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2025 Regular Session
HOUSE BILL NO. 635
BY REPRESENTATIVE BAMBURG AND SENATOR BASS
Prefiled pursuant to Article III, Section 2(A)(4)(b)(i) of the Constitution of Louisiana.
INSURANCE DEPARTMENT: Establishes the Creating Holistic Options in Coverage for
Enterprise and Self-Insurance (CHOICES) Law
1 AN ACT
2To amend and reenact Subpart S of Part I of Title 22 of the Louisiana Revised Statutes of
3 1950, to be comprised of R.S. 22:550.1 through 550.32 and R.S. 44:4.1(B)(11) and
4 to enact R.S. 22:821(40), relative to captive insurance companies; to provide for
5 definitions; to provide for application and regulation requirements; to provide for
6 capital and surplus requirements; to provide for confidentiality of certain records; to
7 provide a public records exception for certain records; to provide for examinations;
8 to provide for redomestication; to provide for dormancy; to require for the payment
9 of fees; and to provide for related matters.
10Be it enacted by the Legislature of Louisiana:
11 Section 1. Section 2 of this Act amends and reenacts Subpart S of Part I of Title 22
12of the Louisiana Revised Statutes of 1950 in its entirety. Due to the length of the Subpart,
13present law is not included as overstruck text.
14 Section 2. Subpart S of Part I of Title 22 of the Louisiana Revised Statutes of 1950,
15comprised of R.S. 22:550.1 through 550.32, is hereby amended and reenacted and R.S.
1622:821(40) is hereby enacted to read as follows:
17 SUBPART S. CAPTIVE INSURANCE COMPANI ES
18 §550.1. Purpose and short title
19 The purpose of this Subpart is to regulate the formation and operation of
20 domestic captive insurance companies within the state of Louisiana. This Subpart
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1 may be known and cited as the "Creating Holistic Options in Coverage for Enterprise
2 and Self-insurance Law" or "CHOICES Law".
3 §550.2. Definitions
4 As used in this Subpart, unless the context otherwise requires, the following
5 definitions apply:
6 (1) "Affiliated company" means a company in the same corporate system as
7 its parent or a member organization by virtue of common ownership, control,
8 operation, or management.
9 (2) "Association" means any legal association of individuals, corporations,
10 limited liability companies, partnerships, associations, or other entities,
11 independently or in conjunction with some or all of its member organizations, doing
12 any of the following:
13 (a) Owning, controlling, or holding the power to vote all of the outstanding
14 voting securities of an association captive insurance company incorporated as a stock
15 insurer.
16 (b) Having complete voting control over an association captive insurance
17 company incorporated as a mutual insurer.
18 (c) Having complete voting control over an association captive insurance
19 company.
20 (d) Constituting all of the subscribers of an association captive insurance
21 company formed as a reciprocal insurer.
22 (3) "Association captive insurer" or "insurance company" means any
23 company that insures only the risks of the member organizations of the association,
24 affiliated companies of the member organizations, and the risks of the association
25 itself.
26 (4) "Branch captive insurance company" means an alien captive insurance
27 company licensed by the commissioner to transact the business of insurance in this
28 state. For the purposes of this Subpart, a branch captive insurance company is the
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1 same as a pure captive insurance company, as defined in this Section, with respect
2 to operations in this state unless otherwise permitted by the commissioner.
3 (5) "Captive insurance company" means any pure captive insurance
4 company, association captive insurance company, risk retention group, or affiliated
5 reinsurance company formed or licensed pursuant to this Subpart.
6 (6) "Cash equivalents" means any short-term, highly liquid investments that
7 are both of the following:
8 (a) Readily convertible to known amounts of cash.
9 (b) So near their maturity that they present insignificant risk of changes in
10 value due to changes in interest rates.
11 (7) "Commissioner" means the commissioner of insurance.
12 (8) "Common ownership and control" means the direct or indirect ownership
13 of fifty-one percent or more of the outstanding voting stock of two or more
14 corporations by the same member or members.
15 (9) "Controlled unaffiliated business" means a business that meets all of the
16 following criteria:
17 (a) It is not in the corporate system of a parent and its affiliated companies,
18 in the case of a pure captive insurance company.
19 (b) It has an existing contractual relationship with a parent or one of its
20 affiliated companies, in the case of a pure captive insurance company.
21 (c) Risks are managed by a pure captive insurance company in accordance
22 with R.S. 22:550.28.
23 (10) "Department" means the Department of Insurance.
24 (11) "Excess workers' compensation insurance" means, in the case of an
25 employer that has insured or self-insured its workers' compensation risks in
26 accordance with applicable state or federal law, insurance in excess of the specified
27 per-incident or aggregate limit established by the commissioner.
28 (12) "Hazardous financial condition" means that, based upon its present or
29 reasonably anticipated financial condition, a captive insurance company, although
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1 not yet financially impaired or insolvent, is unlikely to be able to do either of the
2 following:
3 (a) Meet obligations to policyholders with respect to known claims and
4 reasonably anticipated claims.
5 (b) Pay other obligations in the normal course of business.
6 (13) "Member organization" means any corporation, partnership, association,
7 or other form of business organization that belongs to an association. Political
8 subdivisions, as defined in Section 44 of Article VI of the Constitution of Louisiana,
9 are not eligible for membership in an association.
10 (14) "Parent" means a corporation, limited liability company, partnership,
11 other entity, or an individual who directly or indirectly owns, controls, or holds the
12 power to vote more than fifty-one percent of the outstanding voting interests in
13 connection with any of the following:
14 (a) Securities of a pure captive insurance company organized as a stock
15 corporation.
16 (b) Membership interests of a pure captive insurance company organized as
17 a nonprofit corporation.
18 (c) Membership interests of a captive insurance company organized as a
19 limited liability company.
20 (15) "Pure captive insurance company" means any company that insures
21 risks of its parent and affiliated companies or controlled unaffiliated businesses.
22 (16) "Risk retention group" means a captive insurance company organized
23 under the laws of this state pursuant to the Liability Risk Retention Act of 1986, 15
24 U.S.C. §3901 et seq., as amended, as a stock corporation, a mutual corporation, a
25 reciprocal, or other limited liability entity.
26 (17) "Stock insurer" means an incorporated insurer with issued and
27 outstanding stock whose capital and surplus is owned by its stockholders
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1 §550.3. Applicability of other provisions
2 A. The terms and conditions set forth in R.S. 22:96 and R.S. 22:2001 et seq.,
3 pertaining to rehabilitation, liquidation, conservation, dissolution, and administrative
4 supervision, apply to captive insurance companies licensed pursuant to this Subpart.
5 B. The provisions of R.S. 22:72 regarding stock and mutual conversions
6 apply to captive insurance companies licensed pursuant to this Subpart.
7 C. The provisions of acquisition of control or merger with a domestic insurer
8 provided for in the Insurance Holding Company System Regulatory Law, R.S.
9 22:691.1 et seq., apply to captive insurance companies licensed pursuant to this
10 Subpart.
11 §550.4. Regulations
12 The commissioner may establish such rules and regulations in accordance
13 with the Administrative Procedure Act as are necessary to implement and enforce the
14 provisions of this Subpart.
15 §550.5. Incorporation of a captive insurance company
16 A. A captive insurance company may be incorporated as a stock corporation
17 or a nonstock corporation pursuant to this Title, or may be formed as a limited
18 liability company, partnership, limited partnership, statutory trust, or any lawful form
19 of entity approved by the commissioner.
20 B. A captive insurance company shall prepare articles of incorporation to be
21 approved and recorded in the same manner as provided in R.S. 22:61 et seq. In
22 determining whether to grant approval, the commissioner shall consider all of the
23 following:
24 (1) The character, reputation, financial standing, and purposes of the
25 incorporators or organizers.
26 (2) The character, reputation, financial responsibility, experience relating to
27 insurance, and business qualifications of the officers and directors.
28 (3) The competence of any person who, pursuant to a contract with the
29 captive insurance company, will manage the affairs of the company.
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1 (4) The competence, reputation, and experience of the company's legal
2 counsel relating to the regulation of insurance.
3 (5) The company's business plan.
4 (6) Such other aspects as the commissioner deems advisable.
5 C. The articles of incorporation or bylaws of a captive insurance company
6 shall require that a quorum of the board of directors consists of not less than one-half
7 of the number of directors prescribed by the articles of incorporation or bylaws.
8 D. The capital stock of a captive insurance company shall be issued at not
9 less than par value.
10 §550.6. Certificate of authority required to transact insurance
11 A captive insurance company shall not transact the business of insurance in
12 this state unless the captive insurance company first obtains a certificate of authority
13 from the commissioner.
14 §550.7. Application requirements; confidential information
15 A. After incorporation, a captive insurance company shall apply to the
16 commissioner for a certificate of authority. The application shall be certified by the
17 initial board of directors of the captive insurance company and be accompanied by
18 the fee as set forth in R.S. 22:821. Before receiving a certificate of authority, a
19 captive insurance company shall file an application including all of the following:
20 (1) A copy of its bylaws, organizational documents, and any other statements
21 or documents required by the commissioner.
22 (2) A financial statement that has been certified by two principal officers.
23 (3) Biographical background information, on a form prescribed by the
24 commissioner, for each person who controls, directly or indirectly, ten percent or
25 more of the captive insurance company and for each director and officer in
26 accordance with the requirements set forth in R.S. 22:41.3.
27 (4) A plan of operation which clearly indicates the method of operation
28 including all of the following items:
29 (a) The types and limits of insurance that will be provided.
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1 (b) Pro forma financial statements for a period covering three years,
2 including a balance sheet, income statement, and cash flow statement.
3 (c) The amount and liquidity of assets relative to the risks to be assumed.
4 (d) The expertise, experience, and character of the persons who will manage
5 the company.
6 (e) A description of the reinsurance program.
7 (f) A description of the underwriting policy, including who will perform
8 such functions.
9 (g) A description of the claims handling procedures, including who will
10 perform such functions.
11 (h) A description of the investment policy.
12 (i) A description of its ratemaking policies and procedures.
13 (j) The adequacy of its programs providing for loss prevention by its parent
14 or member organizations.
15 (k) The overall soundness of the plan of operation.
16 (5) A feasibility study or other analysis prepared by a qualified actuary.
17 (6)(a) A description of the coverages, deductibles, coverage limits, and rates,
18 together with such additional information as the commissioner may reasonably
19 require.
20 (b) If there is a subsequent material change in any item in the description,
21 the company shall submit an appropriate revision for approval and shall not offer any
22 additional kinds of insurance until a revision of the description is approved by the
23 commissioner. The company shall inform the adoption of such change.
24 (7) Evidence of its beneficial ownership, sponsorship, or membership.
25 (8) Such other factors deemed relevant by the commissioner in ascertaining
26 whether the proposed captive insurance company will be able to meet its policy
27 obligations.
28 B. Each applicant shall pay to the commissioner nonrefundable fees in
29 application for an initial certificate of authority and for actuarial review pursuant to
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1 R.S. 22:821. The commissioner may retain legal, financial, and examination services
2 from outside the department and may charge the reasonable cost of services to the
3 applicant. The provisions of R.S. 22:1981 et seq. apply to examinations,
4 investigations, and processing conducted pursuant to this Subsection.
5 C. If the commissioner is satisfied that the filed documents and statements
6 of the captive insurance company comply with the provisions of this Subpart, and
7 that the captive insurance company has been duly organized, the commissioner may
8 grant a certificate of authority authorizing it to engage in the business of insurance
9 in this state.
10 D.(1) In accordance with confidentiality provisions provided for in this Title,
11 information submitted pursuant to this Subsection, including any subsequent updates,
12 amendments, or revisions of or to such information, is confidential and shall not be
13 made public by the commissioner or an employee or agent of the commissioner
14 without the written consent of the company, except that the commissioner may
15 disclose, publish, or authorize the disclosure or publication of certain information for
16 the following purposes:
17 (a) In furtherance of legal or regulatory proceedings brought as a part of the
18 commissioner's official duties.
19 (b) To provide information to criminal law enforcement authorities for use
20 in the exercise of the commissioner's duties and authorities.
21 (c) To provide information to a public officer having jurisdiction over the
22 regulation of insurance with other state, federal, or international agencies, under the
23 following circumstances:
24 (i) The receiving public official shall agree in writing to maintain the
25 confidentiality of the information.
26 (ii) The laws of the state or foreign government in which the public official
27 serves require the information to be and to remain confidential.
28 (2)(a) Information submitted pursuant to this Section remains confidential
29 and shall not be made public by the commissioner or an employee or agent of the
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1 commissioner without the written consent of the captive insurance company, except
2 as provided in Paragraph (1) of this Subsection and under the following
3 circumstances:
4 (b) The information may be discoverable by a party in a civil action or
5 contested case to which the captive insurance company that submitted the
6 information is a party, and the party seeking to discover the information shows all
7 of the following:
8 (i) The information sought is relevant to and necessary for the furtherance
9 of the action or case.
10 (ii) The information sought is unavailable from other nonconfidential
11 sources.
12 (iii) A subpoena issued by a judicial or administrative officer of competent
13 jurisdiction has been submitted to the commissioner.
14 E. Neither the commissioner nor any person who receives documents,
15 material, or information pursuant to this Section while acting under the authority of
16 the commissioner is required or permitted to testify in any private civil action
17 concerning confidential documents, material, or information.
18 F. Nothing in this Section shall be construed to excuse the applicant from
19 making any required disclosure pursuant to this Subpart.
20 §550.8. Initial examination and issuance of certificate of authority
21 Upon receipt of the application for certificate of authority, the commissioner
22 shall cause an initial examination to be made of the captive insurance company. If,
23 in the opinion of the commissioner, the examination shows the corporation to be duly
24 organized with adequate capital and surplus to meet its policyholder obligations, and
25 in compliance with all requirements of law, he shall notify the applicant and issue
26 a certificate of authority.
27 §550.9. Change of information submitted with application
28 A captive insurance company shall notify the commissioner of any changes
29 to the plan of operation or other information submitted with the application within
30 thirty days of the adoption of the change.
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1 §550.10. Capital and surplus requirements
2 A. Prior to issuing policies of insurance or entering into any contracts of
3 reinsurance, each pure captive insurance company shall possess and thereafter
4 maintain unimpaired paid-in capital and surplus of not less than two hundred fifty
5 thousand dollars to be maintained pursuant to Subsection F of this Section.
6 B. Prior to issuing any policies of insurance or entering into any contracts
7 of reinsurance, each association captive insurance company shall possess and
8 thereafter maintain unimpaired paid-in capital and surplus of not less than five
9 hundred thousand dollars and surplus required to be maintained pursuant to
10 Subsection F of this Section.
11 C. Prior to issuing any policies of insurance or entering into any contracts
12 of reinsurance, each risk retention group shall possess and thereafter maintain
13 unimpaired paid-in capital and surplus of not less than one million dollars or surplus
14 required to be maintained pursuant to Subsection F of this Section.
15 D. A branch captive insurance company shall maintain at all times an
16 unimpaired paid-in capital and surplus requirement of two hundred and fifty
17 thousand dollars or an amount determined by the commissioner pursuant to
18 Subsection F of this Section. Additionally, as security for the payment of liabilities
19 attributable to branch operations, the commissioner may require that a trust fund,
20 funded by an irrevocable letter of credit or other acceptable asset, be established and
21 maintained in the United States for the benefit of United States policyholders and
22 ceding insurers. The amount of security required is not less than the capital and
23 surplus requirement and the reserves on the insurance policies or reinsurance
24 contracts.
25 E. Except as otherwise provided by the commissioner pursuant to Subsection
26 F of this Section, the capital required to be maintained pursuant to this Section shall
27 be in the form of cash, cash equivalents, bonds, marketable securities, a trust
28 approved by the commissioner and pledged to the commissioner, or evidences of
29 indebtedness which are direct general obligations of the government of the United
30 States.
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1 F. The commissioner may prescribe additional requirements relating to
2 capital and surplus based on the type, volume, and nature of the insurance business
3 that is transacted by the captive insurance company.
4 §550.11. Deposit required of association captive insurance companies
5 Before receiving a certificate of authority, all association captive insurance
6 companies shall deposit with the commissioner a safekeeping or trust receipt from
7 a bank located in the state and doing business within the state or from a savings and
8 loan association chartered to do business in this state indicating that the association
9 captive insurance company has deposited one hundred thousand dollars in money or
10 bonds of the United States, the state of Louisiana, or any political subdivision
11 thereof, of the par value of not less than one hundred thousand dollars. All securities
12 deposited pursuant to this Section shall be held in trust for the benefit and protection
13 of and as security for all policyholders of the association captive insurance company
14 making the deposit.
15 §550.12. Suspension or revocation of certificate of authority; hearings
16 A. The commissioner may refuse, suspend, or revoke the certificate of
17 authority of a captive insurance company if, after an examination, the commissioner
18 determines that the captive insurance company satisfies any one of the following:
19 (1) Is insolvent or has impaired its required capital or surplus.
20 (2) Is in such condition that its further transaction of business in this state
21 would be hazardous to the policyholders, creditors, or the public.
22 (3) Has failed to meet a requirement of R.S. 22:550.10.
23 (4) Has refused or failed to submit an annual report, as required by R.S.
24 22:550.21, or any other report or statement required by law or by order of the
25 commissioner.
26 (5) Has failed to comply with the provisions of its charter or bylaws.
27 (6) Has failed to submit to an examination, or has refused or failed to pay the
28 cost of an examination required pursuant to R.S. 22:550.22.
29 (7) Has used any method in transacting the business of insurance pursuant
30 to this Subpart which is detrimental to the operation of the captive insurance
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1 company or would make its condition unsound with respect to its policyholders or
2 the general public.
3 (8) Has failed otherwise to comply with the laws of this state.
4 (9) The suspension or revocation of the certificate of authority of the captive
5 insurance company is in the best interest of its policyholders or the general public.
6 B. A captive insurance company whose certificate of authority has been
7 suspended, revoked, or refused shall not be subsequently authorized unless the
8 grounds for such suspension, revocation, or refusal no longer exist and the captive
9 insurance company is otherwise fully qualified.
10 C. An aggrieved party affected by the commissioner's decision, act, or order
11 may demand a hearing in accordance with Chapter 12 of this Title, R.S. 22:2191 et
12 seq.
13 §550.13. Authorized and prohibited types of insurance
14 A. Except as otherwise provided in this Section, a captive insurance
15 company licensed pursuant to this Subpart may transact any form of insurance
16 classified in R.S. 22:47.
17 B. A captive insurance company licensed pursuant to this Subpart shall
18 comply with the following:
19 (1) The insurer shall not directly provide insurance classified as life, health
20 and accident, title, credit life, credit property and casualty, or annuity as described
21 in R.S. 22:47.
22 (2) The insurer shall not directly provide personal motor vehicle,
23 homeowners' insurance coverage, or any other noncommercial line of coverage.
24 (3) The insurer shall not directly provide workers' compensation or
25 employers' liability insurance coverage, except in connection with a self-funded
26 insurance program as prescribed in this Section.
27 (4) The insurer shall not accept or cede reinsurance, except as otherwise
28 provided in R.S. 22:550.17.
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1 (5) The insurer may provide excess workers' compensation insurance to its
2 parent and affiliated companies, unless otherwise prohibited by the laws of the state
3 in which the insurance is transacted.
4 (6) The insurer may reinsure workers' compensation insurance provided
5 pursuant to a program of self-funded insurance of its parent and affiliated companies
6 if either one of the following applies:
7 (a) The parent or affiliated company providing the self-funded insurance is
8 certified as a self-insured employer by the Louisiana Workforce Commission, if the
9 insurance is being transacted in this state.
10 (b) The program of self-funded insurance is otherwise qualified pursuant to,
11 or in compliance with, the laws of the state in which the insurance is transacted.
12 (7) A risk retention group shall not insure any risks other than those of its
13 members and owners.
14 (8) Any captive insurance company may provide excess workers'
15 compensation insurance to its parent and affiliated companies, unless prohibited by
16 federal law or laws of the state having jurisdiction over the transaction. Any captive
17 insurance company, unless prohibited by federal law, may reinsure workers'
18 compensation of a qualified self-insured plan of its parent or affiliated companies.
19 C. A pure captive insurance company shall not insure any risks other than
20 those of its parent and affiliated companies or controlled unaffiliated businesses.
21 D. An association captive insurance company shall not insure any risks other
22 than those of the member organizations of its association and the affiliated
23 companies of the member organizations.
24 E. An association captive insurance company shall not expose itself to loss
25 on any one risk in an amount which exceeds ten percent of the captive insurance
26 company's capital and surplus. A risk, or any portion thereof, which has been
27 reinsured shall be deducted in determining the limitation of risk prescribed in the
28 Section.
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1 F. An association captive insurance company shall maintain a ratio of actual
2 annual premiums written, net of reinsurance, to current capital and surplus less than
3 or equal to four to one.
4 G. Notwithstanding the provisions of this Section, a captive insurance
5 company may obtain a certificate of authority to provide coverage for unrelated risks
6 if the commissioner deems that extraordinary circumstances exist which make the
7 provision of this coverage by a captive insurance company appropriate and in the
8 best interest of the public. In determining whether such extraordinary circumstances
9 exist, the commissioner shall consider all of the following factors:
10 (1) The extent to which the particular coverage is available in the voluntary
11 market.
12 (2) The existence of a relationship between the parent of the captive
13 insurance company and the proposed policyholders other than that of insurer to
14 insured.
15 (3) Whether the captive insurance company has sufficient capital and surplus
16 to insure the proposed risks.
17 (4) Any other factors which the commissioner deems appropriate.
18 §550.14. Formation and meetings of board of directors; additional requirements to
19 transact insurance
20 A. The board of directors of a captive insurance company shall meet in
21 accordance with the following standards:
22 (1) The captive insurance company shall maintain its books and records in
23 accordance with R.S. 22:68.
24 (2) Prior to transacting insurance in this state, a captive insurance company
25 shall do all of the following:
26 (a) Make adequate arrangements with a bank located in this state that is
27 authorized pursuant to state or federal law to transfer money.
28 (b) Employ or enter into a contract with a natural person or business
29 organization to manage the affairs of the captive insurance company that meets the
30 standards of competence and experience satisfactory to the commissioner.
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1 (c) Employ or enter into a contract with a qualified and experienced certified
2 public accountant that is approved by the commissioner or a firm of certified public
3 accountants that is nationally recognized.
4 (d) Employ or enter into a contract with qualified, experienced actuaries who
5 are approved by the commissioner to perform reviews and evaluations of the
6 operations of the captive insurance company.
7 B. A captive insurance company shall not engage in any insurance business
8 in this state unless it complies with all of the following:
9 (1) It first obtains from the commissioner a certificate of authority
10 authorizing it to do business in this state.
11 (2) Its board of directors, committee of managers, or, in the case of a
12 reciprocal insurer, its subscribers' advisory committee holds at least one meeting
13 each year in this state, except for an association captive insurance company, whose
14 board of directors shall meet at least quarterly each year.
15 (3) It maintains its principal place of business in this state.
16 (4) It appoints a registered agent to accept service of process and to
17 otherwise act on its behalf in this state, provided that whenever the registered agent
18 cannot with reasonable diligence be found at the registered office of the captive
19 insurance company, the commissioner shall be an agent of the captive insurance
20 company upon whom any process, notice, or demand may be delivered as authorized
21 service of process.
22 §550.15. Payment of dividends
23 A captive insurance company shall not pay dividends out of, or make any
24 other distribution with respect to its capital or surplus, or both, unless the captive
25 insurance company has obtained the prior approval of the commissioner to make
26 such a payment or distribution.
27 §550.16. Investments; loan to parent or affiliated company in certain circumstances
28 A. Except as otherwise provided in this Section, an association captive
29 insurance company shall comply with the requirements relating to domestic insurer
30 investments as set forth in R.S. 22:601.1 et seq.
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1 B. A pure captive insurance company is not subject to any restrictions on
2 allowable investments, except that the commissioner may prohibit or limit any
3 investment that threatens the solvency or liquidity of the pure captive insurance
4 company.
5 C. A pure captive insurance company may make a loan to its parent or
6 affiliated company if the loan meets each of the following requirements:
7 (1) The loan is first approved in writing by the commissioner.
8 (2) The loan is evidenced by a note that is in a form approved by the
9 commissioner.
10 (3) The loan does not include any money that has been set aside as capital
11 or surplus as required by R.S. 22:550.10.
12 §550.17. Reinsurance; credit for reserves on risks or portions of risks in certain
13 circumstances; plan for workers' compensation deemed reinsurance in certain
14 circumstances
15 A. A captive insurance company shall not provide reinsurance on risks ceded
16 by any other insurer without prior written approval of the commissioner.
17 B. A captive insurance company may take credit for reserves on risks or
18 portions of risks ceded to a reinsurer, as authorized for domestic insurance
19 companies and shall be in compliance with Subpart E of Part III of Chapter 2, R.S.
20 22:651 et seq.
21 C. Subject to the approval of the commissioner, a captive insurance company
22 may take credit for reserves on risks or portions of risks ceded to a reinsurer, or to
23 a pool, an exchange, or an association acting as a reinsurer, that does not comply
24 with the requirements of Subsection B of this Section. The commissioner may
25 require such documents, financial information or other evidence as he determines
26 necessary to show that such reinsurer, pool, exchange, or association will be able to
27 provide adequate security for its financial obligations. The commissioner may deny
28 authorization or impose any limitations on the activities of such reinsurer, pool,
29 exchange, or association that, in his judgment, are necessary and proper to provide
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1 adequate security for the ceding captive insurance company and for the protection
2 and benefit of the general public.
3 D. For the purposes of this Subpart, insurance provided by a captive
4 insurance company of any plan for workers' compensation of its parent and affiliated
5 companies which is certified or otherwise qualified in the state in which the
6 insurance is provided as a self-insurance plan shall be deemed to be reinsurance.
7 §550.18. Captive insurance company prohibited from joining or contributing to risk-
8 sharing plan, risk pool or insurance insolvency guaranty fund
9 A. A captive insurance company shall not join or contribute financially to
10 any risk-sharing plan, risk pool, or insurance insolvency guaranty fund in this state.
11 A captive insurance company or its insured, its parent or an affiliated company, or
12 any member organization of its association shall not receive any benefit from such
13 a plan, pool, or fund for claims arising out of the operations of the captive insurance
14 company.
15 B. Any policy issued by an association captive insurance company shall
16 contain in at least fourteen-point boldface capital letters on the front page and the
17 declaration page, the following notice:
18 "NOTICE
19THIS POLICY IS ISSUED BY A CAPTIVE INSURANCE COMPANY. YOUR CAPTIVE
20INSURANCE COMPANY MAY NOT BE SUBJECT TO ALL OF THE INSURANCE
21LAWS AND REGULATIONS OF YOUR STATE. STATE INSURANCE INSOLVENCY
22GUARANTY FUNDS ARE NOT AVAILABLE FOR YOUR CAPTIVE INSURANCE
23COMPANY."
24 §550.19. Prohibited acts regarding solicitation or sale
25 A captive insurance company shall not engage in either of the following:
26 (1) The solicitation or sale of insurance by an association captive insurance
27 company to any person who is not eligible for membership in such association.
28 (2) The solicitation or sale of insurance by, or operation of, a captive
29 insurance company that is in a hazardous financial condition or is financially
30 impaired.
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1 §550.20. Prohibition on ownership by an insurance company
2 A captive insurance company shall not do business in this state if an
3 insurance company is directly or indirectly a member or owner of such captive
4 insurance company, except when the members of the captive insurance company are
5 all insurance companies.
6 §550.21. Annual report of financial condition to commissioner; regulations
7 designating form; alternative date to file annual report
8 Every captive insurance company licensed in this state shall file each of the
9 following with the department:
10 (1) Annually on or before March first, a statement of its financial condition
11 for the year ending December thirty-first immediately preceding, and any
12 amendment to the plan of operation at last year-end, verified by the oath of at least
13 two of its executive officers. The statement shall be in the form prescribed by the
14 commissioner.
15 (2) Annually on or before June thirtieth, an audited statement of the captive
16 insurance company's financial condition prepared in accordance with generally
17 accepted accounting principles in the United States for the year ending December
18 thirty-first immediately preceding, which shall include all of the following:
19 (a) Report of independent certified public accountant.
20 (b) Balance sheet.
21 (c) Income statement.
22 (d) Statement of cash flows.
23 (e) Statement of changes in capital and surplus.
24 (f) Notes to financial statements.
25 (g) Report of evaluation of internal controls.
26 (h) Accountant's letter.
27 (i) Actuarial analysis application.
28 (3) An annual actuarial certification of loss reserves and loss expense
29 reserves which includes an opinion of the adequacy of the loss reserves and loss
30 expense reserves of the captive insurance company, in a format acceptable to the
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1 commissioner. The person that certifies the reserves shall be approved by the
2 commissioner and shall be a qualified actuary as defined in the National Association
3 of Insurance Commissioners Quarterly and Annual Statement
4 Instructions—Property/Casualty.
5 §550.22. Examination by commissioner
6 A. If the commissioner determines it to be prudent, but not less frequently
7 than once every five years, the commissioner shall cause an examination of each
8 captive insurance company under the provisions of Chapter 8 of this Title, R.S.
9 22:1981 et seq. The company or companies examined pursuant to R.S. 22:1981 et
10 seq. shall pay the expenses and charges of the examination to the commissioner. The
11 Louisiana Public Records Law, pursuant to R.S. 44:1 et seq., and confidentiality
12 provisions in this Title apply to all documents, materials, information, privileged
13 documents, examination reports, preliminary examination reports or results, working
14 papers, recorded information and copies thereof, or other information that is
15 produced by, obtained by, or disclosed to the commissioner or any other person in
16 the course of an examination made pursuant to this Subpart.
17 B. In furtherance of the commissioner's duties, the commissioner may share
18 and receive documents, materials, or other information pursuant to R.S. 22:2 and
19 R.S. 22:1981 et seq.
20 §550.23. Taxes on premiums and assessments
21 A. Each captive insurance company shall pay to the commissioner on or
22 before March first of each year a tax at the rate of fifteen-hundredths of one percent
23 on the direct premiums collected or contracted for on policies or contracts of
24 insurance written by the captive insurance company during the year ending the prior
25 December thirty-first, after deducting from the direct premiums subject to the tax the
26 amounts paid to policyholders as return premiums which shall include dividends on
27 unabsorbed premiums or premium deposits returned or credited to policyholders.
28 B. Each captive insurance company shall pay to the commissioner on or
29 before March first of each year a tax at the rate of two hundred fourteen-thousandths
30 of one percent on the first twenty million dollars of assumed reinsurance premium,
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1 one hundred forty-three-thousandths of one percent on the next twenty million
2 dollars, forty-eighths-thousandths of one percent on the next twenty million dollars,
3 and twenty-four-thousandths of one percent on each dollar thereafter. However, no
4 reinsurance tax applies to premiums for risks or portions of risks that are subject to
5 taxation on a direct basis pursuant to Subsection A of this Section. No reinsurance
6 premium tax shall be payable in connection with the receipt of assets in exchange for
7 the assumption of loss reserves and other liabilities of another insurer under common
8 ownership and control if such transaction is part of a plan to discontinue the
9 operations of such other insurer, and if the intent of the parties to such transaction
10 is to renew or maintain such business with the captive insurance company. No
11 reinsurance premium tax shall be payable in connection with the receipt of assets in
12 exchange for the assumption of loss reserves and other liabilities of a captive
13 insurance company's parent or affiliates if the intent of such exchange is to renew or
14 maintain such business with the captive insurance company.
15 C. The annual minimum aggregate tax to be paid by a captive insurance
16 company calculated pursuant to Subsections A and B of this Section is seven
17 thousand five hundred dollars. The annual maximum aggregate tax to be paid by a
18 captive insurance company calculated pursuant to Subsections A and B of this
19 Section is two hundred thousand dollars.
20 D. The reduction of tax in accordance with R.S. 22:832 does not apply to
21 captive insurance companies.
22 E. A captive insurance company failing to make returns as required by this
23 Subpart or failing to pay within the time required for all taxes assessed by this
24 Section shall be subject to the provisions R.S. 22:846.
25 F. Subject to the provisions of Subsection C of this Section, two or more
26 captive insurance companies under common ownership and control shall be taxed
27 as though they were a single captive insurance company.
28 G. As used in this Section:
29 (1) "Common ownership and control" means ownership and control of two
30 or more captive insurance companies by the same person or group of persons.
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1 (2) "Ownership and control" means the following:
2 (a) In the case of a stock corporation, the direct or indirect ownership of
3 eighty percent or more of the outstanding voting stock of the corporation.
4 (b) In the case of a mutual or nonprofit corporation, the direct or indirect
5 ownership of eighty percent or more of the surplus and the voting power of such
6 corporation.
7 (c) In the case of a limited liability company, the direct or indirect ownership
8 of eighty percent or more of the membership interests in the limited liability
9 company.
10 (d) The tax provided for in this Section constitutes all taxes collectible under
11 the laws of this state from any captive insurance company, and no other occupation
12 tax or other taxes shall be levied or collected from any captive insurance company
13 by the state or any parish, city, or municipality within this state, except meals and
14 rooms taxes, sales and use taxes, and ad valorem taxes on real and personal property
15 used in the production of income.
16 H. The premium tax revenues collected pursuant to this Section shall be
17 transferred annually to the department for the regulation of captive insurance
18 companies pursuant to this Subpart.
19 I. The tax provided for in this Section shall be calculated on an annual basis,
20 notwithstanding policies or contracts of insurance or contracts of reinsurance issued
21 on a multi-year basis. In the case of multi-year policies or contracts, the premium
22 shall be prorated for purposes of determining the tax pursuant to this Section.
23 §550.24. Rates
24 A. Each captive insurance company shall file rates for property and casualty
25 lines of insurance in accordance with R.S. 22:1451 et seq. on an actuarially justified
26 basis with the department and may use the rates thirty days after filing, unless the
27 department disapproves the use of rates within the thirty-day period. For all other
28 lines of insurance, captive insurance companies shall file rates on an actuarially
29 justified basis with the department and may use the rates within the thirty day period.
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1 B. A captive insurance company shall not be required to join a rating
2 organization.
3 §550.25. Policy forms
4 A. A captive insurance company shall not issue, deliver, or use a policy form
5 unless it has been filed with and approved by the commissioner.
6 B. Every such filing shall be made not less than thirty days in advance for
7 any lines of insurance of any such issuance, delivery, or use. At the expiration of
8 thirty days, the filed form shall be deemed approved unless prior thereto it has been
9 affirmatively approved or disapproved by order of the commissioner of insurance.
10 The commissioner may extend by not more than an additional fifteen days the period
11 within which he may so affirmatively approve or disapprove any such form, by
12 giving notice of such extension before expiration of the initial thirty-day period. At
13 the expiration of any such period as so extended, and in the absence of such prior
14 affirmative approval or disapproval, any such form shall be deemed approved. The
15 commissioner may withdraw any such approval at any time for cause. Approval of
16 any such form by the commissioner constitutes a waiver of any unexpired portion of
17 the initial fifteen-day waiting period.
18 §550.26. Conflict of interest
19 Each captive insurance company shall adopt a conflict of interest policy
20 whereby officers, directors, and key personnel annually file a conflict of interest
21 disclosure statement with the board of directors.
22 § 550.27. Redomestication
23 A. Any foreign or alien insurer that qualifies for licensure as a captive
24 insurance company in this state may redomesticate to this state by complying with
25 all of the requirements of law relative to the organization and licensing of a captive
26 insurance company, and by filing with the secretary of state its articles of
27 association, charter, or other organization document, together with appropriate
28 amendments thereto adopted in accordance with the laws of this state, bringing such
29 articles of association, charter, or other organizational document into compliance
30 with the laws of this state. An insurer becoming a domestic captive insurance
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1 company through this redomestication process shall pay to the commissioner such
2 fees as would otherwise be payable by a captive insurance company in accordance
3 with R.S. 22:821 for organizing and becoming licensed or transacting business in this
4 state. The commissioner may issue a conditional certificate of authority prior to the
5 effective date of the redomestication in order to facilitate the transaction and provide
6 notice of approval of the transaction to the outgoing jurisdiction. The domestic
7 insurer shall be entitled to the necessary or appropriate certificates and licenses to
8 continue its business and transact business in this state and shall be subject to the
9 authority and jurisdiction of this state. An insurer redomesticating into this state as
10 a captive insurance company does not need to merge, consolidate, transfer assets, or
11 otherwise engage in any other reorganization, other than specified in this Section.
12 B. Upon the approval of and compliance with such conditions as may be
13 imposed by the commissioner, any domestic captive insurance company may transfer
14 its domicile, in accordance with the laws thereof, to any other state or jurisdiction
15 and upon such a transfer, shall cease to be a domestic captive insurance company,
16 and its corporate or other legal existence in this state shall cease upon the filing of
17 articles of redomestication with the secretary of state, or upon a later date if a
18 delayed effective date is specified in the articles of redomestication, accompanied
19 by a certificate of approval of redomestication issued by the commissioner and proof
20 of acceptance of the insurer by the secretary of state or analogous officer of the
21 jurisdiction to which the captive insurance company is redomesticating, and upon
22 payment of a filing fee to the secretary of state. The articles of redomestication shall
23 contain, at a minimum, the following information:
24 (1) The name, organizational form, date of formation, and jurisdiction of
25 formation of the redomesticating entity.
26 (2) The jurisdiction to which the redomesticating entity will be transferring
27 its domicile and its name following the redomestication date.
28 (3) The registered office and agent of the redomesticating entity following
29 the redomestication date.
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1 (4) A statement that the redomestication has been approved by the
2 appropriate vote of the shareholders or other owners of the redomesticating entity.
3 C. Upon redomestication in accordance with this Section, the foreign or alien
4 insurer shall become a captive insurance company organized under the laws of this
5 state and have all the rights, privileges, immunities, and powers, and be subject to
6 all applicable laws, duties, and liabilities of domestic insurers of the same type. Such
7 captive insurance company shall possess all rights that were obtained prior to the
8 redomestication to the extent permitted by the laws of this state and shall be
9 responsible and liable for all liabilities and obligations that were obtained prior to the
10 redomestication. The certificate of authority, agents, appointments and licenses,
11 rates, and other items that the commissioner allows, in his discretion, that are in
12 existence at the time any insurer transfers its corporate domicile to this or any other
13 state or jurisdiction by redomestication pursuant to this Section, shall continue in full
14 force and effect upon the transfer. All outstanding policies of any transferring
15 insurer shall remain in full force and effect.
16 §550.28. Rules for controlled unaffiliated business
17 The commissioner may adopt rules establishing standards to ensure that a
18 parent or its affiliated company is able to exercise control of the risk management
19 function of any controlled unaffiliated business to be insured by a pure captive
20 insurance company, provided that until such time as rules pursuant to this Section
21 are adopted by the commissioner, the commissioner may approve the coverage of
22 such risks by a pure captive insurance company.
23 §550.29. Names of companies
24 A captive insurance company shall only adopt a name for the captive
25 insurance company that is approved by the commissioner.
26 §550.30. Branch captive insurance companies
27 A. As used in this Section, unless the context requires otherwise, the
28 following definitions apply:
29 (1) "Alien captive insurance company" means any insurance company
30 formed to write insurance business for its parents and affiliates and licensed pursuant
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1 to the laws of an alien jurisdiction which imposes statutory or regulatory standards
2 in a form acceptable to the commissioner on companies transacting the business of
3 insurance in such jurisdiction.
4 (2) "Branch business" means any insurance business transacted by a branch
5 captive insurance company in this state.
6 (3) "Branch captive insurance company" means any alien captive insurance
7 company that has obtained a certificate of authority from the commissioner to
8 transact the business of insurance in this state through a business unit with a
9 principal place of business in this state.
10 (4) "Branch operations" means any business operations of a branch captive
11 insurance company in this state.
12 B. In the case of a branch captive insurance company, as security for the
13 payment of liabilities attributable to the branch operations, the commissioner shall
14 require that either a trust fund funded by assets acceptable to the commissioner or
15 an irrevocable letter of credit be established and maintained in the United States for
16 the benefit of United States policyholders and United States ceding insurers under
17 insurance policies issued or reinsurance contracts issued or assumed by the branch
18 captive insurance company through its branch operations. The amount of such
19 security shall be no less than the amount set forth in R.S. 22:550.10 and the reserves
20 on such insurance policies or reinsurance contracts, including reserves for losses,
21 allocated loss adjustment expenses, incurred but not reported losses, and unearned
22 premiums with regard to business written through the branch operations; however,
23 the commissioner may permit a branch captive insurance company that is required
24 to post security for loss reserves on branch business by its reinsurer to reduce the
25 funds in the trust account or the amount payable under the irrevocable letter of credit
26 required by this Section by the same amount if the security remains posted with the
27 reinsurer. If the form of security selected is a letter of credit, the letter of credit shall
28 be established, issued, or confirmed by a bank chartered in this state or a member
29 bank of the Federal Reserve System.
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1 C. A branch captive insurance company shall not be issued a certificate of
2 authority unless it possesses and thereafter maintains, as security for the payment of
3 liabilities attributable to the branch operations, both of the following:
4 (1) An amount equal to the amount set forth in R.S. 22:550.10 as the
5 minimum capital requirement for a pure captive insurance company.
6 (2) Reserves on such insurance policies or such reinsurance contracts as may
7 be issued or assumed by the branch captive insurance company through its branch
8 operations, including reserves for losses, allocated loss adjustment expenses,
9 incurred but not reported losses, and unearned premiums with regard to business
10 written through the branch operations; however, the commissioner may permit a
11 branch captive insurance company to credit against any such reserve requirement any
12 security for loss reserves that the branch captive insurance company may post with
13 a ceding insurer or that may be posted by a reinsurer with the branch captive
14 insurance company, in either case as long as such security remains posted.
15 D. A branch captive insurance company is considered a pure captive
16 insurance company with respect to operations in this state.
17 E. Subject to the prior approval of the commissioner, the amounts required
18 in Subsection B of this Section may be held in the form of any of the following:
19 (1) A trust formed under a trust agreement and funded by assets acceptable
20 to the commissioner.
21 (2) An irrevocable letter of credit issued or confirmed by a bank in this state
22 and approved by the commissioner.
23 (3) With respect to the amounts required in Subsection B of this Section
24 only, cash on deposit with the commissioner.
25 (4) Any combination of the funds prescribed in this Subsection.
26 F. Prior to March first of each year, or by March fifteenth after its fiscal year
27 end with the approval of the commissioner, a branch captive insurance company
28 shall file with the commissioner a copy of all reports and statements required to be
29 filed under the laws of the jurisdiction in which the alien captive insurance company
30 is formed, verified by oath of two of its executive officers. If the commissioner is
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1 satisfied that the annual report filed by the alien captive insurance company in its
2 domiciliary jurisdiction provides adequate information concerning the financial
3 condition of the alien captive insurance company, the commissioner may waive the
4 requirement for completion of the captive annual statement for business written in
5 the alien jurisdiction.
6 G.(1) The examination of a branch captive insurance company pursuant to
7 R.S. 22:550.22 shall be of branch business and branch operations only, as long as the
8 branch captive insurance company provides annually to the commissioner a
9 certificate of compliance, or its equivalent, issued by or filed with the licensing
10 authority of the jurisdiction in which the branch captive insurance company is
11 formed, and demonstrates to the commissioner's satisfaction that it is operating in
12 sound financial condition in accordance with all applicable laws and regulations of
13 such jurisdiction.
14 (2) As a condition of licensure, the alien captive insurance company shall
15 grant authority to the commissioner for examination of the affairs of the alien captive
16 insurance company in the jurisdiction in which the alien captive insurance company
17 is formed.
18 H. In the case of a branch captive insurance company, the tax provided for
19 in R.S. 22:550.23 of this title apply only to the branch business of the company.
20 I. All documents, materials, or other information, including confidential and
21 privileged documents, examination reports, preliminary examination reports or
22 results, working papers, recorded information, and copies thereof that are produced
23 or obtained by, or disclosed to the commissioner or any other person in the course
24 of an examination pursuant to this Subpart, are confidential and privileged in
25 accordance with the Louisiana Public Records Law, R.S. 44:1 et seq., examinations
26 pursuant to R.S. 22:1981, et seq., and confidentiality provisions in this Title.
27 J. In furtherance of the commissioner's duties, the commissioner may share
28 and receive documents, materials, or other information pursuant to Louisiana Public
29 Records Law, R.S. 44:1 et seq., examinations pursuant to R.S. 22:1981, et seq., and
30 confidentiality provisions in this Title.
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1 §550.31. Affiliated reinsurance companies
2 A.(1) An affiliated reinsurance company is subject to the provisions of this
3 Subpart. If there is a conflict between the provisions of this Subpart and the
4 provisions of this Section, the provisions of this Section shall control.
5 (2) An affiliated reinsurance company is subject to all applicable rules
6 adopted pursuant to this Subpart.
7 B. As used in this Section, the following definitions apply:
8 (1) "Affiliated reinsurance company" means a company licensed by the
9 commissioner pursuant to this Subpart to reinsure risks ceded by one or more ceding
10 insurers that are affiliated companies. Subject to the prior approval of the
11 commissioner, not more than ten percent of the risks reinsured may be ceded by
12 ceding insurers that are not affiliated companies.
13 (2) "Ceding insurer" means an insurance company approved by the
14 commissioner and licensed or otherwise authorized to transact the business of
15 insurance or reinsurance in its state or country of domicile, which cedes risk to an
16 affiliated reinsurance company pursuant to a reinsurance contract.
17 (3) "Organizational documents" means the affiliated reinsurance company's
18 articles of incorporation and bylaws and such other documents subject to approval
19 by the commissioner.
20 (4) "Reinsurance contract" means a contract between an affiliated reinsurance
21 company and a ceding insurer in which the affiliated reinsurance company agrees to
22 provide reinsurance to the ceding insurer.
23 C.(1) An affiliated reinsurance company shall only reinsure the risks of a
24 ceding insurer. An affiliated reinsurance company may cede the risks assumed under
25 a reinsurance contract to another reinsurer, subject to the prior approval of the
26 commissioner.
27 (2) In conjunction with the issuance of a certificate of authority to an
28 affiliated reinsurance company, the commissioner may issue an order that includes
29 any provisions, terms, and conditions regarding the organization, licensing, and
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1 operation of the affiliated reinsurance company that are deemed appropriate by the
2 commissioner and that are not inconsistent with the provisions of this Subpart.
3 (3) To qualify for a certificate of authority, an affiliated reinsurance company
4 is subject to, in addition to the requirements of R.S. 22:550.5, 550.7, 550.13, and
5 550.14, the following:
6 (a) The source and form of the affiliated reinsurance company's capital and
7 surplus.
8 (b) The investment policy of the affiliated reinsurance company, which shall
9 provide for a diversified investment portfolio both as to type and issue and shall
10 include a requirement for liquidity and for the reasonable preservation,
11 administration, and management of such assets with respect to the risks associated
12 with any reinsurance transactions.
13 (b) Copies of all agreements and documentation, including reinsurance
14 agreements unless otherwise approved by the commissioner and any other statements
15 or documents required by the commissioner to evaluate the affiliated reinsurance
16 company's application for a certificate of authority.
17 (4) R.S. 22:550.5, 550.7, 550.13, and 550.14 apply to all information
18 submitted pursuant to this Section and to any order issued by the commissioner to
19 the affiliated reinsurance company.
20 D.(1) An affiliated reinsurance company may be incorporated as a stock
21 insurer with its capital divided into shares, or in such other organizational form as
22 may be approved by the commissioner.
23 (2) An affiliated reinsurance company's organizational documents shall limit
24 the affiliated reinsurance company's authority to the transaction of the business of
25 insurance or reinsurance and to those activities that the affiliated reinsurance
26 company conducts to accomplish its purposes as expressed in this Subpart.
27 E. An affiliated reinsurance company shall not be issued a certificate of
28 authority unless it possesses and thereafter maintains unimpaired paid-in capital and
29 surplus of not less than five million dollars. The commissioner may prescribe
30 additional capital and surplus based upon the type, volume, and nature of reinsurance
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1 business transacted. Except as otherwise provided in this Section, the provisions of
2 risk based capital provided for in R.S. 22:611 et seq. apply in full to an affiliated
3 reinsurance company.
4 F.(1) An affiliated reinsurance company shall only reinsure the risks of a
5 ceding insurer, pursuant to a reinsurance contract. An affiliated reinsurance company
6 shall not issue a contract of insurance or a contract for assumption of risk or
7 indemnification of loss other than such reinsurance contract.
8 (2) The reinsurance contract shall contain all provisions reasonably required
9 or approved by the commissioner, which requirements shall take into account the
10 laws applicable to the ceding insurer in this Title, regarding the ceding insurer's
11 taking credit for the reinsurance provided under such reinsurance contract.
12 (3) An affiliated reinsurance company may cede risks assumed through a
13 reinsurance contract to one or more reinsurers through the purchase of reinsurance,
14 subject to the prior approval of the commissioner. Except as otherwise provided in
15 this Section, the provisions for reinsurance of risks apply in full to an affiliated
16 reinsurance company.
17 (4) Unless otherwise approved in advance by the commissioner, a reinsurance
18 contract shall not contain any provision for payment by the affiliated reinsurance
19 company in discharge of its obligations under the reinsurance contract to any person
20 other than the ceding insurer or any receiver of the ceding insurer.
21 (5) An affiliated reinsurance company shall notify the commissioner
22 immediately of any action by a ceding insurer or any other person to foreclose on or
23 otherwise take possession of collateral provided by the affiliated reinsurance
24 company to secure any obligation of the affiliated reinsurance company.
25 G.(1) The assets of an affiliated reinsurance company shall be preserved and
26 administered by or on behalf of the affiliated reinsurance company to satisfy the
27 liabilities and obligations of the affiliated reinsurance company incident to the
28 reinsurance contract and other related agreements.
29 (2) The commissioner may prohibit or limit any investment that threatens the
30 solvency or liquidity of the affiliated reinsurance company unless the investment is
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1 otherwise approved in its plan of operation or in an order issued to the affiliated
2 reinsurance company pursuant to Subsection C of this Section.
3 H.(1) For the purposes of R.S. 22:550.21, both of the following apply:
4 (a) Each affiliated reinsurance company shall file its report in the form
5 required by examinations and reports in this Title, and each affiliated reinsurance
6 company shall comply with the requirements set forth in National Association of
7 Insurance Commissioners filing requirements provided for in this Title.
8 (b) An affiliated reinsurance company shall report using statutory accounting
9 principles in accordance with the National Association of Insurance Commissioner's
10 Accounting Practices and Procedures Manual. Reporting shall be in such general
11 form and context, as approved by, and shall contain any other information required
12 by, the National Association of Insurance Commissioners, with any useful or
13 necessary modifications or adaptions thereof required approved or accepted by the
14 commissioner for the type of insurance and kinds of insurers to be reported upon,
15 and as supplemented by additional information required by the commissioner.
16 (2) Unless otherwise approved in advance by the commissioner, an affiliated
17 reinsurance company shall maintain its books, records, documents, accounts,
18 vouchers, and agreements in this state. An affiliated reinsurance company shall make
19 its books, records, documents, accounts, vouchers, and agreements available for
20 inspection by the commissioner at any time. An affiliated reinsurance company shall
21 keep its books and records in such manner that its financial condition, affairs, and
22 operations can be readily ascertained and so that the commissioner may readily
23 verify its financial statements and determine its compliance with this Subpart.
24 (3) Unless otherwise approved in advance by the commissioner, all books,
25 records, documents, accounts, vouchers, and agreements shall be preserved and kept
26 available in this state for the purpose of examination and inspection and until such
27 time as the commissioner approves the destruction or other disposition of such
28 books, records, documents, accounts, vouchers, and agreements. If the commissioner
29 approves the keeping outside this state of the items listed in this Paragraph, the
30 affiliated reinsurance company shall maintain in this state a complete and true copy
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1 of each such item. Books, records, documents, accounts, vouchers, and agreements
2 may be photographed, reproduced on film, or stored and reproduced electronically.
3 (4) The provisions of annual financial reporting and qualified accountants of
4 this Title apply in full to an affiliated reinsurance company in accordance with this
5 Subpart and this Title.
6 I. Except as otherwise provided in this Section, the provisions of holding
7 companies and subsidiaries in this Title apply in full to an affiliated reinsurance
8 company.
9 J. Except as otherwise provided in this Section, the provisions of corporate
10 governance and disclosure in this Title apply in full to an affiliated reinsurance
11 company.
12 K. Except as otherwise provided in this Section, the provisions of own risk
13 and solvency assessment in this Title apply in full to an affiliated reinsurance
14 company.
15 L. Except as otherwise provided in this Section, the provisions of
16 requirements for actuarial opinions in this Title apply in full to an affiliated
17 reinsurance company.
18 M.(1) The examination provisions of R.S. 22:1981 and the confidentiality
19 provisions of this Title and the Louisiana Public Records Law, R.S. 44:1 et seq.,
20 apply to all documents, materials, and other information, including confidential and
21 privileged documents, examination reports, preliminary examination reports or
22 results, working papers, recorded information, and copies of any of these produced
23 or obtained by, or disclosed to the commissioner or any other person in the course
24 of an examination made pursuant to this Subpart.
25 (2) In furtherance of the commissioner's regulatory duties, the commissioner
26 may share and receive documents, materials, or other information pursuant to
27 relevant provisions of confidentiality and information-sharing agreements in
28 accordance with this Subpart.
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1 §550.32. Dormant captive insurance companies
2 A. As used in this Section, unless the context requires otherwise, "dormant
3 captive insurance company" means a captive insurance company that has ceased
4 transacting the business of insurance, including the issuance of insurance policies,
5 and has no remaining liabilities associated with insurance business transactions or
6 insurance policies issued prior to the filing of its application for a certificate of
7 dormancy pursuant to this Section.
8 B. A captive insurance company domiciled in this state that meets the criteria
9 of Subsection A of this Section may apply to the commissioner for a certificate of
10 dormancy. The certificate of dormancy is subject to renewal every five years and
11 shall be forfeited if not renewed within such time.
12 C. A dormant captive insurance company that has been issued a certificate
13 of dormancy shall do all of the following:
14 (1) Possess and thereafter maintain unimpaired, paid-in capital and surplus
15 of not less than twenty-five thousand dollars; however, if the dormant captive
16 insurance company had never capitalized, it is not required to add capital upon
17 entering dormancy.
18 (2) Prior to March first of each year, submit to the commissioner a report of
19 its financial condition, verified by oath of two of its executive officers, in a form as
20 may be prescribed by the commissioner.
21 (3) Pay a certificate of authority reactivation application fee of five hundred
22 dollars in accordance with R.S. 22:821.
23 D. A dormant captive insurance company is not be subject to or liable for the
24 payment of any tax pursuant to R.S. 22:550.23 of this Subpart.
25 E. A dormant captive insurance company shall apply to the commissioner for
26 approval to surrender its certificate of dormancy and resume conducting the business
27 of insurance prior to issuing any insurance policies.
28 F. The commissioner shall revoke a certificate of dormancy if a dormant
29 captive insurance company no longer meets the criteria of Subsection A of this
30 Section.
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1 * * *
2 §821. Fees
3 * * *
4 B. The commissioner shall collect the following fees in advance:
5 * * *
6 (40) For captive insurance companies:
7 (a) Fee for initial application for certificate of authority...................$500.00
8 (b) Fee for application of actuarial review .......................................$6,000.00
9 Section 3. R.S. 44:4.1(B)(11) is hereby amended and reenacted to read as follows:
10 §4.1. Exceptions
11 * * *
12 B. The legislature further recognizes that there exist exceptions, exemptions,
13 and limitations to the laws pertaining to public records throughout the revised
14 statutes and codes of this state. Therefore, the following exceptions, exemptions, and
15 limitations are hereby continued in effect by incorporation into this Chapter by
16 citation:
17 * * *
18 (11) R.S. 22:2, 14, 31, 42.1, 88, 244, 263, 265, 461, 550.7, 550.30, 550.31,
19 571, 572, 572.1, 572.2, 574, 601.3, 618, 639, 691.4, 691.5, 691.6, 691.7, 691.8,
20 691.9, 691.9.1, 691.10, 691.38, 691.56, 732, 752, 753, 771, 834, 972(D), 976, 1008,
21 1019.2, 1203, 1460, 1464, 1466, 1483.1, 1488, 1546, 1559, 1566(D), 1644, 1656,
22 1657.1, 1660.7, 1723, 1796, 1801, 1808.3, 1927, 1929, 1983, 1984, 2036, 2045,
23 2056, 2085, 2091, 2293, 2303, 2508
24 * * *
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DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part
of the legislative instrument. The keyword, one-liner, abstract, and digest do not constitute
part of the law or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 635 Original 2025 Regular Session Bamburg
Abstract: Renames the "Captive Insurers Law" as the "Creating Holistic Options in
Coverage for Enterprise and Self-Insurance (CHOICES) Law and provides
regulations for domestic captive insurance companies and affiliated entities.
Present law provides regulations for the authorization and operation of domestic captive
insurers within the state. Proposed law generally retains the structure of present law but
makes modifications.
Present law provides certain definitions. Proposed law retains present law and modifies the
definitions of "captive insurer", "excess workers' compensation insurance", and "parent".
Defines "controlled unaffiliated business", "branch captive insurer", and "risk retention
group".
Present law defines a captive insurer as an insurance company that only insures all or part
of the risks of its parent company. Proposed law retains present law but changes all
references from "captive insurer" to "captive insurance company." Further provides that a
captive insurance company includes an association captive insurance company, risk retention
group, or affiliated reinsurance company.
Proposed law requires a captive insurance company to be incorporated as a stock insurer
with articles of incorporation subject to approval by the commissioner (commissioner).
Proposed law modifies present law by authorizing a captive insurance company to
incorporate as a stock corporation or nonstock corporation.
Present law requires captive insurance companies to receive approval by the commissioner
to transact business in the state of La. Provides a listing of items for inclusion in the
application for a certificate of authority, including but not limited to articles of incorporation
and bylaws, financial statements, and a plan of operation. Proposed law retains present law.
Present law provides regulations regarding rehabilitation, liquidation, conservation,
dissolution, administrative supervision, acquisition of control or merger, and conversion to
captive insurance companies. Proposed law retains present law.
Present law requires that the information submitted in the application be kept confidential
except that it may be discoverable by a party in a civil action or contested case. Provides for
disclosure by the commissioner, at his discretion, to a public officer having jurisdiction over
the regulation of insurance in another state as long as the public officer agrees in writing to
maintain the confidentiality of such information. Proposed law retains present law.
Present law provides a public records exception for certain records described in present law.
Proposed law retains present law and extends the public records exception to books and
other materials for examination described in proposed law.
Present and proposed law requires captive insurance companies and affiliated entities to
maintain certain capital and surpluses.
Present law requires a pure captive insurance company to maintain unimpaired paid-in
capital and surplus of not less than $500,000. Proposed law reduces the minimum amount
from $500,000 to $250,000.
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Present law requires an association captive insurance company to maintain unimpaired paid-
in capital and surplus of not less than $1,000,000. Proposed law reduces the minimum
amount from $1,000,000 to $500,000.
Proposed law requires a risk retention group to maintain unimpaired paid-in capital and
surplus of not less than $1,000,000.
Proposed law requires a branch captive insurance company to maintain unimpaired paid-in
capital and surplus of not less than $250,000.
Present law requires unimpaired paid-in capital and surplus funds to be in the form of cash,
cash equivalents, or bonds or evidences of indebtedness which are direct general obligations
of the U.S. government. Proposed law retains present law.
Present law authorizes the commissioner to prescribe additional requirements relating to
capital and surplus based on the type, volume, and nature of the insurance business
transacted. Proposed law retains present law.
Present law requires a captive insurance company to deposit with the commissioner a trust
receipt from a bank doing business within the state indicating that the company has
deposited $100,000 in money or bonds before receiving a certificate of authority. Proposed
law requires the bank to also be located in the state. Otherwise retains present law.
Present law permits the commissioner to refuse, suspend, or revoke the certificate of
authority of a captive insurance company for specific reasons provided for in present law.
Proposed law retains present law.
Present law prohibits a captive insurance company from directly providing insurance
classified as life, health and accident, title, credit life, credit property and casualty, or
annuity; directly providing personal motor vehicle, homeowners' insurance coverage, or any
other noncommercial line of coverage; directly providing workers' compensation or
employers' liability insurance coverage, except in connection with a self-funded insurance
program as prescribed in present law; and accepting or ceding reinsurance, except as
otherwise provided in present law.
Proposed law retains present law.
Present law permits a captive insurance company to provide excess workers' compensation
insurance to its parent and affiliated companies, unless otherwise prohibited by the laws of
the state in which the insurance is transacted. Provides other provisions related to workers'
compensation insurance. Proposed law retains present law.
Present law prohibits a captive insurance company from insuring any risks other than those
of its parent company, member organization, or affiliated companies of the member
organization. Restricts an association captive insurer from exposing itself to loss on any one
risk in an amount exceeding 10% of the captive insurer's capital and surplus. Requires an
association captive insurer to maintain a ratio of actual annual premiums written to current
capital and surplus less than or equal to four to one. Proposed law retains present law.
Present law authorizes the commissioner to license a captive insurance company to provide
coverage for unrelated risks if it is appropriate and in the best interest of the public. Proposed
law retains present law.
Present law requires a captive insurance company to maintain its principal place of business
in the state; make adequate arrangements with a bank located in the state that is authorized
to transfer money; employ or enter into a contract with a natural person or business
organization to manage the affairs of the company; and employ or enter into a contract with
a certified public accountant and experienced actuary. Proposed law retains present law.
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Proposed law prohibits a captive insurance company from doing business in state of La.
unless it first obtains a certificate of authority from the commissioner. Requires its board of
directors and other stakeholders to hold at least 1 annual meeting in the state, except for an
association captive insurance company, whose board of directors is required to meet at least
quarterly each year. Further requires the company to appoint a registered agent to accept
service of process and to otherwise act on its behalf, authorizing the commissioner as agent
if the appointed agent cannot be located.
Present law prohibits a captive insurance company from paying dividends out of its capital
or surplus without prior approval from the commissioner. Exempts a pure captive insurance
company from any restrictions on allowable investments except that the commissioner may
prohibit or limit any investment that threatens the solvency or liquidity of the pure captive
insurer. Authorizes a pure captive insurance company to make a loan to its parent or
affiliated company if the loan is approved by the commissioner, is evidenced by a note that
it is in the approved form, and does not include any money that has been set aside as capital
or surplus. Proposed law retains present law.
Present law prohibits a captive insurance company from providing reinsurance on risks
ceded by any other insurer without approval of the commissioner. Authorizes a captive
insurer to take credit for reserves on risks or portions of risks ceded to a pool. Provides
provisions for workers' compensation deemed as reinsurance. Prohibits a captive insurance
company from joining or contributing financially to any risk-sharing plan, risk pool, or
insurance insolvency guaranty fund. Proposed law retains present law.
Present law requires any policy issued by an association captive insurance company to
include, on the front page in 12- point boldface capital letters, a notice that the policy is
issued by a captive insurance company that may not be subject to all of the insurance laws
and regulations of the state and that state insurance insolvency funds are not available to the
policyholders. Proposed law increases the font size from 12-point to 14-point font and
otherwise retains present law.
Present law prohibits a captive insurance company's solicitation or sale of insurance by an
association captive insurance company to any person who is not eligible for membership.
Further prohibits the solicitation or sale of insurance by a captive insurance company that
is in a hazardous financial condition.
Proposed law retains present law.
Present law restricts a captive insurance company from doing business in the state if the
insurance company is directly or indirectly a member or owner of the company, unless in
the case of a captive insurance company whose total membership consists of insurance
companies. Proposed law retains present law.
Proposed law requires licensed captive insurance companies to file a statement of its
financial condition, any amendment to the plan of operation, and other financial statements
that show the condition of the company. Proposed law retains present law.
Present law requires the commissioner to perform an examination, at least once every 5
years, of the captive insurance company as prescribed in present law. Proposed law retains
present law but provides the types of documentation to be examined and provisions
regarding confidentiality.
Present law subjects captive insurance companies to taxation at the same rate and the same
interest, fines, and penalties for nonpayment as domestic insurers. Applies provisions related
to assessments of the La. Citizens Property Insurance Corp.
Proposed law deletes present law and requires 0.15% on direct premiums, with deductions
for return premiums. Provides for tax rates on premiums with tiers of certain percentages.
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Present law requires policy forms to be filed and approved by the commissioner not less than
45 days in advance of any such issuance, delivery, or use. Authorizes the commissioner to
extend the approval or disapproval period by 15 days. Further authorizes the commissioner
to withdraw any approval at any time for cause. Proposed law lessens the timeframe from
45 days to 30 days with respect to the 45-day references in present law. Otherwise retains
present law.
Present law requires a captive insurance company to adopt a conflict of interest policy that
requires officers, directors and key personnel to annually file a conflict of interest disclosure
statement with the board of directors. Proposed law retains present law.
Proposed law authorizes redomestication of a foreign or alien insurer as a captive insurance
company in the state of La. Requires the company to meet state licensing and filing
requirements for operation. Proposed law also authorizes a domestic captive insurance
company to transfer its domicile to another jurisdiction by following the applicable laws of
redomestication. Requires the insurer to remain responsible for its liabilities and existing
policies in effect.
Proposed law defines and regulates branch captive insurance companies. Requires the
companies to maintain financial security through trust funds or letters of credit to cover
liabilities for branch business. Requires certain capital and reserves, file reports, and
financial examinations.
Proposed law defines and regulates affiliated reinsurance companies. Limits their activities
to reinsuring affiliated insurers, subject to the commissioner's approval, and establishes
requirements for licensure, capital, operations, and financial reporting.
Proposed law defines and regulates dormant captive insurance companies and provides a
certificate of dormancy. Provides that such companies are those no longer transacting in the
business of insurance and with no remaining liabilities associated with insurance business
transactions or insurance policies. Provides for other certain conditions and reports to be
submitted to the commissioner.
Present law authorizes the commissioner to collect certain fees pursuant to present law.
Requires captive insurance companies to pay a $500 fee for the initial application for a
certificate of authority. Requires a $6,000 fee for the accompanying application for actuarial
review.
Present law authorizes the commissioner to promulgate and adopt rules and regulations in
accordance with the APA for implementation and enforcement of regulations necessary for
captive insurance companies and affiliated entities. Proposed law retains present law.
(Amends R.S. 22:550.1-550.32 and R.S. 44:4.1(B)(11); Adds R.S. 22:821(40))
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