H.B. 191

1

CAPTIVE INSURANCE LAW AMENDMENTS
2 2005 GENERAL SESSION
3 STATE OF UTAH
4 Sponsor: James A. Dunnigan
5
6 LONG TITLE
7 General Description:
8 This bill amends the Insurance Code by modifying provisions related to captive
9 insurance companies.
10 Highlighted Provisions:
11 This bill:
12 . eliminates the premium tax on a policy or contract written by a captive insurance
13 company and replaces it with a fee that is paid annually by a captive insurance
14 company to obtain or renew a certificate of authority;
15 . requires the Insurance Commissioner to set the fee in accordance with statute and
16 after considering whether the fee amount is competitive with those in other states;
17 . creates a dedicated credit funded by the fees received by the department from
18 captive insurance companies;
19 . designates how monies from the dedicated credit shall be used by the department;
20 and
21 . makes technical changes.
22 Monies Appropriated in this Bill:
23 None
24 Other Special Clauses:
25 None
26 Utah Code Sections Affected:
27 AMENDS:

28 31A-3-304, as enacted by Chapter 251, Laws of Utah 2003
29
30 Be it enacted by the Legislature of the state of Utah:
31 Section 1. Section 31A-3-304 is amended to read:
32 31A-3-304. Annual fees -- Other taxes or fees prohibited.
33 [(1) A captive insurance company, as defined in Section 31A-37-102 , is subject to a
34 tax on the direct premiums collected or contracted for on policies or contracts of insurance
35 written by the captive insurance company during the year ending December 31 next preceding,
36 after deducting from the direct premiums subject to the tax the amounts paid to policyholders
37 as return premiums, including dividends on unabsorbed premiums or premium deposits
38 returned or credited to policyholders, at the rate of:]
39 [(a) .4% on the first $20,000,000;]
40 [(b) .3% on the next $20,000,000;]
41 [(c) .2% on the next $20,000,000; and]
42 [(d) .075% on each dollar thereafter.]
43 [(2) (a) A captive insurance company is subject to a tax on assumed reinsurance
44 premium at the rate of:]
45 [(i) .225% on the first $20,000,000 of assumed reinsurance premium;]
46 [(ii) .15% on the next $20,000,000 of assumed reinsurance premium;]
47 [(iii) .050% on the next $20,000,000 of assumed reinsurance premium; and]
48 [(iv) .025% of each dollar thereafter of assumed reinsurance premium.]
49 [(b) Notwithstanding Subsection (2)(a), reinsurance tax does not apply to premiums for
50 risks or portions of risks that are subject to taxation on a direct basis under Subsection (1).]
51 [(c) A premium tax under this section is not payable in connection with the receipt of
52 assets in exchange for the assumption of loss reserves and other liabilities of another insurer
53 under common ownership and control if:]
54 [(i) the transaction is part of a plan to discontinue the operations of the other insurer;
55 and]
56 [(ii) the intent of the parties to the transaction is to renew or maintain business with the
57 captive insurance company.]
58 [(3)] (1) (a) [If the aggregate taxes to be paid by a captive insurance company

59 calculated under Subsections (1) and (2) amount to less than $5,000 in any year, the] A captive
60 insurance company shall pay [a tax of $5,000 for that year] an annual fee imposed under this
61 section to obtain or renew a certificate of authority.
62 (b) The commissioner shall:
63 (i) determine the annual fee pursuant to Sections 31A-3-103 and 63-38-3.2 ; and
64 (ii) consider whether the annual fee is competitive with fees imposed by other states on
65 captive insurance companies.
66 [(4)] (2) A captive insurance company that fails to [make returns or to] pay [all taxes]
67 the fee required by this section is subject to the relevant sanctions of this title.
68 [(5) Two or more captive insurance companies under common ownership and control
69 shall be taxed as though they were a single captive insurance company.]
70 [(6) In the case of a branch captive insurance company, as defined in Section
71 31A-37-102 , the tax provided for in this section applies only to the branch business of the
72 company.]
73 [(7)] (3) (a) Except as provided in Subsection [(7)] (3)(b), the [tax] fee provided for in
74 this section constitutes [all taxes collectible] the sole tax or fee under the laws of this state
75 [from] that may be otherwise levied or assessed on a captive insurance company, and no other
76 occupation tax or other [taxes] tax or fee may be levied or collected from a captive insurance
77 company by the state or a county, city, or municipality within this state.
78 (b) Notwithstanding Subsection [(7)] (3)(a), a captive insurance company is subject to
79 real and personal property taxes.
80 [(8)] (4) A captive insurance company shall pay [a tax] the fee imposed by this section
81 to the [State Tax Commission] department by March 31 of each year.
82 (5) (a) The funds received pursuant to Subsection (2) shall be deposited into the
83 General Fund as a dedicated credit to be used by the department to:
84 (i) administer and enforce Chapter 37, Captive Insurance Companies Act; and
85 (ii) promote the captive insurance industry in Utah.
86 (b) At the end of each fiscal year, funds received by the department in excess of
87 $250,000 shall be treated as free revenue in the General Fund.

Legislative Review Note
as of 1-7-05 8:55 AM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel