Types of Captives:
- Pure Captive: An insurance company that insures the risks of its parent, the parent’s affiliated companies, and the risks of controlled unaffiliated business entities. It has a minimum capital and surplus requirement of $250,000 and must be formed as a business entity, such as a stock company, a mutual, a limited liability company, or a nonprofit. A pure captive is not subject to restrictions on allowable investments and uses generally accepted accounting principles.
- Industrial Insured Captive: An insurance company that insures the risks of the industrial insured group, the industrial insured group’s affiliated companies, and the risks of controlled unaffiliated business of an industrial insured or its affiliates. To qualify as an industrial insured, each member must meet the following three requirements. First, they must procure their insurance of any risk by use of a full-time employee acting as an insurance manager or buyer. Second, their aggregate annual premiums for insurance on all risks must be at least $25,000. Third, they must employ a minimum of 25 full-time employees. An industrial insured captive has a minimum capital and surplus requirement of $500,000 and can be formed as a stock company, a mutual, a nonprofit, a limited liability company, or a reciprocal insurer. It uses generally accepted accounting principles, and it has investment limitations as established by the commissioner by rule.
- Branch Captive: An alien captive company authorized to transact the business of insurance in this state through a business entity with its principal place of business in this state. The alien captive must apply to the secretary of state for a certificate of authority to transact business in this state. Minimum capital and surplus requirements are the same as required for the organizational form of the alien captive company. A branch captive has no restrictions on allowable investments and uses generally accepted accounting principles.
- Protected Cell Captive: A captive company with the minimum capital and surplus provided by one or more sponsors, that insures the risks of separate participants through participant contracts, funds the company’s liability to each participant through one or more protected cells, segregates the assets of each protected cell from the assets or other protected cells, and from the protected cell captive company’s general account. It typically has a minimum capital and surplus requirement of $500,000 but can be reduced to $250,000 if the protected cell company does not assume any risks, the risks insured by the protected cells are homogenous, and there are no more than ten cells. The protected cell captive must be incorporated or formed as a limited liability company. It has no restrictions on allowable investments and uses generally accepted accounting principles.
- Special Purpose Captive: A captive company that is formed or authorized under Iowa Code 521J that does not meet the definition of any other type of captive in this section or that is formed by, on behalf of, or for the benefit of a political subdivision of this state. The minimum capital and surplus requirement are determined after giving consideration to the business plan, feasibility study, pro forma documents, and the nature of the risks to be insured. A special purpose captive must be formed as a business entity, such as a stock company, a mutual, a limited liability company, or a nonprofit. It has no restrictions on allowable investments and uses generally accepted accounting principles.
- Risk Retention Group: An alternative risk transfer entity formed pursuant to the Liability Risk Retention Act of 1986. The group is restricted to writing only liability coverage. The group may be licensed in a single state yet operate nationwide provided it properly registers with all other states in which it proposes to solicit or write insurance. A captive risk retention group is subject to chapter 515E and can be considered an industrial insured group under an industrial insured captive company.
Service Providers:
- Captive Manager – an individual on the Iowa approved captive management firms list and, pursuant to a written contract with a captive company, provides and coordinates services including but not limited to accounting, statutory filings, signed annual statements and coordination of related services. The captive manager acts as an intermediary who facilitates and assists the captive company in meeting its statutory requirements.
- Qualified Actuary – an individual who is a member of the American academy of actuaries, is qualified to provide the certifications as described in the United States qualifications standards promulgated by the American academy of actuaries pursuant to the code of professional conduct adopted by the American academy of actuaries, the society of actuaries, the American society of pension professionals and actuaries, the casualty actuarial society, and the conference of consulting actuaries. The individual shall be approved by the commissioner and shall be a Fellow of the Casualty Actuarial Society, a member in good standing of the American Academy of Actuaries, a member in good standing of the Society of Actuaries, or an individual who has demonstrated competence to the commissioner.
- Independent Certified Public Accountant – a certified public accountant retained to conduct the independent annual audit may only be appointed from the list of approved certified public accounting firms or individual certified public accountants maintained by the commissioner. The accountant must be independent with respect to the captive company, conforms to the standards of the profession as contained in the Code of Professional Ethics and pronouncements of the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, and is properly licensed by an appropriate state licensing authority.