The DC Council’s Health Committee marked up the Captive Insurance Company Amendment Act of 2026, bill B 26-0588, on October 14, moving a package that would let pure captives and protected cells pay dividends and make certain business plan changes without prior approval from the Department of Insurance, Securities and Banking (DISB). Under the proposal, a captive’s board could approve a dividend and simply notify DISB within 30 days. Captive International reported on October 9 that Sean O’Donnell, DISB’s director of captives, told the DC Captive Conference the same week that council questions had revived the bill and that he was hopeful it would pass by year end.
The stakes are larger than the District’s size suggests. DC now hosts 241 captive entities, including 120 protected cells, up from 220 at the start of 2026, with 22 formations so far this year and four applications pending. Gross written premium reached roughly $3.7 billion at the end of 2025, up from just under $3 billion at the end of 2024. If the bill passes, a material share of that premium base will operate under a dividend regime with no regulator reviewing the distribution before capital leaves the captive.
Who it affects
The primary audience is self-insured employers, hospital systems, and public entities that own single-parent captives or rent cells in DC, especially those using the domicile for casualty lines with long tails: workers’ compensation, general liability, and professional liability. It also matters to any group considering DC for a new cell, since the bill pairs the dividend change with expedited protected cell licensing and a premium tax exemption for dormant captives. DC’s premium tax is already among the lowest of the major domiciles at 0.25% on the first $25 million of premium, capped at $100,000 per year, so the package is explicitly a competitiveness play aimed at formation volume.
What the bill changes
Today, a DC captive that wants to pay a dividend to its parent needs DISB’s prior written approval. The regulator reviews the request against the captive’s most recent actuarial opinion and financial statements and effectively asks whether the surplus being declared is genuinely redundant, meaning excess to any reasonably foreseeable reserve need, or whether it is just unearned margin that would be needed if reserves develop adversely.
The amendment replaces that gate with board approval plus a 30-day notice. O’Donnell framed it as streamlining: “Things that do require pre-approval now, you can do it without pre-approval as long as your board approves and you notify us within 30 days.” He noted owners can still seek guidance voluntarily.
The bill also adds a dormant captive statute that exempts inactive captives from premium taxes and fees for any full year they remain inactive. O’Donnell said the measure could keep owners from dissolving structures they might want to resurrect later. That is a real convenience, but it also means more captives will sit on legacy reserves with no active premium feeding them, which is a different reserve monitoring problem than a clean wind-down.
Where this shows up in your reserves
This is a governance and capital adequacy story, not a frequency or severity story, but it lands on a specific line in your actuarial report. When a captive board approves a dividend, the number that matters is the difference between carried reserves and the actuarial central estimate, plus whatever margin the selected confidence level implies. Under prior DISB review, a second set of eyes checked that the dividend fit inside that margin. Without it, the entire judgment rests on the quality of the reserve opinion the board is relying on: the confidence level selected, the documentation of why that level is appropriate for the lines written, and whether the opinion covers the downside scenarios that a dividend makes harder to absorb.
The practical diagnostic is in the actuarial opinion itself. Look at whether the stated confidence level is supported for your tail, or merely asserted. A captive writing workers’ compensation or hospital professional liability with a 10-year-plus tail that declares surplus based on a central estimate, or on a modest margin, is distributing capital that adverse development could claw back. For a refresher on how much of your surplus is actually IBNR-dependent rather than case-supported, see our guide to IBNR in single-parent captives, and for what a board should be extracting from the annual reserve report, see our board member’s guide to captive reserve reports.
The pattern across domiciles
DC is not an outlier. Tennessee recently tightened its actuarial opinion deadline for captives, Utah has moved to gate certain reserve estimates against capital, and Iowa raised the capital floor for cell captives to $100,000. Florida passed a protected cell law earlier this year. The competitive logic is the same everywhere: reduce regulatory friction to win formations. But every time a domicile removes a regulatory checkpoint, the captive owner inherits that checkpoint internally, whether the board realizes it or not. The formation boom that DC is courting, 22 new entities in under a year, will include first-time captive owners whose boards have never performed a regulator’s job before.
What this means for your next review
If your captive is domiciled in DC, or you are weighing it, put the dividend approval process on the agenda for your next board meeting and your next reserve study. The question to put to your actuary is direct: if our board gains authority to approve dividends without prior regulatory sign-off, what confidence level and documentation standard should our reserve opinion meet before we recommend a distribution? Ask also how reserve adequacy looks under a downside scenario after the dividend is paid, not just at the moment of approval. For guidance on probing the opinion itself, our piece on how to evaluate an actuarial report lists the questions worth asking before capital leaves.
Decision-maker checklist
- Confirm your captive’s board charter and dividend policy specify what evidence, including the actuarial opinion and its confidence level, must be in hand before a distribution is approved.
- Ask your actuary whether the current opinion’s confidence level and margin support the specific dividend amount contemplated, and get the answer in writing.
- Request a post-dividend solvency view: pro forma capital and surplus under adverse development, not just the point-in-time balance.
- If you hold a dormant DC captive, inventory its legacy reserves and confirm who is monitoring development now that the structure may sit tax-exempt but still exposed.
- Watch for DISB implementing guidance on what board-approval documentation it expects captives to retain in place of its own prior review.
An independent reserve review brings a second pair of eyes that is free of the captive manager’s or fronting carrier’s incentive structure. If DISB stops reviewing dividend requests before capital moves, that second opinion becomes the only external check left. We are building a directory of independent reviewing actuaries; if you would like to be considered, get in touch.
Sources
- Captive International, “DC captive market growing as legislative reforms advance,” October 9, 2026
- Docket Room, B 26-0588, Captive Insurance Company Amendment Act of 2026, District of Columbia Council, committee markup October 14, 2026
- DC Department of Insurance, Securities and Banking, captive insurance program and Risk Finance Bureau materials