What does a captive have to file with the state each year?
Two annual filings, a separate tax return, and approvals that come before the act
Fenhua Liu describes a compact annual obligation: an actuarial opinion supporting the loss reserves, and an audited financial report. The tax return goes separately to the Department of Revenue Services. Alongside the calendar filings sit the things that require permission first, including material business plan changes and any dividend back to the owners. What the department is watching for is solvency and liquidity, and she describes going back to a captive when the loss ratio runs high or capital and surplus fall.
The annual burden is smaller than owners tend to fear. An actuarial opinion supporting the loss reserves and an audited financial report are the two documents that go to the department, and the tax return goes to Revenue Services rather than to the insurance regulator.
That is the whole calendar obligation. It is worth comparing with the effort of forming the captive in the first place, which is where most of the work sits.
Key takeaways
A Connecticut captive files an actuarial opinion supporting its loss reserves and an audited financial report each year, with the tax return going separately to Revenue Services.
Material business plan changes and any dividend to the owners require approval before the fact, which Liu says is a legal requirement.
When the loss ratio runs high or capital and surplus fall significantly, the department goes back to the captive and asks for more capital or premium.
The other half of the obligation is not on the calendar at all. Material changes to the business plan need to be filed for approval, and so does any dividend back to the owners, which Liu says is required by law rather than by departmental preference.
Both are prior approvals. The pattern holds across every regulator in this library: the filings tell the state what happened, and the approvals decide what is allowed to happen.
From the conversation
Fenhua Liu
Assistant Deputy Commissioner and Director of Captive Insurance, Connecticut Insurance Department
“if they want the dividends sent back to the owners or whatever reasons, they need to send us for approval by law as well”
This answer begins at 10:28 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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