Assigned to FIN AS
PASSED BY HOUSE
Assigned to FIN AS
PASSED BY HOUSE
ARIZONA STATE SENATE
Fifty-Third Legislature, Second Regular Session
AMENDED
property tax appeals; court
findings
(NOW: captive insurers; licensing)
As passed by the Senate, S.B. 1101 restricted judicial authority to determine the Full Cash Value of a property for property tax appeals filed by a county assessor.
The House of Representatives adopted a strike-everything amendment that does the following:
Purpose
Allows an agency captive insurer to directly insure certain risks with the approval of the Director of the Arizona Department of Insurance (Director).
Background
Statute defines captive insurer as an insurance company that is owned by another organization and whose exclusive purpose is to insure risks to member organizations or group members and their affiliates (A.R.S § 20-487). Captive insurers include pure captive insurers, agency captive insurers, group captive insurers or protected cell captive insurers that are formed, licensed and domiciled in Arizona.
An agency captive insurer is defined as a captive insurer that is owned by one or more business entities that are: 1) licensed in any state as insurance producers or managing general agents; and 2) that only insure risks on policies placed through their owners (A.R.S. § 20-1098).
Statute currently prohibits an agency captive insurer from the following: 1) insuring any risks other than those placed by or through its owners; and 2) directly insuring life or disability insurance risks (A.R.S. § 20-1098.01).
There is no anticipated fiscal impact to the state General Fund associated with this legislation.
Provisions
1. Allows, subject to the approval of the Director, an agency captive insurer to directly insure life or disability insurance risks. Limits the types of life or disability insurance risks that the Director may approve to the following:
a) employer group term life insurance;
b) employer group disability income insurance; and
c) reimbursement of employer health plan deductibles.
2. Allows the Director to require the business that is written by an agency captive insurer to be any of the following:
a) fronted by an insurer that holds a certificate of authority under the laws of any state;
b) reinsured by a reinsurer authorized, accredited or approved by the Director; and
c) secured by a U.S. trust fund for policyholder and claimant benefit or funded by an irrevocable letter of credit or other arrangement that is acceptable to the Director.
3. Allows the Director to require an agency captive insurer to increase the funding of any security arrangement.
4. Requires, in instances where the form of security is a letter of credit, the letter of credit to be issued or confirmed by a bank account that is approved by the Director.
5. Applies the following to an agency captive insurer that directly insures life or disability insurance risks:
a) each policy and certificate must be marked by the agency captive insurer with a conspicuously stamped or written notice, in bold-faced type, stating:
i. that the policy is issued by an insurer that is not an Arizona Insurance Guaranty Fund (Guaranty Fund) member; and
ii. that, if the insurer becomes insolvent, then insureds or claimants will not be eligible for Guaranty Fund protection under A.R.S. Title 20, Insurance.
b) the agency captive insurer may insure only life or disability insurance risks for employers whose principal place of business is in Arizona;
c) the agency captive insurer may not be owned or controlled by an insurer that is authorized to transact insurance in Arizona;
d) the agency captive insurer must have its financial statements audited by an independent certified public accountant; and
e) the agency captive insurer may not directly insure life or disability insurance risks, unless all of the following apply:
i. the insurance producer or managing general agent owning the agency captive insurer remains in regulatory good standing in all states where it is licensed;
ii. the agency captive insurer insures only specified insurance risks that are placed by or through an insurance producer or managing general agent owning the agency captive insurer and, if required by the Director, provides the form of such policies to the Director; and
iii. the agency captive insurer discloses to the original policyholder or policyholders, in a Director-approved form or manner, all limitations, rights and obligations that are held by the agency captive insurer due to its affiliation with an insurance producer or managing general agent.
6. Requires an agency captive insurer that insures life or disability insurance risks to pay the premium tax for policies relating to such risks that is in excess of statutory fees.
7. Becomes effective on the general effective date.
Amendments Adopted by the House of Representatives
1. Adopted a strike-everything amendment relating to agency captive insurer risks.
2. Specifies which types of insurance risks may be approved by the Director and the applicable criteria which must be met by agency captive insurers that insure such risks.
House Action
BI 3/12/18 DPA/SE 5-3-0-0
3rd Read 4/18/18 34-26-0
Prepared by Senate Research
April 18, 2018
FB/lb