North Carolina Enacts Captive Insurance Bill

A recently enacted bill in North Carolina will permit, for the first time, the creation of captive insurers based in the Tar Heel State.

The North Carolina Captive Insurance Act (HB 473) was signed into law by Gov. Pat McCrory on June 19. It will take effect beginning July 1.

Until now, businesses in North Carolina seeking to create captive insurance companies to self-insure their risks had to look outside the state. State legislators who had sponsored the measure said they are aiming to bring employment and tax revenues associated with creating captive insurers.

Regarding capital and surplus requirements, the bill stipulates that no captive insurance company shall be issued a license unless it possesses and maintains unimpaired paid-in capital and surplus of: at least $250,000 — or such other amount determined by the insurance commissioner — in the case of a pure captive insurance company; at least $500,000 in the case of an association captive insurance company or an industrial insured captive insurance company; at least $1 million in the case of a risk retention group; and at least $250,000 in the case of a protected cell captive insurance company.

The commissioner may prescribe additional capital and surplus based upon the type, volume, and nature of insurance business to be transacted, the bill further stipulates. Capital and surplus shall be in the form of cash or an irrevocable letter of credit issued by a bank approved by the commissioner.

The bill, North Carolina Captive Insurance Act, can be found at the state’s General Assembly website (a PDF file).