DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES  
CAPTIVE INSURANCE COMPANY RULES  
(By authority conferred on the director of the department of insurance and financial services  
by sections 210, 4651, 4747, and 4813 of 1956 PA 218, 1969 PA 306, E.O. 2013-1; MCL  
500.210, MCL 500.4651, MCL 500.4747, MCL 500.4813, MCL 24.231 to MCL 24.233, MCL  
550.991.)  
R 500.101 Definitions.  
Rule 1. As used in these rules:  
(a) “Act” means the insurance code of 1956, 1956 PA 218, MCL 500.100 to 500.8302.  
(b) “Captive insurance company” means a captive insurance company as defined in section  
4601 of the act, a special purpose financial captive as defined in section 4701 of the act, or a  
protected cell company as defined in section 4801 of the act.  
(c) “Captive manager” means any person entering into a contract with a captive insurance  
company, or the parent or affiliate of a captive insurance company, for the purpose of managing  
the operations of the captive insurance company.  
(d) “Director” means the director of the department of insurance and financial services unless  
otherwise noted.  
(e) “Limited certificate of authority” means a limited certificate of authority issued by the  
director pursuant to chapter 46 or 47 of the act, MCL 500.4601 to 500.4673, MCL 500.4701  
to 500.4747.  
(f) “Person” means an individual, corporation, limited liability company, association,  
partnership, limited partnership, limited liability partnership, trust, business trust, entity,  
unincorporated organization, joint venture, or other legal or commercial entity.  
(g) Terms defined in the insurance code of 1956, 1956 PA 218, MCL 500.100 to MCL  
500.8302, have the same meanings when used in these rules.  
History: 2015 AACS.  
R 500.102 Severability.  
Rule 2. If a provision of a rule or the application of a rule to any person or circumstance is  
held invalid by a court of competent jurisdiction, then the provision or application shall not  
affect other provisions that can be given effect without the invalid provision or application.  
History: 2015 AACS.  
R 500.103 Application for limited certificate of authority.  
Rule 3. An application for a captive insurance company limited certificate of authority shall  
include all of the information requested on an application form prescribed by the director.  
History: 2015 AACS.  
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R 500.104 Record retention.  
Rule 4. (1) Each captive insurance company shall maintain, in a place secure from theft, loss,  
or destruction, the financial, investment, and business records of the captive insurance  
company. The records shall include accurate, complete, legible, and permanent records, in  
electronic or hard copy format, of any books, records, data, or documents pertaining to,  
prepared, or generated by the captive insurance company, including, but not limited to, all of  
the following:  
(a) Accounting records.  
(b) Actuarial reports and studies.  
(c) Audits and auditor management letters.  
(d) Board, shareholder, member, audit, and claim committee meeting minutes.  
(e) Captive insurance company formation documents.  
(f) Claims records.  
(g) Correspondence.  
(h) Computer generated data.  
(i) Contracts.  
(j) Coverage applications, forms, and policies.  
(k) Internal audit records.  
(l) Investment records.  
(m) Loss prevention plans.  
(n) Segregated cell formation, financial, investment, and claims documents.  
(2) Captive insurance companies shall do both of the following:  
(a) Retain captive insurance company records for a minimum of 7 years.  
(b) Make captive insurance company records available to the director or the director’s  
designee for review or examination at the principal Michigan office of the captive insurance  
company or, if requested by the director, provide copies of such records to the director in a  
format prescribed by the director.  
History: 2015 AACS.  
R 500.105 Captive manager.  
Rule 5. (1) A captive insurance company desiring to utilize a captive manager shall ensure  
that the captive manager has submitted to the director for approval a complete captive manager  
application in a form prescribed by the director.  
(2) A captive insurance company may utilize only a captive manager whose captive manager  
application has been approved by the director. A captive insurance company shall do both of  
the following:  
(a) Submit a copy of the captive manager contract to the director.  
(b) Ensure that the captive manager contract states that a captive manager is subject to the  
control of the captive insurance company’s board of directors or other supervisory  
management body.  
(3) Captive manager contracts in effect prior to the effective date of these rules shall not be  
subject to prior approval by the director until such time as they are renewed by the captive  
manager and the captive insurance company. All new captive manager contracts and captive  
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manager contracts renewed on or after the effective date of these rules are subject to subrules  
(1) and (2) of this rule.  
(4) The director may withdraw or suspend approval of a captive manager if any of the  
following occur:  
(a) The captive manager knows or should know the officers or directors of the company are  
or were engaged in any conduct that, in connection with the captive entity, violates state or  
federal laws, rules, or regulations.  
(b) The captive manager engages in conduct that would otherwise threaten the solvency of  
the captive insurer and fails to report such conduct to the director in a timely manner.  
(c) The captive manager knows or should know of actions of a captive under management  
that may lead to revocation or suspension of the limited certificate of authority under the act  
and fails to inform the captive board of directors and the director in a timely manner.  
(d) The captive manager fails to perform the basic manager responsibilities or reporting  
requirements required under the act and these rules.  
(e) The captive manager engages in conduct detrimental to the interests of the captive insurer,  
including but is not limited to, a conflict of interest or conduct that constitutes a breach of the  
fiduciary duty owed to the captive insurer.  
History: 2015 AACS.  
R 500.106 Audited financial statements.  
Rule 6. (1) No later than 5 months after the fiscal year end of the captive insurance company,  
the captive insurance company shall file with the director audited financial statements of the  
captive insurance company prepared by an independent certified public accountant.  
(2) An independent certified public accountant’s audit of a captive insurance company shall  
include the following:  
(a) The independent certified public accountant’s opinion covering all years under audit. The  
opinion shall be addressed to the captive insurance company on the independent certified  
public accountant’s stationary, shall bear the original handwritten signature of the independent  
certified public accountant, and shall be dated.  
(b) A report of evaluation of the internal controls of the captive insurance company. This  
report shall include an evaluation of the internal controls of the company relating to the  
methods and procedures used in the securing of assets and the reliability of the financial  
records.  
(c) An independent certified public accountant’s letter stating the independent certified  
public accountant is all of the following:  
(i) Independent with respect to the captive insurance company and conforms to the standard  
of the profession as contained in the code of professional ethics and pronouncements of the  
American institute of certified public accountants and pronouncements of the financial  
accounting standards board.  
(ii) Properly licensed by an appropriate state regulatory authority or similar regulatory  
authority.  
(iii) A member in good standing with the American institute of certified public accountants  
or similar organization.  
(iv) The general background and experience of the staff engaged in the audit, including the  
staff’s experience in auditing captive and other insurance companies.  
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(v) The independent certified public accountant agrees to make the audit work papers  
available to the director or the director’s designee.  
(3) The captive insurance company shall require the independent certified public accountant  
to do both of the following:  
(a) Make the work papers prepared in the conduct of the captive insurance company’s audit  
available to the director.  
(b) Retain the audit work papers for a period not less than 7 years after the last day of the  
applicable reporting period.  
(4) The director may, at his or her discretion, exempt a captive insurance company from the  
requirements of this rule.  
History: 2015 AACS.  
R 500.107 Scope of approval of certificate of authority.  
Rule 7. If the director approves a captive insurance company limited certificate of authority  
application, the approval is only for the applicant’s qualification for the limited certificate of  
authority. The approval does not indicate or suggest that the director has considered, opined  
on, or approved any of the following:  
(a) The qualifications or application of the applicant for any other purpose.  
(b) Additional captive special purpose securitizations proposed by a special purpose financial  
captive.  
(c) Protected cells not authorized by the certificate of authority granted to the applicant.  
History: 2015 AACS.  
R 500.108 Duty to disclose changes in information.  
Rule 8. The holder of a limited certificate of authority has an ongoing duty to promptly  
disclose any material changes in information to the director as soon as the holder of the limited  
certificate of authority becomes aware of the change. The holder of a limited certificate of  
authority shall submit to the director for review and approval before implementation of the  
following:  
(a) Any material modifications to the captive’s plan of operation.  
(b) Any proposed new special purpose securitization proposed by a special purpose financial  
captive.  
(c) Any new protected cell programs.  
History: 2015 AACS.  
R 500.109 Obligation to report certain events.  
Rule 9. An applicant for a limited certificate of authority and the holder of a limited certificate  
of authority shall provide written notice to the director at the time the applicant or holder  
becomes aware of any of the following:  
(a) Any change in the officers, directors, or managers of the captive insurance company.  
(b) Insolvency or impairment of capital or retained earnings.  
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(c) Failure to meet the requirements of section 4611 of the act, MCL 500.4611, if applicable.  
(d) The suspension or revocation of the certificate of authority or equivalent authorization of  
a branch captive insurance company in the jurisdiction in which the company was formed.  
(e) A captive insurance company that is a limited liability company is no longer in good  
standing under section 207a of 1993 PA 23, MCL 450.4207a.  
(f) The captive insurance company fails to remove or discharge an officer or director of the  
company within 30 days after the director of the department of insurance and financial services  
makes a written request that the officer or director of the company should be removed or  
discharged.  
(g) The captive insurance company fails to pay any final judgment rendered against it in this  
state on any policy, bond, recognizance, or undertaking issued or guaranteed by it within a  
reasonable period of time after entry of the final judgment.  
History: 2015 AACS.  
R 500.110 Investigative hearings.  
Rule 10. (1) The director may initiate an investigation, undertake an examination, or take  
such other action as the director, in the exercise of discretion, determines is necessary or  
appropriate to assure the holder of a limited certificate of authority complies with all applicable  
provisions of the act.  
(2) The director may conduct hearings for any of the following:  
(a) To investigate an applicant, an application, or a holder of a limited certificate of authority.  
(b) To gather information in furtherance of acting on an application for a limited certificate  
of authority.  
(c) To investigate alleged violations of the applicable provisions of the act or these rules by  
a holder of a limited certificate of authority.  
(3) The director may require captive managers, officers, directors, shareholders, members of  
an applicant, or holders of a limited certificate of authority to testify or to produce documents,  
records, or other materials at a proceeding conducted under this rule.  
(4) The director may issue subpoenas for the production of persons, documents, or other items  
at a proceeding conducted under this rule.  
(5) All testimony at proceedings conducted under this rule shall be given under oath or  
affirmation.  
(6) All proceedings under this rule shall be conducted in compliance with the contested  
hearing procedures of the administrative procedures act, 1969 PA 306, MCL 24.201 to 24.328,  
and R 500.2101 to R 500.2142.  
(7) The director shall direct the applicant or holder of a limited certificate of authority to pay  
the expenses and charges associated with an investigative hearing.  
History: 2015 AACS.  
R 500.111 Limited certificate of authority as a revocable privilege.  
Rule 11. The holder of a limited certificate of authority has an ongoing duty to comply with  
all applicable provisions of the act. A limited certificate of authority is not a property right, but  
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is a revocable privilege contingent upon compliance with all applicable provisions of the act  
and regulations promulgated thereunder.  
History: 2015 AACS.  
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