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Dear Friends,

Thank you for your interest in Montana's captive insurance opportunities. Here in Montana, we're serious about developing a vibrant captive industry. Captives are a dynamic niche in the insurance marketplace. More and more companies and groups are seeing the advantages of captives: autonomy, tax benefits, regulatory efficiency, and cost, among others.

My office would love to show you our cooperative, efficient and timely regulatory atmosphere. I'm confident you'll find Montana to be unique in its ability to offer one-on-one working relationships with Insurance department staff and statewide elected officials. The spectacular scenery, charming Western communities and friendly people don't hurt either.

Enclosed you'll find the history of and links to Montana's captive insurance law, a complete captive insurer application packet, business location information and some general information about Montana. I hope you find this information helpful in your decision-making process.

Capture some of the Montana mystique. Put your captive right here in Big Sky Country. I look forward to hearing from you soon.

    

History of Montana Captive Laws

Procedures for Forming a Montana Captive Insurance Company

Montana Captive Insurer Application Instructions and Forms

List of Forms, Statutes & Rules

Montana Commissioner of Securities and Insurance Monica J. Lindeen

Sincerely,

Monica J. Lindeen
Commissioner of Securities and Insurance for Montana

    

 

 

History of Montana Captive Laws

The 2001 Legislature passed a law allowing captive insurance companies to operate in Montana .  A captive insurance company is a specialized company established primarily to insure the risks of a parent company or members of an association.  They serve the insurance needs of the parent organization or association without the uncertainties of commercial availability and cost.  They provide an insurance alternative for businesses and organizations, which is particularly important during times of a hard insurance market when companies are looking for options.

The law requires Montana-based captives to locate their headquarters in Montana and hold an annual board meeting here.  Captives do not interact with consumers in the same fashion as traditional multi-line companies so the State Auditor’s Office has been able to create a streamlined regulatory environment for them.

As demonstrated by Vermont, the captive insurance industry can provide significant economic benefit to a state.  Vermont became a captive domicile in the early 1970’s.  Today, Vermont has licensed more than 800 captive insurance companies from which it collects annual premium taxes of more than $25 million.  In addition, an infrastructure of professional service providers (managers, accountants, lawyers, actuaries) has developed to support the industry.  To date, 37 captive insurance companies have chosen Montana as their domicile, 26 having been licensed since 2005.  Captive insurers domiciled in Montana provide insurance to rural hospitals, nursing homes, doctors, commercial trucking companies, contractors, and others.  The anticipated premium tax collection in FY 2009 is approximately $350,000.    Two Montana based captive management firms have been established in Montana to provide professional services.  Long-term benefits to Montana include the potential for new jobs, an expanded tax base and increased economic activity.

This year, my office worked with the Montana Legislature to pass a new law that eases requirements for captive insurance operations in Montana and will strengthen our state’s position as a captive domicile.

Under the new law, HB 160, Montana-licensed captives, will continue to have the maximum premium tax capped at $100,000 dollars per year
What’s more, a pro-rated payment schedule id now in effect for first year captive insurance companies to help reduce front-end costs.

The bill also gives my office the ability to waive the risk-based capital report for risk retention groups that have been in existence for less than two years. With regard to the formation of captives, the number of required organizers has been reduced from three to one.

The law provides additional flexibility for Risk Retention Group investments.

 

 

 

 

 

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Procedures for Forming a Montana Captive Insurance Company

Montana’s 57th Legislature passed legislation allowing Captive Insurance Companies to do business.  This law will be found in Montana Code Annotated (MCA) Title 33, Chapter 28.  Updated MCAs containing this law are available on the web site at http://data.opi.state.mt.us/bills/mca_toc/33_28.htm. 

The procedures listed below should be followed to incorporate a captive insurer in Montana and to apply for a Certificate of Authority from the Montana Commissioner of Securities an Insurance:

  1. Prepare the documents needed for the application for Certificate of Authority.  (See the captive application for a list of items.) 
  2. Submit the application to the commissioner for review.  Include a $200 application fee and a $300 license fee.
  3. Prepare the documents needed to incorporate the insurer.  Drafts of these documents must be submitted with the application.  The services of a local attorney may be desirable. 
  4. Provide information concerning the adequacy of the expertise, experience, and character of the person or persons who will manage the captive insurer.  (Biographical Affidavit included)  Affidavits required on Directors, Officers and Management Personnel.
  5. Have your CPA complete the Application Authorization form to perform audits as required for captives. (Application included)
  6. Have your actuary complete the Application form for authorization to render the opinion on reserves for captive accounts.  (Application included)
  7. If Letter of Credit will be used for Capital & Surplus, see sample.
  8. The Montana insurance code authorizes the commissioner to obtain services to review the application for a captive insurer at the applicant’s expense.  If the commissioner determines that such services are needed, you will be required to submit an additional copy of the application materials to the reviewer and you will be notified of the cost.
  9. The Department may perform an organizational examination in advance of or as soon as possible after you receive the Certificate of Authority and have capitalized the captive (6.6.6803 ARM).  The cost of this examination will be borne by the applicant.
  10. Montana captive insurers must file an annual statement, Section 33-28-107.

If you have any questions regarding captive insurance companies in Montana, please contact Steve Matthews at 406-444-4372 or at smatthews@mt.gov.

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Montana Captive Insurer Application Instructions and Forms

Financial Regulation

Montana administrative rules require that an independent certified public accountant, approved by the commissioner, audit the captive annually. The applicant must select an accountant who meets the requirements of the administrative rule. You may ask the Department if your CPA is currently approved.  See 6.6.6801 through 6.6.6821 ARM.

Certification of Reserves

Montana administrative rules require that loss reserves and loss expense reserves be certified by a Fellow of the Casualty Actuarial Society, a member in good standing of the American Academy of Actuaries, or an individual who has demonstrated his competence in loss reserve evaluation to the commissioner. The commissioner must approve the actuary. The applicant must select an actuary that meets the requirements of the administrative rule. See 6.6.6816 ARM.

Review Firm

If it is considered necessary, the commissioner may have the application reviewed by outside experts, with the costs of the review paid by the applicant. The outside review is of an advisory nature only and the commissioner will make final approval or disapproval of an application only.

Annual Statement Form

Pursuant to Section 3-28-107(2)(a), MCA, on or before March 1 of each year, each captive insurance company shall submit to the commissioner a report of its financial condition in a form and manner as required by the commissioner, verified by oath of two of its executive officers.

As required by Section 33-28-107(2)(c), MCA, each captive insurance company shall report using generally accepted accounting principles, unless the commissioner requires the use of statutory accounting principles

Captive Risk Retention Groups must file an annual statement on the annual statement blank adopted by the National Association of Insurance Commissioners (NAIC) for property-casualty insurance companies. This form must also be filed with the NAIC.

Pure and Industrial Captive Insurance Companies may file the short form financial on or before March 1. The short form financial on the GAAP basis may be downloaded from the list of forms below.  Any differences between the statement submitted on March 1 and the CPA audit of June 30 need to be reconciled and the reconciliation must be included in the notes to the financial statements within the CPA's audited financial report. .

Location of Captive Records

All books, records, and other information necessary for a statutory examination should be located in Montana.

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List of Forms, Statutes & Rules