When actuary Greg Fears attended a Western Region Captive Insurance Conference in April, he expected to le
arn and share information about emerging uses of captives for commercial risks, including trucking captives—a recent focus of his attention.
But during the last session of the conference, Fears, a director and consulting actuary for Pinnacle Actua
rial Resources, heard something he hadn’t heard in his 20-plus years of captive advisory work. When Utah’s repre
sentative spoke up at that final panel, consisting of a group of regulators reporting new developments in t
heir state, Utah’s captive director said his state passed legislation to
allow homeowners associations to form captives in Utah.
Fears checked the law after the session. As of May 1, 2024
, Utah Code Section 31A-37-202 states that “if approved by the commi
ssioner….an association captive insurance company that sati
sfies the requirements of this chapter may provide homeowners insurance.”
“This is a monumental change in the captive insurance market,” Fears wrote in a blog post on the Pinnacl
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e website that he penned after the captive conference to del
iver the game-changing news. Noting that there are 30 or 40 states that have captive legislation, “what hasn’t been
included in the past in that captive legislation is allowing personal lines
type insurance,” he told Carrier Management during a recent interview.
There’s only one exception that’s come close previously—laws allowing tenant legal liability insurance for cap
tives owned by landlord
s—”but typically it’s a fronted program with an A-rated carrier, and the captive is assuming part of the risk,” Fears said.
Utah is different. Utah is allowing captives in response to the current struggles of homeowners in any catastroph
e-prone states where traditional residential insurance coverage is becoming increasingly unaffordable—and una
vailable. “You are seeing traditional insurance companies pull out of Florida, pull out of California, or send non
renewal notices to reduce the writings in those states. Some customers are going bare with their insurance,” Fears said.
The director of Utah’s Captive Insurance Division, Travis Wegkamp,
who spoke at the captive conference, confirmed to Carrier Management that this opens up opportunities for HOAs
in wildfire-exposed areas of California as well as Utah, and even those located in hurricane-exposed regions of F
lorida. “The captive itself would be a Utah entity but the parent company or the association can be from anywhere in the world really,” Wegkamp said.
Fears, stopping short of predicting that HOA captives will be the next big trend in the captive insurance mark
et, said that availability and affordability issues have spurred the
development of commercial property and commercial auto captives in recent years. “If we continue to see the
traditional insurance companies pulling out of states where there are those catastrophe exposures or they’
re writing exclusions on all that cat exposure, you could see captives starting to step in to fill that insurance need for homeowners,” he said.