New Law Helps Florida Attract U.S. Domiciled Captive Insurers

by Carlton Fields

During the 2012 Regular Legislative Session, the Florida Legislature [1] passed Committee Substitute for Committee Substitute for House Bill 1101, an omnibus insurance bill which contains many provisions relating to various types of insurance. One of the important parts in this legislation is the section pertaining to Captive Insurance. On April 24, 2012, the bill was signed into law by Governor Rick Scott. This article will summarize the primary provisions of this new captive insurance legislation.

Florida captive insurance legislation became effective in 1982. Florida captive insurance is regulated by the Office of Insurance Regulation ("OIR") under Part V of ch. 628, F.S. That Part defines a captive insurer to be "a domestic insurer established under Part I to insure the risks of a specific corporation or group of corporations under common ownership owned by the corporation or corporations from which it accepts risk under a contract of insurance."

Effect of the Bill


Unlike current law, the bill provides a definition section and includes fifteen definitions. The bill changes the term "captive insurer" to "captive insurance company" and redefines said term to mean a domestic insurer established under Part V, including pure captive insurance companies, special purpose captive insurance companies, and industrial insured captive insurance companies. These captive formations are all included in the definitions section. The bill retains the definition of an industrial insured and an industrial insured captive insurance company.

The bill also requires the following of captive insurance and reinsurance companies:

  • The captive must have at least three incorporators, of which, at least two must be Florida residents.
  • At least one member of the captive's board of directors must be a Florida resident.
  • With stock insurers, the capital stock must be issued at par value of not less than $1 and not more than $100 per share.
  • The articles of incorporation must be provided in triplicate and approved by OIR before being filed with the Secretary of State.


Under current law, captives may apply to OIR to provide commercial property, commercial casualty, and commercial marine insurance coverage, but not workers' compensation or employer's liability insurance. Also, an industrial insured captive insurer may provide workers compensation and employer's liability insurance only in excess of at least $25 million in the annual aggregate. The bill allows captives to apply to OIR for all insurance authorized in Florida, except for workers' compensation and employer's liability, life, health insurance, personal motor vehicle insurance, and personal residential property insurance. With a captive reinsurance company, however, the bill distinctly allows it to apply to write reinsurance covering property and casualty insurance or reinsurance contracts.

Capital and Surplus

Current law requires industrial insured captive insurers to maintain unimpaired capital and surplus of at least $20 million before it can be licensed. Pure captive licensure requires unimpaired paid-in capital of at least $500,000 and surplus of at least $250,000. Additionally, current law also requires captive insurers to comply with the same capital and surplus requirements imposed on Florida domestic insurers (i.e., $5 million). The bill substantially reduces the capital and surplus requirements for captive insurance companies in Florida. Note, however, that the bill allows OIR to determine the capital and surplus requirements for special purpose captive insurance companies. The following chart exemplifies the bill's capital and surplus requirements according to formation.

Captive Formation




Pure Captive




Industrial Insured Captive - stock




Industrial Insured Captive - mutual  




Special Purpose Captive

Capital and surplus to be determined by OIR.

Captive Reinsurance Company

Capital andsurplus not less than the greater of $300 million or 10% of reserves.


The bill creates filing requirements specific to captive insurance and reinsurance companies. The bill specifically requires the captive insurer or reinsurer to file with OIR the following:

  • A certified copy of its articles of incorporation and bylaws;
  • A statement of its financial condition under oath by its president and secretary;
  • Evidence of the amount and liquidity of the proposed captive's assets relative to the risks to be assumed;
  • Evidence of adequate expertise, experience, and character of the person(s) who will manage the company;
  • Evidence of the overall soundness of the company's plan of operation;
  • Evidence of adequate loss prevention programs of the company's parent, member organizations, or industrial insureds (note: this is not an explicit requirement for captive reinsurance companies); and
  • Any other factors relevant to OIR in ascertaining whether the company will be able to meet its policy obligations.

Further, applicants' officers and directors are subject to background investigations and must submit biographical affidavits and fingerprint cards. OIR may deny, suspend, or revoke authority to insure or reinsure:

  • When an officer or director of an applicant was previously the officer or director of an insolvent business.
  • When an officer, director, stockholder of 10% or more of securities, or incorporator has been found guilty or pleaded guilty or nolo contendere to any felony or crime of moral turpitude punishable by imprisonment of 1 year or more. Existing captives with a person falling under this provision must immediately remove this person or be subject to license revocation or suspension.

After meeting the filing requirements, the captive needs to obtain a license from OIR to insure or reinsure in Florida and do the following:

  • Hold at least one board of directors' meeting each year in Florida;
  • Maintain its principal place of business in Florida; and
  • Appoint a resident registered agent to act on its behalf in Florida.

The bill requires captive insurance and reinsurance companies to pay a processing fee of $1,500 and a renewal fee of $1,000. Additional $5 fees may be applicable for documents requiring certification of authenticity or the commissioner's signature.


Current law requires captive insurance companies to submit, at least annually, a financial condition report to OIR, and grants the Financial Services Commission authority to adopt by rule the form in which captive insurers shall report. The law explicitly states that this is the only annual report that is required. The bill revises this language so that a captive insurance company may not be required to submit any other annual report, though limits the scope of other possible annual reporting requirements to Part V, Captive Insurers. The Financial Services Commission retains the authority to adopt by rule the form in which captive insurance companies shall report. The bill specifically requires captive reinsurance companies to report identically.

Additionally, the bill requires the financial report to be annual but no later than March 1, as opposed to current law, in which annual reporting is based around the company's fiscal year. However, the bill does allow captive insurance companies to apply to file annually based on the parent company's fiscal year.


Current law regulates captive reinsurance from both the perspective of a captive insurance company purchasingreinsurance and from the perspective of a captive insurance company providing reinsurance. First, the law specifies that captive insurers may only use reinsurers authorized by OIR to reinsure part or all of its risks. In certain circumstances, however, credit on account of reinsurance may be ceded to an unauthorized reinsurer. Second, captive insurers are not permitted to reinsure risks in Florida when those risks are written by unauthorized insurers.

Not all companies can form captive reinsurance companies. The bill only allows reinsurance companies currently authorized to provide reinsurance in Florida to form captive reinsurance companies. Once formed, the captive reinsurance company cannot directly insure risk.

The bill further provides requirements for captive reinsurance companies regarding discounting loss and loss adjustment expense reserves, and the management of companies' assets, as follows:

  • Captive reinsurance companies are allowed to discount their loss and loss adjustment expense reserves. If they do, they must file an annual actuarial opinion on loss and loss adjustment expense reserves by an independent actuary.
  • At least 35% of a captive reinsurance company's assets must be managed by an asset manager domiciled in Florida.

Effective Date

The new law is effective July 1, 2012.

[1]   This report was compiled in substantial part using public records data from the Florida Senate and the Florida House of Representatives.

For more information, contact Nancy Linnan or Kelly Cruz-Brown.


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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