2005 Arizona Revised Statutes - Revised Statutes §20-1098.03  Minimum capital and surplus; letter of credit

A. The director shall not issue a license to a captive insurer unless the insurer possesses and thereafter maintains minimum unimpaired paid-in capital and surplus in combination as follows:

1. In the case of a pure captive insurer, at least two hundred fifty thousand dollars.

2. In the case of a group captive insurer, at least five hundred thousand dollars.

3. In the case of an agency captive insurer, at least five hundred thousand dollars.

4. In the case of a protected cell captive insurer, at least one million dollars.

5. In the case of a captive insurer that is organized as a reciprocal insurer, at least five hundred thousand dollars in free surplus.

6. In the case of a pure or group captive insurer that transacts only reinsurance, one-half of the applicable amount prescribed in paragraph 1 or 2 of this subsection.

B. All minimum capital and surplus requirements shall be in the form of cash or an irrevocable and unconditional letter of credit that contains an evergreen clause, that is payable to, filed with and held by the director in trust for the protection of all policyholders, ceding insurers and related expenses and that meets the following conditions:

1. The letter of credit shall be issued or confirmed by a qualified United States financial institution as defined in section 20-261.03, subsection A and shall comply with the requirements prescribed by the director.

2. The captive insurer shall not be directly or contingently liable for any letter of credit comprising its capital or surplus and its assets shall not be pledged as security for the letter of credit.

C. The director may prescribe additional capital and surplus requirements based on the type, volume and nature of insurance. The captive insurer may pledge, with the approval of the department, any additional prescribed capital and surplus, whether in the form of cash, another allowable asset or any irrevocable and unconditional letter of credit that contains an evergreen clause.