What makes a captive insurance application get rejected?
Three criteria stop an application, and most problems are solved before it is filed
Travis Wegkamp says outright rejection is not something the division deals with often, because the department talks to prospects before they file and most issues get ironed out then. What does stop an application comes down to three checks: whether the proposed lines of coverage are permissible under Utah's code, whether the people and entities being insured are ones a captive is allowed to insure, and whether the parent and the beneficial owners can actually support the captive financially.
The first thing worth noticing is Wegkamp's framing of the question. He describes rejection as rare, and the reason he gives is procedural rather than flattering: the department has conversations with new prospects before an application is submitted, and the problems get resolved in those conversations rather than in a refusal letter.
That reframes what an applicant should do with this answer. The failure modes below are not gates to be argued past at filing. They are the things to settle with the division before anything is filed.
Key takeaways
Wegkamp says rejection is rare because the department works through problems with prospects before an application is filed.
Permissible coverage is the main check, and he says health, life and personal lines coverages are not allowed in a Utah captive.
The other two checks are whether the insureds are the parent, an affiliate or an approved controlled unaffiliated business, and whether the parent and owners can financially support the captive.
The first criterion is what the captive proposes to write. Wegkamp says the main thing is making sure the lines of coverage are permissible per code, and he names the exclusions directly: health and life coverages and personal lines are not available to a Utah captive.
The second is who is being covered. A captive is licensed to insure its parent and that parent's affiliates. Wegkamp notes one extension, the controlled unaffiliated business, which he says is allowed but takes additional work to set up properly and get approved.
From the conversation
Travis Wegkamp
Director, Captive Insurance Division, Utah Insurance Department
“So really, those are probably the three key criteria that might go into a captive not moving forward.”
This answer begins at 10:15 of the full conversation. Watch or listen to the whole thing.
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.
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