New Legislation Expands Texas Captive Insurance Market

This month Texas Governor Greg Abbott has signed two pieces of recent legislation into law which expand Texas’s growing captive insurance market.

First, Senate Bill 667 amends Chapter 964 of the Texas Insurance Code to permit Texas captive insurance companies to pool risk with other affiliated captives subject to approval by the Texas Department of Insurance (“TDI”). The new law further authorizes a Texas captive insurance company to accept risks from, cede risks to, or take credit for reserves on risks ceded to certain captive reinsurance pools, subject to approval by TDI. The law also clarifies requirements for payment of dividends to captive owners, and requires TDI to adopt rules on that subject.

Second, House Bill 2557 amends Chapter 281 of the Texas Health and Safety Code to permit county hospital districts to form captive insurance companies and captive management companies on their own or through a combination of districts.

These new laws supplement 2013 legislation passed by the Texas Legislature last session, which authorized captive insurance companies to be domiciled in Texas for the first time. The first Texas captive insurance company was licensed on March 17, 2014 and the number of licensees continues to grow. The laws enacted this year enhance an already favorable regulatory environment for Texas-licensed captive companies and to encourage the many Texas businesses with captive insurers in other jurisdictions to re-domesticate to Texas.

A copy of Senate Bill 667 can be found here. A copy of House Bill 2557 can be found here. Once codified, both new laws should be available here. An April 2015 blog entry about Senate Bill 667 prior to its enactment can be found here.