Saturday, June 15, 2024

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Connecticut legislation permits captive parametric contracts

Connecticut Governor Ned Lamont has signed Public Act 23-15, legislation designed to strengthen the state’s captive market including new regulation that permits captives to accept and transfer risks through parametric contracts.

The Bill introduces several changes to Connecticut’s captive insurance laws, offering increased support and flexibility for captives, owners, and service providers, which will become effective on 1 October 2023.

“The bill, championed by Commissioner Andrew Mais of the Connecticut Insurance Department (CID), marks a significant milestone in advancing a business-friendly regulatory environment that encourages innovation and supports the growth of captives to provide more options for businesses to manage their risk,” the CID said.

The new legislation allows captives to accept and transfer risks through parametric contracts, providing businesses with a more efficient method to mitigate risks that are challenging to insure through the commercial market.

The CID noted that its “innovative” parametric approach offers businesses coverage for unique and hard-to-place risks.

The Bill also provides greater flexibility to protected cells by enabling them to establish separate accounts to address businesses’ specific insurance needs.

This enhanced structure provides a solution that aligns with the risk management needs of cell participants, while protecting the assets and liabilities within each account.

A third change is the introduction of a certificate of dormancy for captives that have stopped doing business and have no remaining liabilities. A successful application for dormancy means an exemption from paying Connecticut’s minimum premium tax.

This exemption reduces the financial burden during inactive periods, while allowing captives to be easily reactivated when market conditions or insurance needs change.

“With the signing of P.A. 23-15 Connecticut reaffirms its commitment to maintaining a supportive and competitive captive insurance landscape,” said Commissioner Mais.

“The new legislation, combined with the state’s recognized expertise, competence, and innovation, solidifies Connecticut’s position as a premier domicile for captives.”

The new bill builds upon previous legislative changes enacted in 2022, when the state implemented other pro-captive laws.