On June 17, 2014, Governor John Kasich signed into law, legislation which allows Ohio business to organize captive insurance companies. Captive insurance companies are an alternative to traditional insurance and allow businesses the opportunity to have greater control over managing their insurance needs or to provide insurance for risk that otherwise is not covered by 3rd party insurers. Captives only insure its related entities unlike commercial insurance companies that serve the public.
As a result, captive subsidiaries:
- Can only underwrite the risks of their parent and affiliates
- Cannot be used to insure personal lines of insurance
- Must maintain minimum capital and surplus of $250,000 (through cash, securities, or letter of credit)
- May participate in reinsurance agreements for any risk that the captive company is permitted to underwrite
- Are subject to Ohio’s premium tax requirements (0.35% of net-direct premiums with a minimum of $7,500 a year)
The following lines of insurance may be provided by the captive:
- Commercial multi-peril
- Ocean marine
- Inland marine
- Medical malpractice
- Workers’ compensation (with exceptions)
- Commercial auto liability
- Other insurance lines approved by the Department of Insurance
There are many unique attributes to forming a captive insurance company that are not covered in this blog. If you are interested in learning more about the opportunities a captive insurance company can provide for your business, please contact Jeremy Long, CPA via email or at 330-576-1840. For detailed information on our insurance practice and the services to help you, visit our insurance web page.
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