Alberta's Superintendent of Insurance updated two key guidelines in November 2025, setting clearer rules for captive insurers on licensing requirements and capital thresholds.
The updates address both the Captive Insurance Company Licensing Guide and the Capital Guideline for Captive Insurance Companies. For anyone unfamiliar with captives, these are insurance companies that organizations create to insure their own risks, rather than buying coverage from traditional insurers.
The Superintendent establishes these guidelines to ensure captive insurers stay properly licensed and financially stable enough to meet their claims obligations.
The licensing guide now includes a new section outlining what association captives need to provide when applying for an initial license under Section 15 of the Captive Insurance Companies Act. Associations can be incorporated or unincorporated. They must submit an association agreement with their initial application that states the association's purpose and includes provisions for how members enter and exit, how disputes get resolved, what happens during fundamental changes, how surplus gets distributed, and who's responsible for capital injections.
Ownership structure for association captives can follow three paths: all member organizations of the association can own the voting shares or partnership interests, or the association itself can own everything, or the association and one or more member organizations can share ownership.
The guide also picked up some smaller updates. Any change in captive managers now counts as a material change that must be reported to the Superintendent. Business plans must now include projected premium distribution by province and jurisdiction, including countries outside Canada, broken down by class of insurance. And instead of submitting draft risk management policies during initial licensing, captives now have 90 days after licensing to submit board-approved versions.
The capital guideline spells out acceptable forms of capital more clearly. Letters of credit work only if they're irrevocable and unencumbered, issued by a Canadian financial institution, held for the captive's benefit, payable directly to the captive, and approved by the Superintendent. Inter-company loans don't count as valid assets for meeting minimum capital requirements. The Superintendent excludes these to avoid contagion and asset concentration within corporate groups.
On minimum capital amounts, pure captives writing property and casualty business face three calculation methods, with the highest result determining their requirement. Pure captives writing life insurance or composite coverage must maintain at least $250,000 or work with their actuary to justify higher capital levels based on their specific risk profile. Association captives and sophisticated insured captives start at higher minimums, with the requirement determined by whichever produces the greatest amount among the formulaic approaches or actuarially determined calculations.
The guideline also sets collateral requirements for insurance contract liabilities ceded to unregistered reinsurers, based on credit ratings from approved rating agencies. The scale runs from zero collateral for triple-A rated reinsurers up to full collateral for anything below investment grade. Registered reinsurers licensed in Canada need no collateral regardless of rating.
Association and sophisticated insured captives should establish internal capital targets above base capital levels, working with their actuaries. If capital falls below that internal target, they should notify the Superintendent and provide a replenishment plan.
All captives need written investment policies covering risk tolerance, investment categories, diversification strategy, expected returns, rebalancing procedures, liquidity needs, and related party transactions including loans to parent companies.
