South Dakota Enacts Law Allowing Insurance Agents and Service Contract Producers to Form Captives

South Dakota recently enacted legislation that will allow insurance agents and service contract producers (e.g. motor vehicle dealer) to form captive insurance companies to insure or reinsure the risks placed by or through such agency or service contract producer. The law, which does not got into effect until July 1, 2015, directly addresses a growing area of captive formations, as both insurance agents and service contract producers look to share in the underwriting profits (and risks) of the products they sell. Currently Turks and Caicos is the primary jurisdiction for the formation Producer Owned Reinsurance Companies or “PORCs” within the service contract industry.