Opportunities Enlarge as Texas Expands Its Captive Law

Governor Greg Abbott has signed House Bill 1944, which makes important changes to the Texas captive insurance law (Chapter 964, Texas Insurance Code). H.B. 1944 was authored by Jim Murphy (R-Houston) and sponsored in the Senate by Bryan Hughes (R-Mineola). This is the second consecutive session in which the Texas Legislature has made improvements to the captive statute since its enactment in 2013.

The Texas Captive Insurance Association (TxCIA) worked closely with the Legislature, the Texas Department of Insurance, and other interested parties to enact the following changes to existing law.

• Authorizes a Texas captive insurance company to be formed as a reciprocal insurance exchange
• Authorizes a Texas captive insurance company to take credit for reinsurance ceded to a nonaffiliated reinsurer when specific requirements are met
• Allows a captive insurance company to insure life insurance benefits for employee benefits subject to the Employee Retirement Income Security Act of 1974 (ERISA)
• Allows capital and surplus to be held in the form of Texas county or municipal bonds
• Authorizes the insurance commissioner to waive requirement to provide an actuarial report with the captive's annual filing if certain conditions are met
• Eliminates the requirement that the captive must have a licensed claims adjuster if the claims are limited to first-party claims of the parent and/or affiliates of the captive
• Simplifies the corporate formation processes between the secretary of state and Department of Insurance

At TxCIA's request, H.B. 1944 was filed earlier this year to expand the provisions of Senate Bill 734 that passed in 2013 and authorized captive insurance in Texas for the first time.

The association plans to hold several webinars and presentations in coming months to educate the business community on opportunities offered through the expanded captive law.