Louisiana Enacts CHOICES Act to Boost Captive Insurance Market for Small Businesses

In a move aimed at bolstering the state’s appeal as a hub for captive insurance, Louisiana recently passed the Captive Health and Other Insurance Company Entities Simplification and Enhancement Statute (CHOICES) Act. The legislation is designed to modernize regulations, reduce capital requirements, and streamline compliance, making it easier for small and medium-sized businesses to form captive insurance companies as a risk management tool.

Captive insurance, where companies establish their own insurance subsidiaries to better control coverage and costs, has gained prominence as traditional insurance markets become increasingly expensive and restrictive. Louisiana, historically a leader in captive insurance, faces competition from states like Vermont and Delaware, which have aggressively updated their frameworks to attract more business.

The CHOICES Act addresses concerns raised by insurers and businesses that current regulatory and capital burdens limit participation, especially for smaller companies. By lowering minimum capital thresholds and simplifying the application process, the state hopes to make captive insurance more accessible, helping local businesses better manage risk and reduce reliance on costly commercial policies.

Advocates say the law not only strengthens Louisiana’s competitive position but also encourages economic development by giving companies more flexibility in how they protect their assets. “This legislation reflects Louisiana’s commitment to fostering a business-friendly environment that supports innovative risk management strategies,” said a spokesperson for the Louisiana Department of Insurance.

Critics warn, however, that loosening requirements could increase regulatory risk and potentially expose the state to greater liability if captive insurers face solvency issues. Proponents counter that the legislation maintains strong oversight while balancing the needs of growing businesses.

As commercial insurers continue to tighten underwriting standards, captive insurance offers a valuable alternative for companies seeking customized solutions. With the CHOICES Act, Louisiana is positioning itself to capture more of this expanding market, reinforcing its standing as a key player in the evolving insurance landscape.