11of the protected cell captive company shall be available at all
12times to pay expenses of, or claims against, the protected cell
13captive insurance company.
14Individuals, business entities, and sponsors may be
15participants in a protected cell captive company. A
16participant shall not be required to be a shareholder of
17a protected cell captive company or a shareholder of the
18protected cell captive company’s affiliate.
19The assets of two or more protected cells may be combined for
20the purposes of investment by a protected cell captive company
21and combining the assets shall not be construed as defeating
22the segregation of the protected cells’ assets for accounting
23or other purposes.
24The bill defines “dormant captive company” as a captive
25company, other than a captive risk retention group, that has
26ceased transacting the business of insurance, including the
27issuance of insurance policies, and that has no remaining
28liabilities associated with insurance business transactions or
29insurance policies issued prior to its filing of an application
30for a certificate of dormancy. The bill details the
31requirements for a captive company to apply for a certificate
32of dormancy.
33The bill shall not be construed to exempt a captive company,
34a captive company’s parent, or a captive company’s affiliated
35companies from compliance with applicable state and federal
-35-1laws governing workers’ compensation insurance.
2The commissioner shall adopt rules to implement and
3administer the bill.
4The bill repeals Code chapter 521G (protected cell
5companies) effective January 1, 2025.
6The section of the bill enacting Code section 521J.17
7applies to protected cell captive companies formed, authorized,
8or continued on or after January 1, 2025.
-36-ko/rn