Iowa Lowers Assumed Reinsurance Premium Tax Rates for Captive Insurers

Last year, Iowa legislators, along with Governor Kim Reynolds, enacted legislation to permit the establishment of captive insurance companies within the state.

SF 549 enables the creation of various types of captives, including pure, association, protected cell, special purpose, and industrial insured captives. It sets forth regulatory reporting and examination standards, outlines a premium tax framework, and tasks the Iowa Insurance Division with overseeing the law's implementation and crafting associated rules.

In a recent update, Governor Reynolds signed HF 2636, which reduces assumed reinsurance premium taxes for certain captive insurers in Iowa. The bill received unanimous support from both the House and Senate and is now in effect.

Under HF 2636, premiums between $40 million and $60 million will now be taxed at 0.045 percent, while amounts exceeding $60 million will be taxed at 0.020 percent, a decrease from the previous 5.0 percent set by SF 549.

Premiums up to $20 million will remain taxed at 0.200 percent, and premiums ranging from $20 million to $40 million will continue to carry a tax rate of 0.125 percent.

All captives are subject to a minimum annual premium tax of $5,000.

Womble Bond Dickinson, a law firm, commented in a previous press release, "With a modern, competitive bill that is comparable in many ways to the captive statutes of other jurisdictions, including with respect to premium taxes and fees, dedicated captive regulators, and a robust insurance industry, Iowa will be a competitive domicile to watch in the future."