Missouri Law Expands to Include Sponsored Captive Insurance Companies

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With Governor Nixon’s signature on May 16, 2013, the state of Missouri has adopted legislation modifying its captive insurance law. The legislation, Senate Bill 287, will allow the formation of sponsored captive insurance companies, effective August 28, 2013. The bill also provides for more efficient procedures for captive insurance company organization, merger, or assumption of business, including lowering the minimum capital and surplus requirement for an association captive to $500,000.

The sponsor of the bill, Sen. Scott Rupp (R-Wentzville) stated “Establishing sponsored captive insurance companies in Missouri creates a new business market, stimulating competition and economic growth for our state”.

A sponsored captive insurance company is a captive insurance company that insures the risks only of its participants through protected cells whose assets and liabilities are segregated from each other and from the sponsored captive insurance company’s general account. The minimum capital and surplus of a sponsored captive insurance company is supplied by the company’s sponsor, not its participants.

The segregation of accounts through protected cells coupled with capital and surplus supplied by a common sponsor often makes sponsored captive insurance companies attractive to midsize businesses. These businesses typically have sufficient funds and risk-financing needs to justify a formal self-insurance arrangement. However, they do not have enough funds or risk-financing needs to justify capitalizing their own single-owner pure captive nor enough appetite for the full pooling of risks within a typical group captive.

Establishing and maintaining any type of captive insurance company requires both risk management financing expertise and sound legal advice. Armstrong Teasdale’s attorneys can provide businesses with the legal advice necessary for successful formation and operation of captive insurance companies. In fact, Armstrong Teasdale provided legal advice and representation for the formation and licensing of Missouri’s first captive insurance company.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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