Sureties Successfully Amend Ohio Captive Bill to Exclude Surety
Friday, May 23, 2014
Ohio HB 117 would authorize the establishment of captive insurance companies in Ohio. As originally introduced last year in the House, the bill would have permitted captives to apply for the authority to write certain lines of business, including surety and fidelity.
SFAA believes that captives should not be permitted to write surety bonds. Since captives is owned by and can write insurance only for its parent company, the captive could not provide the independent third party evaluation of whether a contractor is qualified to complete a public works project. A contractor could form a captive and essentially bond itself under this legislation.
The bill has passed the House in 2013 and was sent to the Senate. SFAA and its members met with the bill sponsor and the Ohio Insurance Department, and as promised in 2013, the bill was amended this year in the Senate to address SFAA’s concerns. Surety was eliminated from the lines of business that a captive would be specifically authorized to write. Authority remains in the bill to write fidelity. HB 117 also gives the insurance commissioner discretion to authorize captives to write additional lines of business. To address the surety issue, the Senate version of HB 117 now prohibits the commissioner from authorizing a captive to insure, offer, or enter a three-party agreement under which the captive agrees to pay a parent or affiliate, agrees to make complete, or become responsible for an obligation in response to the default, acts, or omissions of a third party, the parent, or an affiliate.
The bill recently was voted out of committee in the Senate.
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