Incorporation and licensing of a captive insurer occurs with the direct assistance of the DFS Captive Group.

The steps to licensing include:

• A preliminary meeting with the Department to discuss the proposed captive and to review the process.
• The approval for use of the name of the captive.
• The submission of a Captive Insurance Company License Application Form (PDF) with all required attachments.

Upon a determination that an applicant has complied with the provisions of Article 70 of the Insurance Law, a license is issued to the captive insurer.

Each captive is subject to examination at least once every five years.

Note: DFS has called for a national moratorium on captive insurance transactions used to artificially lower reserve and collateral requirements, also known as "shadow insurance." DFS will not approve such transactions.

Before Submitting an Application

Before submitting an application, contact the DFS Captive Insurance Coordinator to arrange a preliminary meeting with the DFS Captive Group to discuss the proposed captive and to review the licensing and incorporation process.

Bernard Lott, Captive Insurance Coordinator
Phone: (212) 709-7763
Fax: (212) 709-3820
Email: [email protected]

An application should include the following:

• A copy of the charter and bylaws or other similar documents
• A financial statement certified by two officers
• A Plan of Operation
• An actuarial analysis (prepared by a qualified independent actuary)
• Letters of Credit (if required).
• Background Investigation Report for each officer and/or director (see instructions below)
• Pro forma financials for the next five years
• A loan agreement
• An independent valuation of a subsidiary (if required)

Plan of Operation

The Plan of Operation submitted with the application must include an actuarial report feasibility study prepared by a qualified independent actuary. Any proposed changes to the Plan of Operation subsequent to licensing shall be submitted to the Superintendent thirty days before becoming effective.

Letters of Credit

If letters of credit are used to meet capital and surplus requirements, the sample Letters of Credit (PDF) form should followed by the institution issuing the letter of credit.

Background Investigation Report

The License Application requires submission of background investigation reports for directors and executive officers of the proposed captive insurer. The directors and executive officers should complete the Form 11 - NAIC Biographical Affidavit found on the NAIC website and provide them to the vendor. The vendor should email the background investigation reports along with the biographical affidavits to George Babu: [email protected].

Principal Office and Records

All of the books and records of the captive insurance company must be maintained at the insurer’s principal office, which must be located in New York State. Books and records consist of all information and files necessary to perform an audit or examination of the captive insurer.

Board of Directors

Three directors are required. The Board of Directors must hold at least one meeting in New York each year. In addition, two members of the Board must be residents of New York.

Manager

The manager of a captive insurance company must be a person or firm that is resident in New York and either licensed as an agent or broker in New York or approved by the Superintendent to act as a captive manager.

Applications and other required documentation should be submitted via email to Bernard Lott at [email protected]

After review of the proposed charter and by-laws by the Department, the applicant will submit an executed copy of the charter. The executed copy of the charter will be forwarded by DFS to the New York State Attorney General for recording and DFS will issue a Certificate of Incorporation to the captive company.

After the company has been incorporated it must submit a copy of its by-laws, certified by the corporate secretary or assistant corporate secretary.

After incorporation, the applicant must also submit proof of funding.

The captive insurance company must also submit a Power of Attorney (PDF) designating the Superintendent as agent for service of process. This shall be accompanied by a Certificate of Designation (PDF) naming the person to whom the Superintendent can forward any process served upon them. A certified copy of Resolution of the Board of Directors (PDF) authorizing both the appointment and the designation is also required.

An Annual Statement must be submitted on or before March 1 of each calendar year.

An independent certified public accountant must opine on the financial condition of the captive insurance company on an annual basis.

Loss reserves and loss expense reserves as reported in the annual statement must be certified by an actuary, who shall be a Fellow of the Casualty Actuarial Society, a member in good standing of the American Academy of Actuaries or who has demonstrated his competence in loss reserve evaluation and has been approved by the Superintendent. It is incumbent upon the captive insurance company to select an actuary meeting these requirements.

The Annual Statement Form is in Microsoft Excel format and should be completed and submitted via the DFS Portal.

To get started, visit the Portal:

DFS Portal

Assessments

2021 Revisions to the Tax Law (PDF)

Captive insurance companies pay an assessment pursuant to Section 206 of the New York Financial Services Law, which is used to defray the operating expenses of the Department. The assessment is based upon the direct premiums written in New York only; non-New York and reinsurance premiums are not used in calculating the assessment. The level of the assessment varies from year-to-year. A Report of Premiums is filed on an annual basis with the Department.

The estimated rate based upon the latest assessment available is .25% of New York direct premiums written.

Taxation

For stock insurers, an incorporation tax of one-twentieth of one percent of the par value of capital stock must be submitted to the Department (New York Tax Law -- Section 180). 

Tax filings and payments are made to the New York State Tax Department in accordance with the provisions of Article 33 of the New York Tax Law. Captive insurers are subject to a premium tax (referred to as a "franchise tax" under NY Tax Law) as set forth in Section 1502-b of the Tax Law. Unless capital is increased, licensed captive insurers are not taxed under any other provision of the New York Tax Law.

Notwithstanding the foregoing, if premium income makes up 50% or less of a captive insurer’s gross receipts for any taxable year, then the captive insurer will be deemed a “combinable captive insurance company” and will be required to file a combined return with its closest controlling stockholder. In such cases, the captive’s income will be subject to taxation under the provisions of either Article 9-A or Article 32 of the New York Tax Law, and not Article 33.

Summary Table of Taxes on Captive Insurers

Taxes are levied on all premiums written unless such premiums are taxed in another jurisdiction.

Questions regarding captive licensing should be directed to Bernard Lott via email [email protected] or by calling (212) 709-7763.