How do you pause, close or move a captive out of a state?
Three exits, one precondition: everything owed has to be settled first
Fenhua Liu treats dormancy, closing and moving as variations on the same process. Whichever exit is taken, the department first confirms there are no outstanding liabilities, that claims have been paid and obligations met, and that fees and premium tax are settled. Dormancy runs off a checklist and is quick. Closing ends in a dissolution filing or the return of the licence. Moving to another domicile requires the receiving regulator's approval, and where business moves between captives it is done by novation agreement with confirmation from both states.
Liu's answer collapses three questions into one framework, which is the useful part. Dormancy, dissolution and redomestication all begin from the same place: the department has to see that nothing is left owing.
That means no existing liabilities, claims paid, obligations met, and the annual licensing fee and premium tax settled. A captive planning any of the three should read that as the real timeline driver, because it is the part the owner controls.
Key takeaways
Dormancy, dissolution and redomestication all require outstanding liabilities, claims, obligations, fees and premium tax to be settled first.
Dormancy runs off a checklist and is quick, and a captive that has written business keeps a minimum amount in place while dormant.
Moving to another state needs the receiving regulator's approval, and business moved between captives goes by novation agreement with confirmation from both domiciles.
Dormancy is the lightest exit and Connecticut runs it off a checklist. Liu describes it as a quick process: forms, a look at the financials already submitted, and a decision. A captive that has written business keeps a minimum amount in place; one that never wrote business is treated differently.
The value of dormancy is that the company survives. Utah's director made the same argument from the cost side, that rebuilding a captive later means a new feasibility study and a new business plan.
From the conversation
Fenhua Liu
Assistant Deputy Commissioner and Director of Captive Insurance, Connecticut Insurance Department
“we have to make sure there's no existing liabilities. All the claims have been paid. All the obligations have been met.”
This answer begins at 14:01 of the full conversation. Watch or listen to the whole thing.
Citations
Sources
- Captive Insurance Regulation, Connecticut Insurance Departmenthttps://portal.ct.gov/cid/mission-and-divisions/captive-insurance
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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