Texas Regulators OK Formation, Redomestication of Captive Insurers

April 14, 2014

The Texas Department of Insurance (TDI) announced the formation of a new captive insurer and the redomestication of two other captive entities have been approved under new rules adopted to implement Senate Bill (SB) 734.

The legislation authored by Sen. John Carona and sponsored by Rep. John Smithee removes regulatory barriers that had forced captives to be headquartered outside of the state.

A license application was approved for Commerce Way Insurance Company Inc. to form a new captive operation in Texas. Redomestication applications also were approved for CART Assurance Company Inc. and Prize Indemnity LLC.

“Our state is now open for business for captive insurers seeking to move to Texas or to set up new operations here,” Commissioner of Insurance Julia Rathgeber said in a statement released by TDI. “The statute has provided for a safe and stable entry of a new type of risk transfer mechanism into the state.”

A captive is defined as an insurance company formed by another company to cover its own risks.

SB 734 requires that affiliated companies have significant operations in Texas in order to form or move a captive here.

Captives licensed in Texas can only insure operational risks of affiliated companies and controlled unaffiliated business; the statute prohibits captives from accepting insurance policy risks of an insurance affiliate.

Source: Texas Department of Insurance

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