Iowa Governor signs captive law

Iowa Governor Kim Reynolds has signed into law HF 2636, a bill for an act relating to the taxation of captive companies, and including effective date provisions.

The bill sets the amount of reinsurance tax due from a captive company.

The original bill set the amount of tax at 5% on assumed reinsurance premiums written of between $40 million and $60 million. The bill has now been amended to lower that to 0.045%.

It also set a rate of two hundred thousandths of one percent on the first twenty million dollars of assumed reinsurance premiums written, again down from the original proposal of 0.2%.

The law is now legal, having taken effect when it was signed.

In 2023 Iowa’s state government passed the Captive Insurance Act, which 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.

However, Iowa’s Legislative Services Agency pointed out in a note that the proposed changes to reinsurance taxes in HF2636 will not have much effect because: “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.”

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