Ohio Governor Signs Captives Bill into Law
Thursday, June 19, 2014
The Governor of Ohio has signed HB 117 into law. HB 117 authorizes 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.
HB 117 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 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 under the legislation. The new law authorizes captives to write fidelity. The new law also gives the insurance commissioner discretion to authorize captives to write additional lines of business. To further address the surety issue, the new law 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 was amended in the Senate this year to include this provision, and the Governor now has signed it into law with the SFAA’s amendments.
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