Iowa is likely to become the next US state to embrace captives, which would make it the 36th US jurisdiction to adopt captive insurance legislation (including the District of Columbia).
On April 24, the Iowa Senate unanimously passed Senate File 549 (SF 549), as amended, “a bill for an act relating to captive insurance companies,” which the House passed earlier in April.
Governor Kim Reynolds is expected to sign the Bill into law, with Bills signed into law normally going into effect 1 July following passage.
SF 549 authorises the formation of pure, association, protected cell, special purpose and industrial insured captives.
The Bill also charges the Iowa Insurance Division with the responsibility of administering the law and promulgating rules under it.
“With a modern, competitive bill that is comparable in many ways to the captive statutes of other jurisdictions, including with respect to premium taxes and fees, dedicated captive regulators and a robust underlying insurance industry, Iowa will be a captive domicile to watch in the future,” said Brian Thomas, associate attorney at Womble Bond Dickinson.
Each captive, including series and protected cell captives, must pay an initial registration fee and an annual renewal fee of $300.
The one-time non-refundable application fee is $200 and every captive must submit an annual report to the Insurance Division by 1 April each year and undergo regulatory exams at the discretion of the insurance commissioner, but no less frequently than every three years.
Annual premium taxes on direct premiums will be 0.35% on the first $20mn of direct premiums, and 0.25% on each dollar of direct premium over $20m.
Annual premium taxes on assumed reinsurance premiums will be 0.20% of assumed reinsurance premiums up to $20m, and 0.125% of assumed reinsurance premiums from $20m to $40m.
Assumed reinsurance premiums that exceed $40m will be taxed at 5%.
The General Assembly has set the minimum annual premium tax for all captives at $5,000, and like the vast majority of other captive jurisdictions, a captive domiciled in Iowa will be required to have a director or manager that is a resident of the state.
Additionally, the parties responsible for managing each captive will be required to hold an annual meeting in Iowa each year.
Iowa will also have dedicated captive insurance regulators, and the Insurance Division is expected to establish a captive insurance bureau to carry out its obligations.
The bureau will be staffed by three new full-time employees: a bureau chief, an examiner specialist and an examiner.