Stricken language would be deleted from and underlined language would be added to present law.
Act 554 of the Regular Session
*ANS130* 02/14/2025 7:48:10 AM ANS130
State of Arkansas 1
95th General Assembly A Bill 2
Regular Session, 2025 SENATE BILL 237 3
4
By: Senator J. Boyd 5
By: Representative Steimel 6
7
For An Act To Be Entitled 8
AN ACT TO AMEND THE LAW CONCERNING THE LICENSING AND 9
REGULATION OF CAPTIVE INSURERS; AND FOR OTHER 10
PURPOSES. 11
12
13
Subtitle 14
TO AMEND THE LAW CONCERNING THE 15
LICENSING AND REGULATION OF CAPTIVE 16
INSURERS. 17
18
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF ARKANSAS: 19
20
SECTION 1. Arkansas Code § 23-63-1601(3), concerning the definition of 21
"association" used in the licensing and regulation of captive insurers, is 22
amended to read as follows: 23
(3) "Association" means a legal association of individuals, 24
corporations, partnerships, or associations that has been in continuous 25
existence for at least one (1) year : 26
(A) The member organizations of which collectively, or 27
which does itself: 28
(i) Own, control, or hold with power to vote all of 29
the outstanding voting securities of an association captive insurance company 30
incorporated as a stock insurer; or 31
(ii) Have complete voting control over an 32
association captive insurance company incorporated as a mutual insurer; or 33
(B) The member organizations of which collectively 34
constitute all of the subscribers of an association captive insurance company 35
formed as a reciprocal insurer; 36 SB237
2 02/14/2025 7:48:10 AM ANS130
1
SECTION 2. Arkansas Code § 23 -63-1601(9), concerning the definition of 2
"Commissioner" used in the licensing and regulation of captive insurers, is 3
repealed. 4
(9) "Commissioner" means the Insurance Commissioner; 5
6
SECTION 3. Arkansas Code § 23 -63-1601(11), concerning the definition 7
of "Department" used in the licensing and regulation of captive insurers, is 8
repealed. 9
(11) "Department" means the State Insurance Department; 10
11
SECTION 4. Arkansas Code § 23 -63-1602, concerning the application for 12
a license as a captive insurer, is amended to add an additional subsection to 13
read as follows: 14
(f)(1) Notwithstanding any other provision of this subchapter, the 15
commissioner may issue a provisional license to a captive insurance company 16
applying for a license under this subchapter if the commissioner finds that 17
issuing a provisional license is in the public's best interest. 18
(2) As a condition to the issuance of a provisional license 19
under subdivision (f)(1) of this section: 20
(A) The applicant shall have: 21
(i) Filed a complete application containing all 22
information required by this section; and 23
(ii) Paid all fees required for a license; and 24
(B) The commissioner shall have made a preliminary finding 25
that the expertise, experience, and character of the person who will control 26
and manage the applicant are acceptable. 27
(3) The commissioner may by order: 28
(A) Limit the authority of a provisional license in any 29
way deemed necessary to protect insureds and the public; or 30
(B) Revoke a provisional license if the interests of 31
insureds or the public are endangered. 32
(4) If an applicant fails to complete the regular licensure 33
application process under this section, the provisional license shall 34
automatically terminate. 35
36 SB237
3 02/14/2025 7:48:10 AM ANS130
SECTION 5. Arkansas Code § 23 -63-1604(a)(1), concerning the capital 1
requirements of a captive insurance company, is amended to read as follows: 2
(a)(1) The Insurance Commissioner shall not issue a license to a 3
producer reinsurance captive insurance company, pure captive insurance 4
company, sponsored captive insurance company, association captive insurance 5
company incorporated as a stock insurer, or industrial insured captive 6
insurance company incorporated as a stock insurer unless the company 7
possesses and maintains unimpaired paid -in capital of: 8
(A) In the case of a producer reinsurance captive 9
insurance company, not less than three hundred thousand dollars ($300,000); 10
(B) In the case of a pure captive insurance company, not 11
less than one hundred thousand dollars ($100,000); 12
(C) In the case of an association captive insurance 13
company incorporated as a stock insurer, not less than four hundred thousand 14
dollars ($400,000) two hundred fifty thousand dollars ($250,000) ; 15
(D) In the case of an industrial insured captive insurance 16
company incorporated as a stock insurer, not less than two hundred thousand 17
dollars ($200,000) two hundred fifty thousand dollars ($250,000) ; 18
(E) In the case of a sponsored captive insurance company, 19
not less than two hundred fifty thousand dollars ($250,000) one hundred 20
thousand dollars ($100,000) ; or 21
(F) In the case of a special purpose captive insurance 22
company, an amount determined by the commissioner after giving due 23
consideration to the company's business plan, feasibility study, and pro 24
formas, including the nature of the risks to be insured, but in no event less 25
than three hundred thousand dollars ($300,000) one hundred twenty-five 26
thousand dollars ($125,000) . 27
28
SECTION 6. Arkansas Code § 23 -63-1604(d), concerning dividends and 29
distributions by a captive insurance company, is amended to read as follows: 30
(d)(1) A captive insurance company may not shall not pay a dividend 31
out of, or other distribution with respect to, capital or surplus, in excess 32
of the limitations set forth in § 23 -63-515, without the prior approval of 33
the commissioner. 34
(2) Approval of an ongoing plan for the payment of dividends or 35
other distributions must shall be conditioned upon the retention, at the time 36 SB237
4 02/14/2025 7:48:10 AM ANS130
of each payment, of capital or surplus in excess of amounts specified by or 1
determined in accordance with according to formulas approved by the 2
commissioner. 3
(3) This subsection shall not does not apply to producer 4
reinsurance captive insurance companies. 5
(4)(A) A pure captive insurance company is not required to 6
obtain prior approval by the commissioner for payment of an ordinary 7
dividend. 8
(B) A pure captive insurance company shall obtain the 9
prior approval by the commissioner for an extraordinary dividend or 10
distribution as defined in § 23 -63-515. 11
12
SECTION 7. Arkansas Code § 23 -63-1605(a)(1), concerning surplus 13
requirements for a captive insurance company, is amended to read as follows: 14
(a)(1) The Insurance Commissioner shall not issue a license to a 15
captive insurance company unless the company possesses and maintains 16
unimpaired surplus of: 17
(A) In the case of a producer reinsurance captive 18
insurance company, not less than three hundred thousand dollars ($300,000); 19
(B) In the case of a pure captive insurance company, not 20
less than one hundred fifty thousand dollars ($150,000) one hundred thousand 21
dollars ($100,000); 22
(C) In the case of an association captive insurance 23
company incorporated as a stock insurer, not less than three hundred fifty 24
thousand dollars ($350,000) two hundred fifty thousand dollars ($250,000) ; 25
(D) In the case of an industrial insured captive insurance 26
company incorporated as a stock insurer, not less than three hundred thousand 27
dollars ($300,000) two hundred fifty thousand dollars ($250,000) ; 28
(E) In the case of an association captive insurance 29
company incorporated as a mutual insurer, not less than seven hundred fifty 30
thousand dollars ($750,000) five hundred thousand dollars ($500,000) ; 31
(F) In the case of an industrial insured captive insurance 32
company incorporated as a mutual insurer, not less than five hundred thousand 33
dollars ($500,000); 34
(G) In the case of a sponsored captive insurance company, 35
not less than two hundred fifty thousand dollars ($250,000) one hundred 36 SB237
5 02/14/2025 7:48:10 AM ANS130
thousand dollars ($100,000) ; and 1
(H) In the case of a special purpose captive insurance 2
company, an amount determined by the commissioner after giving due 3
consideration to the company's business plan, feasibility study, and pro 4
formas, including the nature of the risks to be insured, but in no event less 5
than three hundred thousand dollars ($300,000) one hundred twenty-five 6
thousand dollars ($125,000) . 7
8
SECTION 8. Arkansas Code § 23-63-1606 is amended to read as follows: 9
23-63-1606. Organization. 10
(a) A captive insurance company may be formed and operated in any form 11
of business organization authorized under Arkansas law and approved by the 12
Insurance Commissioner. 13
(b) The alien captive insurance company may register to do business in 14
this state after the commissioner's certificate has been issued. 15
(c) The capital stock of a captive insurance company incorporated as a 16
stock insurer must shall be issued at not less than par value. 17
(d) At least one (1) of the members of the board of directors of a 18
captive insurance company formed as a corporation in this state shall be a 19
resident of the United States or a United States territory. 20
(e) At least one (1) of the members of the subscribers' advisory 21
committee of a captive insurance company formed as a reciprocal insurer shall 22
be a resident of the United States or a United States territory. 23
(f)(1) A captive insurance company formed under this subchapter has 24
the privileges of and is subject to the business organization law of this 25
state and is subject to this subchapter. 26
(2) If a conflict occurs between business organization law and 27
this subchapter, the latter controls. 28
(3)(A) The Arkansas Insurance Code concerning mergers, 29
consolidations, and mutualizations, and redomestications applies in 30
determining the procedures to be followed by a captive insurance company in 31
carrying out any of those transactions. 32
(B) The commissioner may, upon request of an insurer that 33
is a party to a merger authorized under subdivision (f)(3)(A) of this 34
section, waive certain applicable requirements to the merger transaction. 35
(C) A conversion may be accomplished under a reasonable 36 SB237
6 02/14/2025 7:48:10 AM ANS130
plan and procedure as may be approved by the commissioner and according to 1
rules that the commissioner may promulgate. 2
(D) The commissioner may waive or modify the requirements 3
for public notice and hearing. 4
(E) If a notice of public hearing is required but no one 5
requests a hearing, the commissioner may cancel the hearing. 6
(F) An alien insurer may be a party to a merger authorized 7
under subdivision (f)(3)(A) of this section if the requirements for a merger 8
between a captive insurance company and a foreign insurer under this chapter 9
apply to the merger transaction. 10
(g)(1)(A) Notwithstanding any other method authorized by law, a 11
foreign or alien insurer may become a domestic captive insurance company by 12
complying with the requirements of this subchapter relative to the 13
organization and licensing of a domestic captive insurance company of the 14
same type with the approval of the commissioner. 15
(B) A foreign or alien insurer redomesticating to this 16
state under this section may be organized under any corporate form permitted 17
by this chapter. 18
(2)(A) A foreign or alien insurer that is domiciled in a foreign 19
or alien jurisdiction may redomesticate under this section if as a result of 20
the actions taken by the foreign or alien insurer under this section to 21
redomesticate to this state, the foreign or alien insurer shall no longer be 22
a domestic legal entity of the foreign or alien jurisdiction. 23
(B) A foreign or alien insurer that applies to 24
redomesticate under this section shall provide evidence to the commissioner 25
that the applicable regulatory authority of the foreign or alien jurisdiction 26
of its domicile has no objection to the redomestication . 27
(3)(A) The foreign or alien insurer applying to redomesticate 28
under this section shall: 29
(i) File with the Secretary of State its articles of 30
association, charter, or other organizational document, together with 31
appropriate amendments thereto adopted according to the laws of this state; 32
(ii) Bring the articles of association, charter, or 33
other organizational document into compliance with the laws of this state; 34
and 35
(iii) Obtain an approval letter issued by the 36 SB237
7 02/14/2025 7:48:10 AM ANS130
commissioner. 1
(B) The foreign or alien insurer may file with the 2
Secretary of State an election deferring the effective date of the 3
redomestication. 4
(C) Upon filing and paying any required fees, the 5
Secretary of State shall issue an acknowledgement letter to the applicant. 6
(4) The foreign or alien insurer shall file a copy of the 7
Secretary of State's acknowledgement letter with the commissioner, who shall 8
then issue a license under § 23 -63-1602. 9
(5) Upon the completion of a redomestication under this section, 10
the captive insurance company shall be: 11
(A) Considered domiciled in this state; 12
(B) Subject to this subchapter; and 13
(C) Deemed to have a formation date corresponding to its 14
original formation date in the foreign or alien domicile . 15
(6) For the purposes of an examination under § 23 -63-1608, an 16
examination conducted by the foreign or alien domicile that is substantially 17
similar to an examination conducted in this state if the company had been 18
domiciled in this state shall be recognized for the purposes of establishing 19
the period of time when the next examination is due . 20
(7) A foreign or alien insurer redomesticating under this 21
section: 22
(A) Shall: 23
(i) Be liable only for taxes due under § 23 -63-1614 24
on premiums paid to the captive insurance company after redomestication ; and 25
(ii)(a) Report all premium taxes due under § 23 -63-26
1614 but may elect to forego the payment of premium taxes, in either its 27
first or its second year of operations, but not both, after redomesticating 28
into this state. 29
(b) A foreign or alien insurer making an 30
election under subdivision (g)(7)(A)(ii)(a) of this section that surrenders 31
its license or redomesticates to another jurisdiction within five (5) years 32
of redomestication into this state shall immediately pay a tax in an amount 33
equal to the premium tax under § 23 -63-1614 plus ten percent (10%) per annum 34
from the date the premium tax under § 23 -63-1614 would have been due ; and 35
(B) After July 1 of any year shall be subject to only one -36 SB237
8 02/14/2025 7:48:10 AM ANS130
half (½) of the minimum premium tax specified under § 23 -63-1614 in its first 1
year. 2
(8) This section shall not: 3
(A) Be the exclusive means of redomesticating a captive 4
insurance company to this state; and 5
(B) Restrict the ability of an insurance company to 6
undergo a merger, consolidation, transfer of assets and liabilities, or 7
utilize any other means permitted by law to effect the transfer of operations 8
of a foreign or alien insurance company to this state . 9
(h)(1)(A) A captive insurance company formed as a reciprocal insurer 10
under this subchapter is subject to § 23 -70-101 et seq. and this subchapter. 11
(B) If a conflict occurs between § 23 -70-101 et seq. and 12
this subchapter, the latter controls. 13
(C) To the extent a reciprocal insurer is made subject to 14
the Arkansas Insurance Code under § 23 -70-101 et seq., the Arkansas Insurance 15
Code is not applicable to a reciprocal insurer formed under this subchapter 16
unless expressly made applicable to a captive insurance company by this 17
subchapter. 18
(2) In addition to subdivision (g)(1) subdivision (h)(1) of this 19
section, a captive insurance company organized as a reciprocal insurer that 20
is an industrial insured group is subject to § 23 -70-101 et seq. and 21
applicable provisions of the Arkansas Insurance Code. 22
(h)(i) The articles of incorporation or bylaws of a captive insurance 23
company may authorize a quorum of a board of directors to consist of no fewer 24
than one-third (⅓) of the fixed or prescribed number of directors under § 4-25
27-824(b). 26
(i)(j) The subscribers' agreement or other organizing document of a 27
captive insurance company formed as a reciprocal insurer may authorize a 28
quorum of a subscribers' advisory committee to consist of no fewer than one -29
third (⅓) of the number of its members. 30
31
SECTION 9. Arkansas Code § 23 -63-1607(b)(2), concerning reporting 32
requirements of a captive insurance company, is amended to add an additional 33
subdivision to read as follows: 34
(C) The commissioner may waive the requirement of an audit 35
or actuarial opinion for a pure captive insurance company if the parent of 36 SB237
9 02/14/2025 7:48:10 AM ANS130
the pure captive insurance company has: 1
(i) A consolidated audit; 2
(ii) A guaranty for liabilities of the pure captive 3
insurance company; 4
(iii) A minimum net equity of one hundred million 5
dollars ($100,000,000); and 6
(iv) A financial strength rating of "BBB" or better 7
from a rating agency acceptable to the commissioner. 8
9
SECTION 10. Arkansas Code § 23 -63-1608(a), concerning the examination 10
of a captive insurance company, is amended to add an additional subdivision 11
to read as follows: 12
(3) Notwithstanding subdivision (a)(1) of this section, a pure 13
captive insurance company shall be subject to examination: 14
(A) At least one (1) time every seven (7) years; or 15
(B) Whenever the commissioner determines it to be prudent. 16
17
SECTION 11. Arkansas Code § 23 -63-1614 is amended to read as follows: 18
23-63-1614. Premium tax — Definition. 19
(a) Except as provided in this section, a captive insurance company 20
shall pay to the Insurance Commissioner by March 1 of each year, a tax at the 21
rate of: 22
(1) Two hundred fifty thousandths of one percent (0.250%) on the 23
first twenty million dollars ($20,000,000); 24
(2) One hundred fifty thousandths of one percent (0.150%) on the 25
next twenty million dollars ($20,000,000); and 26
(3) Fifty thousandths of one percent (0.050%) on each dollar 27
thereafter, on the direct premiums collected or contracted for on policies or 28
contracts of insurance written by the captive insurance company during the 29
year ending December 31 next preceding, after deducting from the direct 30
premiums subject to the tax the amounts paid to policyholders as return 31
premiums, which shall include dividends on unabsorbed premiums or premium 32
deposits returned or credited to policyholders. 33
(b)(1) Except as provided in this section, a captive insurance company 34
shall pay to the commissioner by March 1 of each year, a tax at the rate of: 35
(A) Two hundred twenty -five thousandths of one percent 36 SB237
10 02/14/2025 7:48:10 AM ANS130
(0.225%) on the first twenty million dollars ($20,000,000) of assumed 1
reinsurance premium; 2
(B) One hundred fifty thousandths of one percent (0.150%) 3
on the next twenty million dollars ($20,000,000); 4
(C) Fifty thousandths of one percent (0.050%) on the next 5
twenty million dollars ($20,000,000); and 6
(D) Twenty-five thousandths of one percent (0.025%) of 7
each dollar thereafter. 8
(2) No reinsurance tax applies A reinsurance tax does not apply 9
to premiums for risks or portions of risks that are subject to taxation on a 10
direct basis under subsection (a) of this section. 11
(3) A premium tax is not payable in connection with the receipt 12
of assets in exchange for the assumption of loss reserves and other 13
liabilities of another insurer under common ownership and control, if the 14
transaction is part of a plan to discontinue the operations of the other 15
insurer and if the intent of the parties to the transaction is to renew or 16
maintain business with the captive insurance company. 17
(c) If the aggregate taxes to be paid by a captive insurance company 18
calculated under subsections (a) and (b) of this section amount to less than 19
five thousand dollars ($5,000) in any year, the captive insurance company 20
shall pay a tax of five thousand dollars ($5,000) for that year. 21
(d) The total tax paid by a captive insurance company shall not exceed 22
one hundred thousand dollars ($100,000) in any year. 23
(e)(1)(A) A captive insurance company may apply for a credit for the 24
noncommissioned salaries and wages of its Arkansas employees that are paid in 25
connection with its captive insurance company operations. 26
(B) The credit under subdivision (e)(1)(A) of this section 27
may be applied as an offset against the premium taxes imposed by this 28
section. 29
(2)(A) An employee shall be employed for six (6) months for the 30
salary or wages to be eligible to qualify for the premium tax credit under 31
subdivision (e)(1)(A) of this section. 32
(B) The employee shall: 33
(i) Have a primary residence in this state; and 34
(ii) Pay income taxes in this state. 35
(3) The offset under subdivision (e)(1)(B) of this section shall 36 SB237
11 02/14/2025 7:48:10 AM ANS130
not reduce the premium tax due by more than fifty percent (50%). 1
(f) A captive insurance company failing to make returns or to pay all 2
taxes required by this section is subject to relevant sanctions under the 3
Arkansas Insurance Code. 4
(f)(g) Two (2) or more captive insurance companies under common 5
ownership and control must shall be taxed as though they were a single 6
captive insurance company. 7
(g)(h) As used in this section, “common ownership and control” means: 8
(1) In the case of stock corporations, the direct or indirect 9
ownership of eighty percent (80%) or more of the outstanding voting stock of 10
two (2) or more corporations by the same shareholder or shareholders; and 11
(2) In the case of mutual corporations, the direct or indirect 12
ownership of eighty percent (80%) or more of the surplus and the voting power 13
of two (2) or more corporations by the same member or members. 14
(h)(i) In the case of a branch captive insurance company, the tax 15
under this section applies only to the branch business of the company. 16
(i)(1)(j)(1) The tax under this section constitutes all taxes 17
collectible under the laws of this state from a captive insurance company. 18
(2) No other tax may be levied or collected from a captive 19
insurance company by this state or a county, city, or municipality of this 20
state, except ad valorem taxes on real and personal property used in the 21
production of income. 22
(j)(k) This section shall not apply to any producer reinsurance 23
captive insurance company that invests and continuously maintains not less 24
than fifty percent (50%) of its assets in certificates of deposit of any bank 25
organized under the laws of the United States with a banking facility in the 26
State of Arkansas or any federally insured bank or savings institution 27
organized under the laws of the State of Arkansas, or in bonds, notes, 28
warrants, or other securities, not in default, that are direct obligations 29
of: 30
(1) This state; 31
(2) Any county, incorporated city or town, or duly organized 32
school district or other taxing district of this state: 33
(A) If no default on the part of the obligor in payment of 34
principal or interest on any of its obligations has occurred within five (5) 35
years prior to the date of the proposed investment; or 36 SB237
12 02/14/2025 7:48:10 AM ANS130
(B) If the obligations were issued less than five (5) 1
years prior to the date of investment, no default in payment of principal or 2
interest has occurred on the obligations to be purchased or on any other 3
public obligation of the obligor within five (5) years of the investment; or 4
(3) Any local improvement district in this state to finance 5
local improvements authorized by law, if the principal and interest of the 6
obligations are payable from assessments on real property within the local 7
improvement district, and: 8
(A) No default on the part of the obligor in payment of 9
principal or interest on any of its obligations has occurred within five (5) 10
years prior to the date of the proposed investment; or 11
(B) If the obligations were issued less than five (5) 12
years prior to the date of investment, no default in payment of principal or 13
interest has occurred on the obligations to be purchased or on any other 14
public obligation of the obligor within five (5) years of the investment. 15
16
SECTION 12. Arkansas Code § 23 -63-1624(c)(3), concerning the license 17
renewal fee of a dormant captive insurance company, is amended to read as 18
follows: 19
(3) Pay a license renewal fee as provided in the rules 20
promulgated by the commissioner under Section 18 of Rule and Regulation 73 of 21
the State Insurance Department. 22
23
SECTION 13. Arkansas Code Title 23, Chapter 63, Subchapter 16, is 24
amended to add an additional section to read as follows: 25
23-63-1625. Violations. 26
(a) The Insurance Commissioner, after notice and a hearing, shall 27
suspend or revoke a certificate of authority of a captive insurance company 28
if the commissioner finds that the captive insurance company: 29
(1)(A) Is in an unsound condition or is in such condition, or is 30
using methods and practices in the conduct of its business, as to allow 31
further transactions of insurance in Arkansas hazardous or injurious to the 32
policyholders of the captive insurance company or to the public. 33
(B) For purposes of this section, the commissioner may 34
consider the present, past, and future trends in the financial condition of 35
the captive insurance company that may affect the solvency of the captive 36 SB237
13 02/14/2025 7:48:10 AM ANS130
insurance company; 1
(2) Refuses to be examined or to produce the accounts, records, 2
or files of the captive insurance company for examination or if any of the 3
officers of the captive insurance company have refused to give information 4
with respect to the affairs of the captive insurance company when required by 5
the commissioner; 6
(3) Fails to pay any final judgment rendered against the captive 7
insurance company within thirty (30) days of entry of the judgment; or 8
(4) Knowingly, or with reckless disregard, violated or failed to 9
comply with the Arkansas Insurance Code or with any lawful rule or order of 10
the commissioner. 11
(b) If the commissioner finds that one (1) or more grounds exist for 12
the suspension or revocation of a certificate of authority of a captive 13
insurance company, the commissioner may: 14
(1) In lieu of suspension, impose upon the holder of the 15
certificate of authority an administrative penalty in the amount of five 16
thousand dollars ($5,000); or 17
(2) In lieu of revocation, impose upon the holder of the 18
certificate of authority an administrative penalty in the amount of ten 19
thousand dollars ($10,000). 20
21
22
APPROVED: 4/14/25 23
24
25
26
27
28
29
30
31
32
33
34
35
36