Fiscal Note
Fiscal Services Division
SF 2397 – Captive Insurance Companies, Reinsurance Tax (LSB5285SV)
Staff Contact: Xavier Leonard (515.725.0509) xavier.leonard@legis.iowa.gov
Fiscal Note Version – New
Description
Senate File 2397 relates to the taxation of captive companies. The Bill amends the amount of
reinsurance tax due from a captive company on assumed reinsurance premiums written.
The Bill takes effect upon enactment.
Background
2023 Iowa Acts, Senate File 549 (Captive Insurance Act), allowed for the formation of captive
insurance companies and protected cell captive companies, established tax rates for captive
insurance premiums, established requirements for the operation of captive insurance
companies and protected cell captive companies, and created the Captive Insurance Regulatory
and Supervision Fund.
Captive insurance companies are a form of self-insurance in which the insurance provider is
owned entirely by the insurance holder. Captive insurance companies often work with
traditional companies and may be an option for businesses to manage risks by underwriting
their own insurance rather than paying premiums to a third-party insurer.
Current and proposed reinsurance tax rates due from captive companies on assumed
reinsurance premiums are shown in Figure 1 below.
Figure 1 — Reinsurance Premium Tax Rate Changes in SF 2397
Amount of Assumed Reinsurance Premiums Written
(Dollars in Millions)
$0.0 to $20.0 $20.0 to $40.0 $40.0 to $60.0 $60.0 and Above
Current Law 0.200% 0.125% 5.000% 5.000%
Proposed Law 0.200% 0.125% 0.045% 0.020%
Assumption
Changes in reinsurance tax rates for captive insurance premiums may have an impact on
revenue collected in the Captive Insurance Regulatory and Supervision Fund, but the amount
cannot be estimated, as there is not currently a market for captive insurance in the State.
Fiscal Impact
Senate File 2397 may decrease tax revenue to the Captive Insurance Regulatory and
Supervision Fund in future years, as the Bill reduces the tax collected on each captive insurance
company’s reinsurance premiums that are in excess of $40.0 million annually.
Reinsurance premium taxes collected on a captive insurance company’s reinsurance premiums
written between $40.0 million and $60.0 million will reduce from 5.000% to 0.045%, a 99.1%
reduction. Reinsurance premium taxes collected on a captive insurance company’s reinsurance
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premiums written in excess of $60.0 million will reduce from 5.000% to 0.020%, a 99.6%
reduction.
There are not currently any reinsurance premium taxes collected on captive insurance
companies; therefore, the fiscal impact to the State cannot be determined.
Sources
Iowa Insurance Division, Department of Insurance and Financial Services
Legislative Services Agency analysis
/s/ Jennifer Acton
March 4, 2024
Doc ID 1447569
The fiscal note for this Bill was prepared pursuant to Joint Rule 17 and the Iowa Code. Data used in developing this
fiscal note is available from the Fiscal Services Division of the Legislative Services Agency upon request.
www.legis.iowa.gov
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Statutes affected:
Introduced: 432.1A