Georgia lawmakers are advancing legislation that could transform the state’s captive insurance market by broadening the authority of limited purpose subsidiaries and lifting restrictions on the types of business captives can conduct.
House Bill 348, introduced in the Georgia Senate, proposes several key changes to the regulatory framework governing captive insurers.
AM Best reported that one of the most significant revisions would allow captives to underwrite any line of insurance or reinsurance, as long as it is deemed appropriate by the state’s insurance commissioner. This would eliminate the current rule that limits captives to specific lines of business.
The bill also seeks to expand the definition of a “sponsor” within the captive insurance space. Under the proposed legislation, sponsors would include not only entities that help establish limited purpose subsidiaries but also those that provide capital or assist in raising equity or debt for these entities.
Additionally, the bill would remove a provision that restricts limited purpose subsidiaries to reinsuring only the risks of the domestic reinsurer that created them. This change could offer greater flexibility for subsidiaries to engage in a wider range of reinsurance activities.
Another provision of HB 348 updates the definition of “controlled unaffiliated business.” The revised definition would cover businesses that have new or existing reinsurance and risk-sharing relationships with a parent company. It would also extend to direct and indirect investors in a pure captive and include captives that engage in reinsurance agreements with other captives – subject to approval by the insurance commissioner.
Georgia’s proposed reforms follow similar moves in other states. In Vermont, Gov. Phil Scott recently signed H. 659, updating captive insurance laws to streamline regulations and align with industry practices.
According to AM Best's report, the proposed changes come amid efforts to reform Georgia’s insurance and legal landscape. The state is currently pursuing several pieces of insurance-related legislation, including a bill targeting third-party litigation funding – a measure that has drawn strong backing from the insurance industry.
Supporters of HB 348 argue that the bill could enhance the flexibility and competitiveness of Georgia’s captive insurance market by removing regulatory barriers.
Critics, however, have yet to publicly weigh in on the potential implications of the legislation.
What impact could these reforms have on businesses and the broader insurance industry? Share your thoughts in the comments.
