From http://www.azcia.org/

Governor Signs Legislation Updating Arizona Captive Insurance Law

On April 24, 2007, Arizona Governor, Janet Napolitano, signed HB2294, Captive Insurer Amendments, enacting significant updates to Arizona's captive insurance law. The legislation was developed and lobbied by the Arizona Captive Insurance Association. It passed through the Arizona legislature with unanimous approval in every vote. The amendments will be effective later this year, ninety days after the legislative session adjourns.

Among the legislation's notable features:

New provisions allowing the establishment of branch captives to provide employee benefits.

New provisions defining "deductible reimbursement" business, and clarifying that deductible reimbursement business is permitted on a direct basis.

Re-defines "industry group captive insurer" to eliminate group member eligibility requirements of a third party insurance consultant and a threshold amount of annual premium expenditure, and substitutes a simple homogenous risk standard.

Allows group captives (except risk retention groups) to cover "controlled unaffiliated business".

Eliminates remaining restrictions against writing commercial motor vehicle business on a direct basis.

Eliminates an Arizona residency requirement for captive managers, and requires that captive managers do business at a location in Arizona.

Reduces the minimum capital requirement for a protected cell captive from $1,000,000 to $500,000.

Allows any surplus note interest rate approved by the Director.

Specifically allows a reinsurance captive to securitize its loss reserve portfolio through contracts that allow the purchase of interests by investors on a non-recourse basis.

Allows a pure captives to be formed as a limited liability company.

Allows a pure captive to have as few as one director.

Allows a group captive to have as few as three directors, and up to as many directors as group members (in addition to outside directors).

Coordinates the effective date of corporate re-domestication to Arizona with the effective date of the new Arizona certificate of authority.

Clarifies that audit reports are due within six months after the end of the captive's fiscal year.

Clarifies the requirement for prior approval of material changes to captive business plans.

Clarifies the confidential treatment of all information related to captive insurers, except for name, type, date licensed, license status, and business of owners (does not apply to risk retention groups)

Specifically authorizes the Director of Insurance to expend monies in the captive insurance regulatory and supervision fund to pay the costs of administering the captive insurance law and to promote Arizona's captive insurance industry pursuant to guidelines that the Director adopts.

Captive insurance companies are a form of self-insurance. They are special purpose insurance companies that are not authorized to provide insurance to unrelated parties, but are limited to providing insurance to related parties who have an interest in controlling covered losses. They provide various insurance and business advantages to enterprises with a sophisticated, proactive approach to commercial insurance and risk management.

Current AzCIA President, Jamie Low, stated, "On behalf of the Arizona Captive Insurance Association, I express my appreciation to the Arizona Department of Insurance, the Arizona legislature, and the Arizona governor for the swift passage and enactment of HB2294. This important law keeps Arizona in the forefront of captive jurisdictions and provides significant pro-business changes to streamline, modernize and facilitate the organization and operations of Arizona-domiciled captive insurers. This legislation will help maintain Arizona as one of the world's leading captive jurisdictions."

Arizona Director of Insurance, Christina Urias, stated, "Together with the Arizona Captive Insurance Association, we have worked to carefully refine and modify Arizona's captive insurance law to encourage the further development of Arizona's growing captive insurance industry. The upcoming Arizona Captive Insurance Association Conference, May 15-17, 2007 at the Arizona Biltmore, will give us the opportunity to highlight these important changes to industry representatives from across the US and abroad."

Arizona Captive Administrator, Rod Morris, stated, "I am very pleased with the passage of the HB2294. It will add clarity and flexibility in a number of areas. Additionally, the unanimous approval in the legislature and immediate agreement by the governor is clear evidence of broad support of the captive program in official circles as well as their interest in keeping it competitive and responsive to industry needs."

Arizona began licensing special purpose reinsurers to function as captive insurers in the 1970s, at one time being home to over 800 such reinsurers. Specific Arizona captive insurance legislation was enacted in 2001, and Arizona began licensing captive insurers in 2002. Since 2001, Arizona's captive legislation has been updated three times to maintain its efficiency and add features. As of April 27, 2007, Arizona had licensed 88 captive insurers.

The Arizona Captive Insurance Association (AzCIA) was formed as an Arizona non-profit corporation on March 2, 2001. Its mission is to support, promote, foster and market the position of the state of Arizona as an attractive, competitive, and vital captive insurance domicile, by providing education and networking opportunities for those who operate within the captive insurance industry.

The Association will host its Annual Conference at the Arizona Biltmore May 15 - 17, 2007. Registration materials and other information about the organization are available on the Association's website, www.azcia.org.

For the full text of the Senate Engrossed Version of the bill, you can click on this link: http://www.azleg.gov/legtext/48leg/1r/bills/hb2294s.pdf