Significant changes to Georgia law governing captive insurance companies took effect on July 1, 2017. The changes relate to the permitted corporate structure of captive insurance companies, new restrictions on risks that may be reinsured by certain captives, procedures for forming, converting and dissolving a captive, and streamlining the issuance of certificates of authority to newly formed captives, among other changes.
Specifically, the new law authorizes captive insurance companies to be formed as manager-managed limited liability companies, in addition to continuing to permit them to be organized as stock or mutual insurers. The Act streamlines the default process to obtain a certificate of authority by directing the Insurance Commissioner to “promptly issue” a certificate of authority to a captive upon satisfaction that the documents filed by the captive comply with the requirements for captive formation. The prior procedure, which the Act authorizes the Commissioner to follow if he chooses, required a captive to provide additional documentation regarding the company’s capital or surplus and a certified financial statement. Under the new default procedure, the captive is required to provide this same documentation “as soon as practicable” after issuance of the certificate of authority, rather than before.
In addition, the law restricts “agency captive insurance companies” to reinsuring (1) risks of insurance or annuity contracts placed by the entity owning the agency captive, or (2) contractual liabilities arising out of service contracts or warranties sold by an entity owning the agency captive. Captives are exempted from the provisions of the insurance code relating to domestic stock and mutual insurers except as otherwise provided by certain specified provisions of the insurance code or by the Commissioner through regulation. The law also requires a captive to obtain prior written approval from the Commissioner before reinsuring certain risks, restricts taxes that apply to risk retention group captives to those on direct premiums for coverages in Georgia, and substantially amends several definitions. (eff. 7/1/2017).