Click on the links below to gain a better understanding of this powerful business and risk management tool!

  • UTAH Regulatory Advantages

    • In 2003, Utah realized the potential benefits of attracting captive insurance companies and passed legislation providing the appropriate regulatory and taxation environment. The objective of the legislation was to establish a business-friendly climate for companies forming captive insurance operations in Utah.

      • Single parent, association and group captives permitted.
      • Reasonable capitalization requirements that may be met with a letter of credit.
      • Coverage includes nearly all commercial lines, including excess workers’ compensation, directors and officers liability plus property and casualty insurance.
      • No approval of rates and forms required.
      • No investment restrictions for pure captives and group captives.
      • Favorable premium tax structure.
      • Allows pure captives to insure controlled unaffiliated businesses.
      • Permits captives to be formed as reciprocal insurers.
      • Permit the licensing of branch offices of offshore captives, which underwrite and administer employee benefit programs of the parent and affiliates.
      • Allow the formation of sponsored captive insurance companies by insurers and re-insurers to provide insurance coverage to distinct and usually unrelated entities (protected cell companies). This enables the protected cell company, which may be too small to justify the expense of forming and operating an individual stand-alone captive company, to employ the sponsor’s capital rather than its own.

  • Captive Advantages

    • The Advantages of Captive Insurance ARE:

      • Increase Control, Reduce A captive insurance company represents an option for many corporations and groups that want to take financial control and manage their own risks rather than paying premiums to commercial insurers.
      • Greater control over claims represents the single BEST reason
      • Coverage tailored to meet the Business Owners needs
      • Reduced operating costs
      • Improved cash flow
      • Increased coverage and capacity
      • Investment income to fund losses
      • Direct access to reinsurance markets
      • Funding and underwriting flexibility
      • Smaller deductibles or self-insured deductible
      • Additional negotiating leverage with underwriters
      • Incentives for loss control

  • Self Insurance, Captive Property & Casualty

    • The growth of self-insurance for property and casualty coverage has moved beyond the major corporations and is now being utilized by small public and private entities, both profit and non-profit. These entities, while not large enough to self-insurance on their own, have found that by grouping together with similar or related entities, they too can enjoy the benefits of self-insurance as a captive. (Some states also permit pooling of non-similar or heterogeneous groups.
      ADVANTAGES:

      • Greater cost control through claims management and loss prevention;
      • Lower fixed costs than conventional insurance plans;
      • Investment income;
      • Share in underwriting profits;
      • Improved coverage's and limits;
      • Access to excess and reinsurance markets.

  • Why Captives are formed?

    • Why Captives are formed

      • Claims Control
      • Cost Allocations
      • Direct Access To Reinsurance Markets
      • Risk Management Controls;
      • Stabilize Costs
      • Tailor Insurance Coverage
      • Availability Of Insurance
      • Affordability Of Insurance
      Reasons Why Captives are formed

      Employee Benefit Programs :
      • To Support Cost Control
      • To Manage Premiums
      • To Control Claims Costs
      Corporate / Business Park Assumption & Management :
      • To Insure the Businesses Own Risk and Place Stop Loss Reinsurance
      • To Administer and Control Claims
      • Affordability Of Insurance

  • Captive Candidates

    • INSURANCE PREMIUM DEVELOPED :

      • Single Parent $1,000,000 +
      • Group / Association $1,500,000 - $2,000,000
      LINES OF COVERAGE :
      • Actuarial Predictable
      • Investment Income To Offset Losses

  • Captive Risk Assumption

    • The Advantages of Captive Insurance ARE:

      • Casualty Risk
      • Property Risks (Non-RPG)
      • Employee Benefits
      • THIRD PARTY Business
        • Including Related Industry Business Owners As An Association Group Program
        • Provide Customer Warranty Protection

  • Captive Cash Flow

  • Captive Technical Support

      • Captive Manager
      • Legal
      • Accounting
      • Actuarial
      • Banking and Investments
      • Claims
      • Risk Management
      • Underwriting
      • Program Administrator
      • Captive Manager

  • Risk Retention Groups

    • Definition : Risk Retention Groups are owner-controlled insurance companies authorized by the Federal Risk Retention Act of 1986. An RRG provides Liability Insurance to members who engage in similar or related business or activities for all or any portion of the exposures of group members, excluding first party coverage's, such as property, workers’ compensation and personal lines. Authorization under the federal statute allows a group to be chartered in one state, but able to engage in the business of insurance in all states, subject to certain specific and limited restrictions. The Federal Act preempts state law in many significant ways.

      ADVANTAGES:

      • Avoidance of multiple state filing and licensing requirements;
      • Member control over risk and litigation management issues;
      • Establishment of stable market for coverage and rates;
      • Elimination of market residuals;
      • Exemption from countersignature laws for agents and brokers;
      • No expense for fronting fees;
      • Unbundling of services.


      NOTE: Pending in Congress and the Senate are two bills intended to expand the Federal Risk Retention Act beyond LIABILITY INSURANCE only;
      NOTE: Pending in the Senate, already passed by the Congress and supported by President Bush, is Federal Regulation for Association Health Plans. Making available group life and health to small employer members of an industry association, similar to the exemptions provided to Business Owners under the Federal Risk Retention Act.

  • Different Types of Captives

    • Single Parent (parent-only or pure captive)
      A wholly owned or controlled company, which is formed to primarily insure the risks of its non-insurance parent or affiliated companies which are related.
      Association or Industry captive.
      An Insurance company owned by a trade, industry or profession for the benefit of its members. It includes industry pools where the risks of all members are pooled and then ceded back to participants on a shared basis, and Risk Retention Groups (RRG).
      Agency Captive.
      An insurance company owned by insurance brokers or agents to reinsure a portion of the insurance they sell.
      Group captive (Stock or Mutual).
      A company owned by a group of companies created to meet a common insurance need.
      Quasi profit center or open market captive.
      A subsidiary whose primary business is that of a single parent captive but which also insures the risks of unrelated parties or assumes open market reinsurance business.
      Rent – a – captive.
      This is where a captive offers its services to others, usually those too small to justify incorporating their own captive insurance company.
      Rent – a – captive segregated portfolio companies.
      This format allows an insurance company to segregate its assets and liabilities of different participating shareholders and have the segregated cells protected from the liabilities of other such cells within the same company.

  • Factors considered in selecting the domicile for a Captive Insurer

      • The legislative and regulatory philosophy, commitment, and appreciation of captive insurance companies.
      • The accessibility to regulators and governmental officials that act on the legislation and regulations that impact captives.
      • The lines of insurance the domicile permits a captive to write.
      • The requirements of records and files that must be maintained in domicile and therefore duplicated if captive administrative offices are located elsewhere.
      • The investment restrictions.
      • The flexibility for a captive to set its rates without prior approval of domicile regulator.
      • The requirements for meetings of the board of directors of the captive.
      • The premium taxes.
      • How the domicile charges expenses for regulatory examinations and timeliness of regulatory exam reports.

Summary of Utah laws and Procedures

In this section you can find out about the usual and customary steps to Forming and Implementing your own personal or group Captive / RRG Insurance Company in Utah.

The expected time from start to finish, if all the paperwork is formalized and complete, would be 30 days.

Captive Company Formation and Implementations - The Steps


Step 1. Contract with an Insurance “Captive Manager”. The use of an approved Captive insurance manager is required for each Captive;
Step 2. Arrange an introductory meeting with the Insurance Department. The purpose of the meeting is to meet with officials of the organizers, and identify the purpose and effort behind this effort.
Step 3. Request from the Insurance Commissioner a Certificate to develop the Captive;
Step 4. Prepare documents for Incorporation;
Step 5. Prepare application documents for submission to the Insurance Department;
Step 6. a review by the Insurance Department of the Application and if suggested reviewed by independent advisors as may be requested by the Insurance Commission;
Step 7. Submit Incorporation papers to the Business office of the State;
Step 8. submit an application with Incorporation papers, FINAL business plan and actuarial Forms, and accounting financial condition;
Step 9. Obtain the issued Authority to do business from the Insurance Commissioners. The average time required to complete the formal process is generally less than 30 days.



Prodecures for forming a Captive or RRG Insurance Company

  1. Prepare the documents needed to incorporate the insurer. The services of a local attorney may be desirable. The articles of incorporation must comply with the procedures for filing the articles of incorporation with the Commissioner of Insurance and the Secretary of State and for obtaining the commissioner’s approval of the proposed articles of incorporation. If the captive insurer will be a mutual company, the bylaws must be filed and approved by the commissioner.
  2. Prepare the documents needed for the application for certificate of authority.
  3. Submit the application to the commissioner for review. Include the state required application fee and the states required license fee.
  4. The Captive states insurance code authorizes the commissioner to obtain services to review the application for a captive insurer at the applicant’s expense. If the commissioner determines that such services are needed, the Captive/RRG will be required to submit an additional copy of the application materials to the reviewer and the Captive/RRG will be notified of the cost.
  5. Provide information concerning the adequacy of the expertise, experience, and character of the person or persons who will manage the captive insurer.
  6. Have a CPA complete the necessary form for authorization to perform audits.
  7. Have an actuary complete the necessary form for authorization to render the opinion on reserves.

The Insurance Department may perform an organizational examination as soon as possible after you receive the Certificate of Authority and have capitalized the captive. The cost of this examination will be borne by the applicant.


Captive Insurance Company Administrative Rules

The following is a summary of the administrative rules governing Captive Insurance Companies.
  1. Each State will accept a Captive Insurance Company’s application during the organizing process.
  2. The rule before licensing captives permits the commissioner to conduct an organizational examination or investigation before licensing a captive insurer.
  3. The rules that apply when captives are authorized:
    • Permit the commissioner to require additional deposits or letters of credit, if he finds it necessary.
    • Permit the Commissioner to establish requirements concerning reinsurance:
      1. Credit is not allowed for reinsurance where there is not a complete transfer of risk to the reinsurer;
      2. Credit is not allowed for reinsurance where there is not an insolvency clause in the reinsurance agreement;
      3. A written reinsurance agreement is required;
      4. The Commissioner may require that each reinsurance contract be filed and approved.
  4. The rules generally require insurance managers, brokers, agents, salespersons, and reinsurance intermediaries to be specifically authorized by the commissioner.
  5. The rules generally require insurers to notify the commissioner within 30 days of changes in directors and officers, providing biographical information about the new directors and officers. It also includes a provision concerning transactions between the directors, officers, and employees and the insurers.
  6. The rules generally require adoption of a conflict of interest statement for officers, directors and key employees, with annual disclosure to the insurer’s Board of Directors.
  7. The rules generally require the Commissioner’s advance written approval for the acquisition of control of a captive insurer.
  8. The rules generally require filing and advance approval by the commissioner for changes in the nature of a captive’s business from the plan of operation in the application.
  9. The rules generally will require an annual audit by a CPA approved by the Commissioner, to be filed on or before June 30th of each year. Contents of the audit must include:
    1. The opinion of the CPA;
    2. A report of the Evaluation of Internal Controls;
    3. The Accountant’s Letter of Qualifications;
    4. The Financial statements; and,
    5. A Certification of Loss Reserves and Loss Expense Reserves by a qualified actuary approved by the commissioner.
  10. The rules generally require insurers to report to the commissioner the CPA who will conduct the annual audit in advance.
  11. The rules will generally state that insurers must require CPAs to notify a company officer and all directors if the CPA determines that the company has materially misstated its annual statement. The notification must be provided to the commissioner within five days of receipt.
  12. The rules generally will state that insurers must require CPAs to make audit work papers available for review by the commissioner.
    • The rules will permit the Commissioner to rescind a captive’s certificate of authority:
      1. If the insurer has not commenced business within two years of being authorized;
      2. If the company ceases to carry on the business of insurance in or from acceptable to the Commissioner within the state;
      3. At the company’s request to rescind the Certificate of Authority; or,
      4. For any reason provided by law.




UCIA Membership

Membership in the Utah Captive Insurance Association serves the important function of allowing dedicated professionals a collective voice with state and federal regulators, legislators, the NAIC, and industry as a whole.

As a member of the UCIA,, individual captive owners and industry service providers have an opportunity to interact with each other and to meet with regulators for the purpose of networking, education, training, and service.

Through membership in the UCIA, the State of Utah captive regulators are be able to increase representation at insurance industry conventions every year to tell the State of Utah’s Captive Industry story. The state has become a domicile of choice for the smaller captives seeking to form insurance companies under U.S. Internal Revenue Code section 831(b). It has also become attractive for larger captive formation, and for those captives that are desiring to re-domicile to a place where the business climate is friendlier, is easier to get to, and provides an out-of-the-ordinary travel experience.

UCIA members reach out to each other to provide a cohesive group to progress the captive industry with bold thinking and new ideas in saving costs.

Please contact any member of the UCIA with questions about joining our group or about the special advantages available.