Fiscal Note
Fiscal Services Division
SF 549 – Captive Insurance (LSB1871SZ.2)
Staff Contact: Xavier Leonard (515.725.0509) xavier.leonard@legis.iowa.gov
Fiscal Note Version – Final Action
Description
Senate File 549 relates to captive insurance and does the following:
• Allows for the formation of captive insurance companies.
• Establishes tax rates for captive insurance premiums.
• Decreases the applicable percent tax rate for insurance companies’ tax in Iowa Code
chapter 432.
• Establishes requirements for the operation of captive insurance companies, including
reporting and examination requirements.
• Permits the Commissioner of Insurance to suspend or revoke certificates to conduct
business.
• Creates a Captive Insurance Regulatory and Supervision Fund, into which all revenue
sources under new Iowa Code chapter 521J will be deposited.
• Permits the formation of protected cell captive companies and provides guidelines for their
operation.
• Requires the Iowa Insurance Division (IID) of the Department of Commerce to create rules
to administer the provisions of the Bill.
Background
Captive insurance companies are a form of self-insurance where the insurance provider is
owned entirely by the insurance holder. Currently, captive insurance companies are not allowed
to operate or sell insurance in the State. There are captive insurance companies headquartered
in Iowa that must do business outside of the State. 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.
All insurance companies and associations of any kind, not including fraternal beneficiary
associations or nonprofit hospital and medical service corporations, must, as required by law,
pay an applicable percent of the gross amount of premiums received during the preceding
calendar year on contracts of insurance covering risks resident in Iowa during the preceding
year, including contracts for group insurance and annuities and without including or deducting
any amounts received or paid for reinsurance. The applicable percent is currently 1.0%.
Assumptions
• The regulation of a newly introduced insurance market to the State will require the IID to hire
3.0 additional full-time equivalent (FTE) positions to carry out the provisions of this Bill.
• The IID will hire a Captive Insurance Bureau Chief at an annual cost between
approximately $166,000 and $243,000, an Examiner Specialist at an annual cost
between approximately $111,000 and $166,000, and an Examiner at an annual cost
between approximately $96,000 and $142,000.
• The IID will need additional office space and supplies for these positions.
• Each of these positions will begin at the start of FY 2024.
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• The State will see a new revenue source as a result of the Bill; however, the total revenue
impact cannot be determined at this time.
• Net taxable premiums will be $15.000 billion in CY 2023.
• Net taxable premiums will increase 6.0% annually.
• Calculations on a fiscal-year basis assume net taxable premium are evenly distributed
across a calendar year.
Fiscal Impact
The introduction of captive insurance companies to the State and the tax on premiums of
captive insurance will increase General Fund revenue; however, the amount cannot be
determined.
The Bill also reduces the applicable percent for the net taxable premiums, which would reduce
General Fund revenue by the amounts estimated in Figure 1.
Figure 1 — 6.0% Annual Growth in Net Taxable Premiums, Dollars in Millions
The annual cost of SF 549 to the Insurance Division includes the hiring of 3.0 FTE positions, the
promotion of the captive insurance industry, and a reduction in General Fund revenue due to
the reduction in the applicable percent for the net taxable premiums. The annual cost of hiring
the FTE positions and promoting the captive insurance industry is estimated to be between
$403,000 and $681,000. The total cost of the Captive Insurance Bureau Chief, Examiner
Specialist, and Examiner is estimated between $373,000 and $551,000. Additional office space
and supplies will cost approximately $29,000 annually. The promotion of the captive insurance
industry will cost $100,000 in travel, marketing, and promotion annually.
Sources
Iowa Insurance Division, Department of Commerce
Legislative Services Agency
/s/ Jennifer Acton
May 17, 2023
Doc ID 1374030
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: 521J.2
Reprinted: 521J.2
Enrolled: 432.1