It’s probably too late for 2026 legislative session, but by this time next year, a newly formed Florida group hopes it will be well on its way toward a new set of laws that will help Florida become a powerhouse domicile for captive insurance companies.
“The goal is to have 200 captives in Florida within five to 10 years—hopefully, five years,” said Andre Teixeira, chairman of the Florida Captive Insurance Association, which was formed only last summer.
Ultimately, Florida corporations could save money by having some control over premiums with their own captives, which often face less-stringent surplus requirements. Or companies could use a planned captive as leverage with insurance carriers to reduce premiums or avoid higher premiums at renewal, Teixeira said.
Landing 200 captives would be quite a change for Florida, which now has barely a handful. To reach its goal, the association has met with the state Office of Insurance Regulation leaders and with legislators. The association wants state lawmakers to slash the premium tax on captives—from the current 1.75% on gross premiums to something more like the 0.3% to 0.4% seen in captive-heavy states like Vermont, North Carolina and Tennessee.
Those states have long touted their friendliness toward captives. Vermont reported 677 captives at the end of last year. North Carolina had some 293 and Tennessee noted 182, according to those states’ insurance regulators.
Teixeira knows those numbers well. He is executive vice president and chief financial officer of The Graham Companies, a major south Florida real estate developer and landowner. The companies, like most businesses and homeowners in Florida, faced escalating property and liability insurance premiums in the early 2020s. The Graham Companies’ annual premiums reached as high as $9 million at one point.
“And we had no claims! That really hurt,” he said.
Company leadership had hoped to launch its own captive in Florida. But with Florida’s relatively hefty premium tax The Graham Companies found it was more economical to build its insurance arm in Utah, a state that has no premium tax on captives—just a $7,500 annual fee.
But that meant having a physical presence in Utah and paying Utah accountants and attorneys.
“We’d like to shift those dollars back to Florida,” he added.
Another incentive for the establishment of more Florida-based captives is the fact that Florida authorities have been aggressive about enforcing a separate, 5.3% tax on insurance procured outside the state without the assistance of a Florida-based broker or insurance agent, explained Ben Stearns, attorney and secretary of the Florida Captive Insurance Association. He recently wrote about the association’s plans in Captive International.
Stearns noted that it’s possible that a bill now in the Florida Legislature could be amended to address the captive insurance tax issues.
Senate Bill 990, scheduled for review today by the Senate Banking and Insurance Committee, would authorize protected-cell captives in Florida. A PCC is a single entity that allows legally segregated companies to receive the benefits of the captive insurance model without the costs of the full set-up of a standalone captive insurance company, explains a legislative analysis of the bill. These entities allow for assets and liabilities on one captive program to be legally segregated from the assets and liabilities of the other captive programs.
Protected cells are allowed and have proven to be popular in several other states. North Carolina, for example, now houses some 771 PCCs, the NC Department of Insurance reported.
Even if SB 900 and its House companion do not include the captive premium tax reduction, the measures show that captives are gaining new attention in the Sunshine State, perhaps opening the door to further action next year.
Others in the industry have warned that while captives can be beneficial for many corporations, they can also be lightly regulated and can easily run into trouble, potentially threatening parent companies’ resources. Remember the number of lawsuits that resulted from allegedly fake captive plans that were sold to youth baseball teams, surrogate mothers and a waste-removal company in the early 2020s?
Teixeira said captives can, in fact, have lower reserve requirements—as little as $250,000 in unrestricted net assets. But in his plan, Florida-based captives would be robust and would be incentivized to keep millions of dollars in surplus. His development firm’s own captive, for instance, holds $20 million in reserve funding. Large reserves make it easier for parent corporations to secure loans and investments, he explained.
“If you show the lender that you have $20 million, they feel OK about lending you the money you need,” Teixeira said.
And while a lowered premium tax on captives might cut the state of Florida out of some future tax revenue, a thriving captive industry would have a much larger economic impact on the state. He estimates that more captives in Florida, along with the hiring of accountants, lawyers and staff, could produce at least $40 million in annual economic benefits to the state.
“A lot of captives for Florida companies are domiciled in other states,” Teixeira said. “Let’s bring them home.”
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Florida
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