Can you sell a captive insurance company along with the business?
Yes, through a Form A, and the prior approval is the part that bites
Travis Wegkamp says a captive can be sold, through a Form A that tells the insurance department about a proposed acquisition of control, merger or ultimate change in control. It needs prior approval and review by the attorney general's office. The department checks the new owner the way it checked the original one, including whether any statute bars them from participating in insurance, and confirms that whatever changes in the business plan is still permissible. His emphasis lands hardest on sequence: the approval has to come first.
The instrument is a Form A, which exists to inform the insurance department of a proposal for an acquisition of control, a merger, or an ultimate change in control. Wegkamp describes it as an involved form that asks for a lot of information, and it goes to the attorney general's office for review.
What the department wants is the same information it wanted at licensing, updated for the new owner: who the new company is, what the purchase price will be, and when the change is expected to happen.
Key takeaways
Selling a captive runs through a Form A notifying the department of an acquisition of control, merger or ultimate change in control.
The department screens the new owner against the statutes barring certain individuals from insurance entities, and rechecks that the business plan stays permissible.
Wegkamp warns that proceeding without the required prior approval can force transactions to be unwound and draw significant regulatory action.
The substantive check is on the buyer. Wegkamp notes there are federal statutes that prohibit certain individuals from participating in insurance or financially related entities, and that the department screens for this at application and again on a change of control.
The second check is on the plan. Whatever is changing in the business plan has to remain allowable under the code, which is the same permissibility test a new applicant faces.
From the conversation
Travis Wegkamp
Director, Captive Insurance Division, Utah Insurance Department
“you need to get the prior approval or else you're going to, it's going to be a much more difficult process.”
Transcript
Read the full transcript 13 turns
Hostis it possible to sell the captive as well
Travis Wegkamp? It is. You need to do what's called a form A and that's, to inform the insurance department of a proposal for an acquisition or control merger, ultimate change in control. That is something that requires the prior approval and the review by the, Attorney General's office to make sure that it's satisfactory. There, are some individuals
Travis Wegkampor, some statutes federal wise that, prohibit certain individuals from participating insurance or, you know, financial related and to these and things like that. That's something we look at during the application process and so if there's going to be a new owner involved, we need to get that information to make sure that they're allowable per, statute there and then we, yeah, we just want to get all the information on, you know, what's the purchase price going to be, who the new
Travis Wegkampcompany is, the expected date of this to take place and just make sure that everything's, again, like the initial application that every, everybody involved is, permissible for code. Nothing's going to change or whatever is going to change with the business plan is allowable per code. So that's, really what we look for. It's, kind of a, it's, a pretty involved form, the form. It, it's asked for a lot of information
Travis Wegkamp. So they'll just, you know, work with the captain manager or their, or their attorney, get all that stuff filled out properly. And once they submit that to us and we've got all that information, then it's a pretty, simple process to review that and look at it and, send it over to the AG. And surprisingly, I, yeah, it's, because you might not initially think that, but you and Steph, correct me if I'm wrong, but I feel like our AG office has actually been pretty quick to turn those around as well
Travis Wegkampand review those
Stephanie Liuwhat if you got
Travis Wegkampthat full form a filled out in the package, it actually is, on, our end, a pretty painless process, I would say, quicker than you might imagine anyways. So there
Host's a process in place
Travis Wegkampand it's not the end
Hostof the world if the captain needs to be sold to a new controlling
Travis Wegkampenergy. Yeah, just, by all means, the, key issue with a lot of this stuff is the prior approval. Get it to us before. Because the, we, try to be forgiving with some of that stuff, but when it comes to something like this that has to go before the AG's office and the law requires prior approval, you need to get the prior approval or else you're going to, it's going to be a much more difficult process. Things are going to
Travis Wegkamphave to be unwound or, face some, significant, kind of regulatory action potentially. So
Citations
Sources
- Captive, Utah Insurance Departmenthttps://insurance.utah.gov/captive
The views expressed are those of the featured guest, drawn from a recorded conversation, and reflect their own professional experience. Nothing on this page is insurance, tax, legal, or investment advice. Consult your own advisors about your specific situation.
Corrections or removal requests: contact@captiveip.com