Arizona Laws 20-1098.03. Minimum capital and surplus; letter of credit; borrowed surplus
A. The director shall not issue a license to a captive insurer unless the insurer possesses and thereafter maintains minimum unimpaired paid-in capital and surplus in combination as follows:
Terms Used In Arizona Laws 20-1098.03
- Agency captive insurer: means a captive insurer that is owned by one or more business entities that are licensed in any state as insurance producers or managing general agents and that only insure risks on policies placed through their owners. See Arizona Laws 20-1098
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- Captive insurer: means any pure captive insurer, agency captive insurer, group captive insurer or protected cell captive insurer that is domiciled in this state and that is formed and licensed under this article. See Arizona Laws 20-1098
- department: means the department of insurance and financial institutions. See Arizona Laws 20-101
- Group captive insurer: means any of the following:
(a) A risk retention group. See Arizona Laws 20-1098
- Protected cell: means a separate account that is established and maintained by a protected cell captive insurer pursuant to a participant contract. See Arizona Laws 20-1098
- Pure captive insurer: means a captive insurer that insures only the risks of its affiliates and controlled unaffiliated business. See Arizona Laws 20-1098
- United States: includes the District of Columbia and the territories. See Arizona Laws 1-215
1. In the case of a pure captive insurer, at least $250,000.
2. In the case of a group captive insurer, at least $500,000.
3. In the case of an agency captive insurer, at least $500,000.
4. In the case of a protected cell captive insurer, at least $500,000.
5. In the case of a captive insurer that is organized as a reciprocal insurer, at least $500,000.
6. In the case of a pure or group captive insurer that transacts only reinsurance, one-half of the applicable amount prescribed in paragraph 1 or 2 of this subsection.
B. All minimum capital and surplus requirements shall be in the form of cash or an irrevocable and unconditional letter of credit that contains an evergreen clause, that is payable to, filed with and held by the director in trust for the protection of all policyholders, ceding insurers and related expenses and that meets the following conditions:
1. The letter of credit shall be issued or confirmed by a qualified United States financial institution as defined in section 20-3601, subsection A and shall comply with the requirements prescribed by the director.
2. The captive insurer shall not be directly or contingently liable for any letter of credit comprising its capital or surplus, and its assets shall not be pledged as security for the letter of credit.
C. The director may prescribe additional capital and surplus requirements based on the type, volume and nature of insurance. The captive insurer may pledge, with the approval of the department, any additional prescribed capital and surplus, whether in the form of cash, another allowable asset or any irrevocable and unconditional letter of credit that contains an evergreen clause.
D. Notwithstanding any other provision of this title, a written agreement under which a captive insurer borrows monies that are required to be repaid only out of the insurer’s surplus in excess of that stipulated in the agreement may provide for interest at any rate agreed on and approved by the director.
E. A captive insurer that is established solely for the purpose of reinsuring risks as part of a program filed and approved by the director to facilitate the securitization of risks ceded to the captive insurer may be a party to contracts that provide that subsequent purchasers of interests in the program assume the interests on a nonrecourse basis, both as to the captive insurer and any affiliate.