Arizona legislators have introduced an update to the state’s captive insurance regulatory framework, Arizona House Bill 2193 (HB 2193), with Kutak Rock’s insurance regulatory and government relations team working in conjunction with stakeholders and policymakers to secure codification of the legislation.
The law has established the “dormant captive insurer” designation, in which captives that have ceased issuing policies and have no outstanding liabilities may apply for a Certificate of Dormancy, which will remain valid for up to five years and can be renewed.
However, dormant captives must maintain a minimum of US$125,000 in unimpaired paid-in capital and surplus, in addition to the filing of annual reports and the paying of renewal fees, to ensure regulatory oversight while reducing “unnecessary burdens”.
The legislation also reduces the minimum capital and surplus threshold for protected cell captives from US$500,000 to US$250,000, in a bid to “encourage innovation and growth” in the state’s captive market, due to a reduced barrier to entry.
Annual license renewal fees have been aligned and must be submitted between 1 July and 1 September, which is said to simplify administrative compliance without impacting 2025 renewal fees, due to it taking effect for 2026 renewal fees, with the department reaching out to coordinate payment of a one-time partial annual renewal fee on or after 30 June 2026.
Once 2027 commences, all captives will pay their renewal fees between the aforementioned dates, to bring all captives — irrespective of fiscal year end — into alignment, in addition to the updated Captive and Risk Retention Group Reference Guides, incorporating HB 2193’s changes, being posted on or around 26 September.
The new law will contain several amendments regarding LLC-structured captives, including the reflection that they are governed by a board of managers, as opposed to a board of directors.
The legislative changes are aimed to “make Arizona an even more attractive domiciliary jurisdiction for captive insurers, balancing growth opportunities with strong regulatory oversight”.
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