How do you pause, close or move a captive out of a state?
Three exits, one precondition: everything owed has to be settled first
Fenhua Liu treats dormancy, closing and moving as variations on the same process. Whichever exit is taken, the department first confirms there are no outstanding liabilities, that claims have been paid and obligations met, and that fees and premium tax are settled. Dormancy runs off a checklist and is quick. Closing ends in a dissolution filing or the return of the licence. Moving to another domicile requires the receiving regulator's approval, and where business moves between captives it is done by novation agreement with confirmation from both states.
Liu's answer collapses three questions into one framework, which is the useful part. Dormancy, dissolution and redomestication all begin from the same place: the department has to see that nothing is left owing.
That means no existing liabilities, claims paid, obligations met, and the annual licensing fee and premium tax settled. A captive planning any of the three should read that as the real timeline driver, because it is the part the owner controls.
Key takeaways
Dormancy, dissolution and redomestication all require outstanding liabilities, claims, obligations, fees and premium tax to be settled first.
Dormancy runs off a checklist and is quick, and a captive that has written business keeps a minimum amount in place while dormant.
Moving to another state needs the receiving regulator's approval, and business moved between captives goes by novation agreement with confirmation from both domiciles.
Dormancy is the lightest exit and Connecticut runs it off a checklist. Liu describes it as a quick process: forms, a look at the financials already submitted, and a decision. A captive that has written business keeps a minimum amount in place; one that never wrote business is treated differently.
The value of dormancy is that the company survives. Utah's director made the same argument from the cost side, that rebuilding a captive later means a new feasibility study and a new business plan.
From the conversation
Fenhua Liu
Assistant Deputy Commissioner and Director of Captive Insurance, Connecticut Insurance Department
“we have to make sure there's no existing liabilities. All the claims have been paid. All the obligations have been met.”
Transcript
Read the full transcript 8 turns
HostHow does dormancy and a change in control or a sale work for Connecticut and
Fenhua Liuthe captive? That's a good question. So Connecticut do allow compactives for, like, you just explained, if they want to put in dormant, we have to make sure there's no existing liabilities. All the claims have been paid. All the obligations have been met. You know, they have processed all those, you know, outstanding claims here. They also have to have a minimum of $15,000 if they have written any business. If they have never written
Fenhua Liuany business, we will have to keep the capital surplus in the account. So we can put them in dormant, which is a very quick process as well. We have a checklist. It's basically just a lot of forms on us and we look at the financials. They have submitted to us and we process very quickly. For those capital, if they redo them as well or they closed, they have, they want to close the capital being Connecticut for whatever reason. And we
Fenhua Liuare requesting them to send a request the same, simply use the checklist. We make sure, again, make sure all the claims have been paid. All the obligations, tax, premium tax or annual licensing fee, which is low, but we only charge $375, by the way, annual licensing fee. But they still have to make sure they pay every, all the obligations. And then we allow them to file dissolution or
Fenhua Liureturn the license kind of request. And we prove that as well. For those redone myself to another state, for example, and we
Fenhua Liumake sure the other state regular, other domicile regulator, they approve whatever they want to do. And then we do the same thing before they move, make sure all the claims are paid. And if we want to, sometimes they do like a novation agreement, they novated the business out of the captive to another, let me say that they may have another captive in another domicile. In that case, they want to merge the two dom
Fenhua Liuicile, two captives. So if they choose another domicile, it's their home state. So the connected captive will be the, after the, all the policies have been novated. And we confirm they have sent out a confirmation. And we have, they also, we also need the confirmation from another domicile to approve and make sure all the agreements, they agreed to approve those like a novation agreement. And
Fenhua Liuafter that, we do allow them to shut it down. So there is a way out
Citations
Sources
- Captive Insurance Regulation, Connecticut Insurance Departmenthttps://portal.ct.gov/cid/mission-and-divisions/captive-insurance
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