- 8 -
specified modifications permitted to take into account the loss
experience of the particular employer.
The insurance laws of some States provide for a category of
limited purpose insurance companies, popularly called captive
insurance companies or captive insurers. Captive insurance
company statutes generally apply to companies that insure on a
direct basis only the risks of companies related by ownership to
the insurer. Because pure captive insurance companies typically
are formed for the purpose of insuring the risks of related
companies, the function of risk selection, in essence, is
attained at the onset.
The State of Colorado's Captive Insurance Company Act
(Colorado captive insurance statute) allows the formation of pure
captive insurance companies whose authority to write direct
insurance business is limited to insuring the risks of related
corporations. The Colorado captive insurance statute requires a
pure captive insurance company licensed in that State to maintain
and to deposit with the commissioner of insurance minimum actual
capital of $300,000 and accumulated surplus of $200,000, which
deposit may be in the form of an irrevocable letter of credit.
The State of Tennessee's Captive Insurance Company Act
(Tennessee captive insurance statute) requires a pure captive
insurance company licensed in that State to maintain minimum
capital and surplus of $750,000, with the surplus to be at least
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011