Forming a Captive in Louisiana: What the CHOICES Law Changes
Captive insurance continues to attract Louisiana businesses that are seeking more control over cost, coverage, and claims. At a high level, a captive is a privately owned insurance company formed by a business, or a group of businesses, to insure their own risks, often within a group or association structure. Captives operate in domiciles with specific regulatory frameworks and can offer price stability, governance input, and tailored underwriting; see our overview of captive insurance groups for fundamentals and common structures such as group captives, association captives, and risk retention groups.
Key CHOICES Law updates for Louisiana captives
Louisiana has revamped its captive insurance statute in the last legislative session. Now known as the Creating Holistic Options In Coverage for Enterprise and Self-Insurance Law, or the CHOICES Law, Louisiana has made major changes to encourage new captives in the state.
Perhaps the biggest change is the capital and surplus requirements. Capital requirements have been reduced across the board, decreasing from $500,000 to $250,000 for pure captives and from $1,000,000 to $500,000 for association captives. Taxes have also changed, as captives are subject to their own tax rates and are no longer subject to the same tax rate as other domestic insurers.
As part of this overhaul, the CHOICES law now contains a redomestication statute. Under this statute, foreign insurers now have a clear and streamlined path to obtain licensure as a captive in Louisiana. Nevertheless, all domestic captives must maintain their principal place of business in Louisiana, appoint a registered agent in Louisiana and its board of directors must hold at least one meeting per year in Louisiana, unless it is an association captive, in which case it must hold quarterly meetings.
Information contained in applications now enjoys confidentiality protections. Furthermore, captives now must adopt strong conflict of interest polices, which require their officers, directors and other key personnel to file annual disclosures with the board of directors.
Another addition allows captives that are no longer issuing policies and that have no remaining liabilities to become “dormant.” Dormant captives are not subject to certain taxation and must maintain a paid-in capital surplus of at least $25,000, though if it was never capitalized, there is no need to add capital. Such captives may reactivate when they are ready to do business again upon paying a fee and filing an application.
Because of the nature of captive insurance companies, under the revamped CHOICES Law, captives are prohibited from participating in or benefiting from any kind of risk-sharing pool or insurance insolvency guaranty fund, and all captive policies are required to contain language to this effect.
In all, these changes, which represent the first major change to the Louisiana captive statute in 17 years, have brought Louisiana more in line with the standards for captive formation in the rest of the country.
Formation and governance basics
- Feasibility and formation: This entails work with legal and financial advisors to assess structure, capital, and domicile fit, though licensing and oversight are state-specific. Our approach emphasizes aligning structure with business goals and building compliance into the plan from day one.
- Governance and operations: Boards should adopt conflict of interest policies, meet as required under Louisiana law, and implement claims and underwriting protocols that reflect the captive’s risk appetite and industry exposures.
Claims and dispute considerations
Captives offer greater control and visibility in claims handling, but that control can bring legal complexity. Disputes can arise among members, with TPAs, or with excess carriers over coverage scope, allocation, or reinsurance terms. Experienced coverage counsel can help resolve conflicts through negotiation or litigation and design claims governance that reduces friction while maintaining regulatory compliance across Louisiana and the broader Gulf South.
Why Louisiana
With offices in in Lafayette, Mandeville, and New Orleans, Galloway attorneys advise captives across Louisiana. Louisiana’s CHOICES Law lowers barriers to entry and modernizes the state’s captive framework, creating a clearer path to form or redomesticate a captive in Louisiana while reinforcing governance and disclosure expectations. For organizations considering a Louisiana captive, whether single-parent, association, or part of a group, the current environment supports careful formation, disciplined governance, and proactive claims strategy aligned with industry best practices.
Disclaimer: This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between Galloway and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material. This material may be considered attorney advertising in some jurisdictions.
