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Texas amends captive insurance law

Posted On: Jun. 19, 2017 2:12 PM CST

Texas Gov. Greg Abbott signed legislation to amend the state’s captive insurance law on Thursday. 

H.B. 1944 authorizes a Texas captive insurer to be formed as a reciprocal insurance exchange and to take credit for reinsurance ceded to a nonaffiliated reinsurer when specific requirements are met, according to a summary by the Texas Captive Insurance Association in Austin published last week. 

The new credit for reinsurance option allows Texas captive insurers to reinsure directly with offshore reinsurance markets, Burnie Burner, an Austin-based member with Mitchell Williams Selig Gates & Woodyard P.L.L.C., said in an article after the Texas Legislature adopted the bill last month. 

The legislation also allows a captive insurance company to insure life insurance benefits for employee benefits subject to the Employee Retirement Income Security Act of 1974 and allows capital and surplus to be held in the form of Texas county or municipal bonds.

Other amendments featured in the legislation authorize the insurance commissioner to waive a requirement to provide an actuarial report with the captive’s annual filing if certain conditions met and eliminates the requirement that the captive must have a licensed claims adjuster if the claims are limited to first-party claims of the parent and/or affiliates of the captive. 

The number of captives in the state has risen over the past three years, with Texas reporting 34 captives in Business Insurance’s most recent captive survey, up from 21 captives in 2015 and 12 in 2014.