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Montana Gov. Steve Bullock has signed a law that will remove a key requirement for captive companies organized as reciprocal insurers and allow captives to enter dormancy.
S.B. 245 will remove the requirement that reciprocal insurers have 25 or more persons domiciled in Montana, according to a statement issued May 9 by the Montana Captive Insurance Association Inc.
The new law will also permit captive insurers to go into dormancy, according to the release. The certificate of dormancy is subject to expiration at the end of a consecutive five-year period with the company being subject to a $1,000 annual dormancy tax due March 1 of each year and a requirement to maintain paid-in capital and surplus of not less than $25,000.
Under the previous law, a captive that no longer desired to operate would terminate its license and pay no insurance premium tax after termination, but the new law allows captives to apply for a certificate of dormancy to avoid termination of the company and pay the $1,000 annual tax for a maximum of five years, according to a fiscal note accompanying the bill.
The Office of the Montana State Auditor estimated that three captives would apply for dormancy certificates in each fiscal year, with 95%, or $2,850, of the resulting tax revenues going into the general fund in fiscal year 2018 and the remaining $150 going into the captive state special revenue fund, according to the note. That tax income is expected to rise to $5,700 in fiscal year 2019 and $8,550 in fiscal year 2020.
Montana had 184 captives in 2016, down from the 196 reported in 2015 but higher than the 177 reported in 2014, according to Business Insurance data.
Atlas Insurance Management has received approval from the Texas Department of Insurance to act as a captive manager in the state.