LANSING - Michigan is the newest U.S. captive domicile.
Michigan Gov. Jennifer Granholm this month signed legislation allowing the formation of captive insurance companies in the state. The law takes effect immediately.
Captive insurance companies are subsidiaries of non-insurers that are formed primarily to insure some or all of the risks of its parent.
Unlike many other states’ captive laws, the Michigan measure does not impose premium taxes but instead charges captive parents fees linked to premium volume. Those annual fees will range from $5,000 for captives with premiums of less than $5 million to $100,000 for captives with premium volume of at least $75 million.
Under the law, the minimum capital and surplus requirement for a single-parent captive is $150,000, while the amount rises to $400,000 for an association captive organized as a stock company or limited-liability company. Association captives organized as mutual insurers will need $750,000 in capital and surplus.
The law also allows employers to form branch captives, which typically are used by companies with offshore captives that want to fund employee benefit risks. Federal rules do not allow the use of offshore captives to fund employee benefit plans offered to employees in the United States.
Michigan becomes the 10th state since 2000 to have enacted captive legislation.
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