Can you sell a captive insurance company along with the business?
Yes, through a Form A, and the prior approval is the part that bites
Travis Wegkamp says a captive can be sold, through a Form A that tells the insurance department about a proposed acquisition of control, merger or ultimate change in control. It needs prior approval and review by the attorney general's office. The department checks the new owner the way it checked the original one, including whether any statute bars them from participating in insurance, and confirms that whatever changes in the business plan is still permissible. His emphasis lands hardest on sequence: the approval has to come first.
The instrument is a Form A, which exists to inform the insurance department of a proposal for an acquisition of control, a merger, or an ultimate change in control. Wegkamp describes it as an involved form that asks for a lot of information, and it goes to the attorney general's office for review.
What the department wants is the same information it wanted at licensing, updated for the new owner: who the new company is, what the purchase price will be, and when the change is expected to happen.
Key takeaways
Selling a captive runs through a Form A notifying the department of an acquisition of control, merger or ultimate change in control.
The department screens the new owner against the statutes barring certain individuals from insurance entities, and rechecks that the business plan stays permissible.
Wegkamp warns that proceeding without the required prior approval can force transactions to be unwound and draw significant regulatory action.
The substantive check is on the buyer. Wegkamp notes there are federal statutes that prohibit certain individuals from participating in insurance or financially related entities, and that the department screens for this at application and again on a change of control.
The second check is on the plan. Whatever is changing in the business plan has to remain allowable under the code, which is the same permissibility test a new applicant faces.
From the conversation
Travis Wegkamp
Director, Captive Insurance Division, Utah Insurance Department
“you need to get the prior approval or else you're going to, it's going to be a much more difficult process.”
This answer begins at 27:30 of the full conversation. Watch or listen to the whole thing.
Citations
Sources
- Captive, Utah Insurance Departmenthttps://insurance.utah.gov/captive
The views expressed are those of the featured guest, drawn from a recorded conversation, and reflect their own professional experience. Nothing on this page is insurance, tax, legal, or investment advice. Consult your own advisors about your specific situation.
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