Mr. Marshall told National Underwriter that while most of the legislation involves cleanup language, the biggest change is that the new law will allow the establishment of branch captives to provide employee benefits.

He said a captive domiciled in Bermuda, for example, could now set up a branch captive in Arizona to write employee benefits. Most importantly, that captive would only be subject to a renewal license fee of $5,500 because Arizona has no premium tax requirements.

"No other domicile is that attractive financially," he said.

Other notable features of the legislation:

o New provisions defining "deductible reimbursement" business, and clarifying that deductible reimbursement business is permitted on a direct basis.

o A redefinition of "industry group captive insurer" to eliminate group member eligibility requirements of a third-party insurance consultant and a threshold amount of annual premium expenditure, and substitute a simple homogenous risk standard.

o A provision allowing group captives (except risk retention groups) to cover "controlled unaffiliated business."

o The elimination of remaining restrictions against writing commercial motor vehicle business on a direct basis.

o The end of an Arizona residency requirement for captive managers, and a requirement that captive managers do business at an Arizona location.

o A reduction in the minimum capital requirement for a protected cell captive from $1 million to $500,000.

o A provision allowing any surplus note interest rate approved by the director.

o Language allowing a reinsurance captive to securitize its risk portfolio through contracts that allow the purchase of interests on a nonrecourse basis.

o Permission for pure captives to be formed as an LLC.

o Provision for group captives to have as few as three directors, and up to as many directors as it has members (in addition to outside directors).

o Coordinates the effective date of corporate redomestication to Arizona and the effective date of the new Arizona certificate of authority.

o Clarifies that audit reports are due within six months after the end of the captive's fiscal year.

o Clarifies the requirement for prior approval of changes to captive business plans.

o Clarifies the confidential treatment of all information related to captive insurers, except for name, type, date licensed, license status and business of owners (does not apply to RRGs).

o Specifically authorizes the director to expend monies in the captive insurance regulatory and supervision fund to pay the costs of administering the captive insurance law and to promote the state's captive insurance industry pursuant to the guidelines that she adopts.