Bill Analysis - Senate Bill 347, Captive Insurance Amendments (Senate Commerce and Insurance, April 8, 2021)

Summary

Bill analysis of Senate Bill 347: Captive Insurance Amendments, 2021-2022 General Assembly, for the Senate Commerce and Insurance committee, dated April 8, 2021 and prepared by Bill Patterson. The analysis states the bill would make various technical and substantive changes to the laws governing captive insurance companies, including requiring the Commissioner of Insurance to keep certain filed information confidential and authorizing an exemption from audit requirements on written request. It states that if a captive insurance company redomesticates to North Carolina with the Commissioner's approval before December 31, 2022, it is exempted from premium taxes for the remainder of that year and the following calendar year. It states the remainder of the act would be effective when it becomes law.

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Full text

                                                     SENATE BILL 347:
                                                     Captive Insurance Amendments.
      2021-2022 General Assembly

      Committee:     Senate Commerce and Insurance. If favorable, Date:          April 8, 2021
                     re-refer to Rules and Operations of the Senate
      Introduced by: Sens. Johnson, McInnis, Edwards                Prepared by: Bill Patterson
      Analysis of:   First Edition                                               Committee Co-Counsel

      OVERVIEW: Senate Bill 347 would make various technical and substantive changes to the laws
      governing captive insurance companies in the State.
      CURRENT LAW: Captive insurance companies form and operate in North Carolina under the North
      Carolina Captive Insurance Act, enacted in 2013.
      BILL ANALYSIS:
      Section 1 of the bill would require the Commissioner of Insurance to maintain the confidentiality of
      information filed by a captive insurance company when it seeks approval of a distribution from capital or
      surplus, a change to its plan of operation, or a loan to an affiliate.
      Section 2 would authorize the Commissioner, upon written request, to exempt any captive insurance
      company from compliance with audit requirements if such compliance would cause it financial or
      organizational hardship. Under current law only captive insurance companies having less than $1.2
      million in written premium are eligible for this exemption.
      Section 3 would authorize the Commissioner to conduct a financial analysis of information obtained from
      a captive insurance company whenever the Commissioner deems it prudent to do so.
      Section 4 would replace the term "board of directors" with the term "governing board," defined as "the
      board of directors or officials possessing similar authority."
      Section 5.(a) would amend G.S. 105-228.4A to:
             •     Provide that two or more captive insurance companies under common ownership and control will
                   be taxed as separate companies if they are either a protected cell captive insurance company or a
                   special purpose captive insurance companies with a cell or series structure.
             •     Specify the aggregate amount of tax payable by a special purpose captive insurance company with
                   a cell or series structure with 10 or more cells or series.
      Section 5.(b) would provide that if a licensed captive insurance company formed and licensed in another
      jurisdiction redomesticates to North Carolina with the approval of the Commissioner prior to December
      31, 2022, it is exempted from premium taxes otherwise due for the remainder of the year in which
      redomestication occurs and for the calendar year following its redomestication. This provision would
      expire for taxable years beginning on or after January 1, 2024.
      Section 6 would require captive insurance companies to be managed at all times by a captive manager
      approved by the Commissioner.


                                                                                                                                                              Legislative Analysis
     Jeffrey Hudson
                                                                                                                                                                    Division
         Director                                           S347-SMTG-22(e1)-v-3                                                                                919-733-2578
This bill analysis was prepared by the nonpartisan legislative staff for the use of legislators in their deliberations and do es not constitute an official statement of legislative intent.
Senate Bill 347
Page 2

Section 7 would subject a captive insurance company to license suspension or revocation for failing to
operate in accordance with its approved plan of operation.
Section 8 would prohibit a captive insurance company from becoming a surety on bail bonds or
guaranteeing their performance.
EFFECTIVE DATE: Section 5.(a) of the act would be effective for taxable years beginning on or after
January 1, 2022. Section 5.(b) of this act would be effective for taxable years beginning on or after January
1, 2021. The remainder of the act would be effective when it becomes law.


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