Subject 120-2-45 CAPTIVE INSURANCE COMPANIES
This Chapter is promulgated by the Commissioner of Insurance pursuant to the authority set forth in O.C.G.A. § 33-41-23.
The purpose of this Chapter is to provide for the establishment and regulation of captive insurance companies.
|(1)||"Commissioner" means the Commissioner of Insurance of the State of Georgia.|
|(2)||"Captive manager" means a third party person that is designated to manage a captive insurance company and to correspond with the Commissioner regarding the business of such company.|
|(3)||"Captive insurance company" or "company" means a captive insurance company as defined in O.C.G.A. § 33-41-2(4).|
|(4)||"Employee captive manager" means an employee of the company who is designated to manage the company and to correspond with the Commissioner regarding the business of such company.|
|(5)||"Person" means an individual, corporation, limited liability company, partnership, association, joint-stock company, trust, unincorporated organization, any similar entity, or any combination of the foregoing acting in concert.|
|(6)||"Service provider" means a captive manager, producer, third party administrator, managing general agent, or an insurance intermediary for a company.|
|(7)||All other terms as defined in O.C.G.A. § 33-41-1et seq. or, as appropriate, Title 33 of the Official Code of Georgia Annotated, which are used in this Regulation shall have the same meaning as in such references.|
|(1)||Each application for a certificate of authority shall be made on the appropriate form prescribed by the Commissioner and found on the Commissioner's website. It shall be accompanied by all required documents. The application and related documents are subject to review and written approval by the Commissioner.|
|(2)||A company holding an active certificate of authority shall renew its certificate of authority by paying the required fee.|
|(1)|| Authorization Required.
No person shall, in or from within this state, act as a service provider without the authorization of the Commissioner. Application for such authorization must be made by completing the appropriate application form, which can be found on the Commissioner's website. The application shall be accompanied by all required documents. The application and related documents shall be filed with the application for certificate of authority and are subject to review and approval by the Commissioner.
|(2)|| Service Provider Agreements.
|(3)|| Designation of a Captive
Unless a company's plan of operation, as approved by the Commissioner, provides for an employee captive manager, company shall report to the Commissioner in writing, the name and address of the person designated as captive manager and retained to manage the company. The captive manager shall apply, on a form adopted by the Commissioner, for approval by the Commissioner. The form is available on the Commissioner's website.
|(4)|| Designation of Third Party Administrator.
Each company shall report to the Commissioner in writing, the name and address of the person designated as the third party administrator performing the claims administration and loss reserve functions for the company. The third party administrator shall register on a form adopted by the Commissioner, for approval by the Commissioner or the Georgia Department of Insurance. If the person acting as the third party administrator is the captive manager, then this form is not required. The form is available on the Commissioner's website.
Affirmative Duty of Captive Manager.
The designated captive manager shall have an affirmative fiduciary duty to report and disclose to the Commissioner any violation of the laws of this state or these regulations by the company or any conduct by the officers and directors of the company that threatens the solvency of the company. Failure to report or disclose any violation to the Commissioner may result in the termination of the approval of such captive manager as an authorized service provider to companies in this state. Any report or disclosure by a captive manger submitted to the Commissioner shall be held as confidential pursuant to O.C.G.A. Section 33-41-16(c).
|(1)|| General Requirement - Direct or Indirect
Each officer, director, and each owner of more than ten percent (10%) of the outstanding shares of stock of a company with management rights and duties, including, but not limited to the right to vote upon and appoint members to the board of directors of the company (the "voting stock"), either directly or indirectly through ownership of other persons, shall submit the appropriate biographical form prescribed by the Commissioner and found on the Commissioner's website.
|(2)|| Trusts, Partnership, and Other Limited
Control Arrangements - Non-Owner Control.
Where the power to direct or cause the direction of the management and policies of the company on behalf of the owners of the company is held by one or more individuals then the following individual(s), by entity type, will provide the biographical form required in this Regulation 120-2-45-.06(1) as the controlling owner:
|(1)||Annual Reports Requirement for Pure Captives. On or before March 1, all companies doing business in this state shall annually submit to the Commissioner a report of its financial condition as of December 31 of the calendar year preceding then verified by oath by an executive officer. The company shall utilize the appropriate form prescribed by the Commissioner for the annual report. The form is available on the Commissioner's website.|
|(2)|| Financial Statements Generally.
Financial Statements shall include:
|(3)|| Annual Reports for Industrial Insured and
Association Captive Insurance Companies and Risk Retention Groups.
|(4)|| Additional Reports.
|(6)|| Compliance Required for
Compliance with this Regulation shall be a condition of the renewal of a certificate of authority under O.C.G.A. § 33-41-10.
|(1)|| Examinations Generally.
The Commissioner or his or her representative may examine a company at any time the Commissioner deems appropriate, but no less frequently than once every five (5) years unless the Commissioner makes a written finding that a longer period is warranted for a company.
|(2)|| Organizational Examination.
In addition to processing the application, an organizational examination may be performed before company is licensed. Such examination shall consist of a general survey of the company's corporate records, including charter, bylaws and minute books; verification of capital and surplus; verification of principal place of business; determination of assets and liabilities; and a review of such other factors as the Commissioner deems necessary.
Organizational Examination Fees.
If an organizational examination is required by the Commissioner, the company shall pay $3,000 to the Commissioner's appointed examiner to cover the expenses of the organizational examination. The Commissioner may require, in writing, the captive insurance company to pay a higher amount based upon his or her finding that the complexity of the proposed plan of operation or the risk to the insured(s) or reinsured(s) requires additional initial review by the Commissioner's appointed examiner.
Any examination undertaken under this Regulation 120-2-45-.08 shall be confidential in accordance with O.C.G.A. § 33-41-16.
|(1)||Audit Requirement. Each captive insurance company shall engage an independent certified public accountant authorized by the Commissioner to conduct a comprehensive audit and shall file such audited financial report with the Commissioner on or before June 30th of each year. The annual audit report shall be considered part of the company's annual report of financial condition.|
Designation of Independent Certified Public Accountant.
Within ninety (90) days of being licensed in Georgia, a company shall report to the Commissioner the name of the audit partner and certified public accountant that it retained to perform its annual audit.
Applicable to Designated Independent Certified Public Accountant.
The Commissioner will accept an audit from the independent certified public accountant subject to the conditions set forth in Regulation 120-2-60-.07(6).
|(4)|| Notification of Adverse
A company shall require the certified public accountant to immediately notify in writing an officer and all members of the Board of Directors of the company of any determination by the independent certified public accountant that the company has materially misstated its financial condition in its report to the Commissioner. The certified public accountant shall furnish such notification to the Commissioner within five (5) business days of the delivery of the written notice to Board of Directors.
|(5)|| Availability and Maintenance
of Working Papers of the Independent Certified Public Accountant.
|(6)|| Annual Audit Requirements
|(1)|| Compliance Generally.
Letters of credit must comply with this Regulation.
|(2)|| Defined Terms.
As used in this Rule, the terms below shall have the following meaning:
|(3)|| Specific Requirements.
For a letter of credit to be acceptable, it must:
|(4)||Example Provided. An example of an acceptable letter of credit and confirmation letter can be found on the Commissioner's website.|
|(1)|| Original Plan of Operation.
The plan of operation shall be submitted in accordance with the Commissioner's instructions which are available on the Commissioner's website.
|(2)|| Changes to
Plan of Operation.
Any material change to the company's management or operations, including without limitation any material change to the plan of operation required by O.C.G.A. § 33-41-10 and Regulation 120-2-45-.11(1) must be filed with the Commissioner at least thirty (30) days prior to the proposed effective date of the proposed amendment.
|(1)|| License Fee.
A license fee of $600 shall be paid at the time of the filing of an Application for Certificate of Authority, for a Captive Insurance Company.
|(2)|| Renewal Fee.
A renewal fee of $500 shall be due for each year after initial licensure of a company.
|(1)|| Premiums Collected Prior to July 1, 2015.
Companies shall file a premium tax return and pay premium taxes in accordance with Chapter 8 of Title 33 for all direct premiums collected prior to July 1, 2015.
|(2)|| Premium Collected On or After July 1,
Companies shall file a premium tax return and pay premium taxes in accordance with O.C.G.A. § 33-41-22 utilizing the forms available on the Commissioner's website, for direct and assumed premium received July 1, 2015 to December 31, 2015. The annual premium tax return and tax shall be due on or before March 1, 2016.
On or after January 1, 2016, the annual premium tax return shall be filed in accordance with O.C.G.A. Section 33-41-22 utilizing the forms available on the Commissioner's website, for direct and assumed premium received from January 1 to December 31. The annual premium taxes required under this chapter shall be paid with the filing of the annual premium tax return due March 1 following the close of the preceding year.
Any insurance company that fails to report and pay the required tax with the annual premium tax return when due shall be subject to a monetary penalty of $5,000.00.
The Commissioner for good cause shown may extend for no more than 30 days the time for filing a tax return or paying any amount required to be paid with any return. The extension may be granted at any time, provided that a request therefor is filed with the Commissioner within or prior to the period for which the extension may be granted. Any taxpayer to whom an extension is granted shall pay, in addition to the tax, interest at the rate of 1 percent per month or fraction thereof until the date of payment.
|(3)|| Risk Retention Group Premium
Companies that operate as a risk retention group shall file and pay premium taxes in accordance with O.C.G.A. § 33-40-5.
|(1)|| General Requirements.
Each company is required to adopt a conflict of interest policy statement for its officers, directors, and key employees. There shall be filed one informational copy filed with the Commissioner with the company's Application for Certificate of Authority for a Captive Insurance Company. Such policy statement shall require such officers, directors and key employees to disclose all positions, whether financial, personal or professional, direct or indirect, that may cause or be perceived to cause a conflict of interest for such person to act in such capacity or that the individual has no outside commitments, personal or otherwise, that would divert him or her from their duty to further the interests of the company he or she represents but this shall not preclude such person from being a director or officer in more than one (1) company. Each officer, director, and key employee shall file such disclosure with the board of directors yearly.
|(2)|| Prohibited Remuneration.
No director, officer, or employee of a company shall, except on behalf of the company, accept, or be the beneficiary of, any fee, brokerage, gift, or other emolument because of any investment, loan, deposit, purchase, sale, payment, or exchange made by or for the company but such person may receive reasonable compensation for necessary services rendered to the captive insurance company in his or her usual private, professional, or business capacity.
Any profit or gain received by or on behalf of any person in violation of this Regulation shall inure to and be recoverable by the company.
|(1)|| Dividends Generally.
All shareholder dividends or distributions shall be filed with the Commissioner for approval using the form provided by the Commissioner at least thirty (30) days prior to the proposed payment or distribution date. No dividend payment or distribution can be made unless the Commissioner approved the payment or the Commissioner does not object to the payment or distribution prior to the lapse of the thirty (30) days' notice period.
|(2)|| Extraordinary Dividends.
|(3)|| Rejection Due To Hazardous Financial
The Commissioner may reject any proposed dividend if he or she finds that the dividend or distribution would create a hazardous financial condition. For the purposes of this Regulation the standards set forth in Regulation 120-2-54-.03 to determine the existence of a hazardous condition may be relied upon by the Commissioner to determine if, after giving effect to the propose dividend or distribution, the company would create a hazardous financial condition.
No tender offer for or a request or invitation for tenders of, or enter into any agreement to exchange securities for, seek to acquire, or acquire in the open market or otherwise, any voting security of a captive insurance company shall be effective without the prior written approval of the Commissioner. The repurchase of securities from shareholders shall be treated as a distribution and is governed by Regulation 120-2-45-.15. In considering any application for acquisition of control or merger with a domestic captive insurance company, the Commissioner shall consider all of the facts and circumstances surrounding the application as well as the criteria for establishment of a captive insurance company set out in this Chapter.
A foreign or alien captive insurance company, upon approval of the Commissioner, may become a captive insurance company authorized to transact business in this state by complying with all of the requirements of the Georgia law relative to the organization and licensing of a captive insurance company in this state of the same or equivalent type in this state. The redomestication of a foreign or alien captive insurance company may be accomplished utilizing one of the following procedures:
|(2)|| Redomestication Review Process.
The Commissioner shall approve or disapprove all applications filed in accordance with Regulation 120-2-45-.17(1) within forty-five (45) days of the date the application is received. The Commissioner shall examine the application to determine whether the company is compliant with the applicable insurance laws of this state. If the application is approved, then the Commissioner shall issue under his or her hand and official seal a certificate approving the granting of the charter for such captive insurance company and shall transmit a copy of the certificate of approval to the Secretary of State.
No company may make a loan to or an investment in its parent company or affiliates unless the company has notified the Commissioner in writing of its intention to enter into such transaction at least thirty (30) days prior thereto, or such shorter period as the Commissioner may permit, and the Commissioner has not disapproved it within such period.
|(2)|| Standards of Review.
The standards set forth in O.C.G.A. § 33-13-5(a)(1) shall apply to any loan or investment under this Regulation 120-2-45-.18
|(3)|| Prohibited Transactions.
Loans of minimum capital and surplus funds required by O.C.G.A. § 33-41-8 are prohibited. In addition, any loan or investment that would create a hazardous financial condition is prohibited. For the purposes of this Regulation the standards set forth in Regulation 120-2-54-.03 to determine the existence of a hazardous condition may be relied upon by the Commissioner to determine if, after giving effect to the propose dividend or distribution, the company would create a hazardous financial condition.
A person is prohibited from transacting insurance in this state without first obtaining a certificate of authority to operate as a captive insurance company or registering as a risk retention group. Failure to obtain a certificate of authority or make the required registration is a violation of Georgia law and the procurement of insurance from any person that has not obtained a certificate of authority or has not registered with the Commissioner shall subject such person to procurement taxes imposed by the Georgia law.
If any provision of this Regulation or the application thereof to any person or circumstance is held invalid by a court of competent jurisdiction, the remainder of the Regulation or the applicability of such provision to other persons or circumstances shall not be affected.