# Captive Programs for Texas Contractors and Developers Under Insurance Code Chapter 964 URL: https://mycontractorsinsurancequote.com/construction-captive-insurance-programs/texas Updated: 2026-10-29 · Reviewed by the Principal, Gleason Insurance Brokers, LLC Publisher: My Contractors Insurance Quote, a website of Gleason Insurance Brokers, LLC Texas licenses captives under Insurance Code chapter 964 to insure the operational risks of their affiliates and certain controlled unaffiliated businesses, with at least $250,000 of capital and surplus and a premium tax of 0.5 percent. A Texas captive may not write workers' compensation, personal auto or residential property, or issue coverage that a law requires from an authorized insurer, so those lines typically stay with licensed carriers. Fit and terms depend on the program, the carriers and the firm's individual risk, and any captive is subject to Texas Department of Insurance approval and underwriting. ## Key Decision Points - Chapter 964 limits a Texas captive to the operational risks of its affiliates and controlled unaffiliated businesses. - A Texas captive may not write workers' compensation, personal auto or residential property, or coverage a law requires from an authorized insurer. - Capital and surplus must be at least $250,000, and the commissioner sets the actual amount. - Licensed captives pay a 0.5 percent premium tax with a $7,500 minimum and a $200,000 maximum; independently procured insurance is taxed at 4.85 percent. - Texas workers' compensation is elective for most private employers, but contractors on public construction must certify coverage. ## What Chapter 964 Lets a Texas Captive Insure Texas Insurance Code chapter 964 defines a captive insurance company as one holding a certificate of authority to insure the operational risks of its affiliates. Section 964.051 limits it to those risks and to the risks of a controlled unaffiliated business, meaning a business under contract with an affiliate whose risks the captive manages. Chapter 964 also provides for captive exchanges and captive reinsurance pools. That framework is built around a company and its affiliates. A contractor interested in an association-style group program typically looks at a program domiciled in a state that licenses group captives, which brings Texas' tax on independently procured insurance into the feasibility study. Either way, a captive is one option for an established firm to evaluate beside its annual program, wraps and project-specific placements, not a fit for every company. The trade-offs between the two models are covered in [group captives compared with single-parent captives](https://mycontractorsinsurancequote.com/resources/group-vs-single-parent-captive). ## Lines a Texas Captive Cannot Write Section 964.051(b) bars a Texas captive from writing life, annuities and accident and health coverage, with ERISA exceptions, and from title, mortgage guaranty, financial guaranty, residential property, personal auto and workers' compensation insurance. Section 964.051(c) adds that it may not issue insurance, including automobile liability, that a state or local law requires as a condition of a license or permit when that law calls for an authorized insurer. For a contractor, that means required auto liability and workers' compensation typically stay with licensed carriers, while a captive may finance retained layers of general liability, excess or other operational risks within the statute. How these limits fit a Texas GC's broader program is covered in [Texas general contractor insurance and bonds](https://mycontractorsinsurancequote.com/texas/audiences/general-contractors). ### Illustrative scenario: A Houston Civil Contractor Keeps Auto Liability with Its Carrier A Houston underground contractor with a large truck fleet studies a Texas pure captive to finance a retained layer of general liability and excess. The study confirms that chapter 964 would not let the captive issue the auto liability its city permits require from an authorized insurer, so that coverage stays with its licensed carrier, and its workers' compensation stays with its insurer because it works on public projects that require certified coverage. The captive is modeled with $250,000 of minimum capital, a higher amount the commissioner may set and the 0.5 percent premium tax. The details are hypothetical, and a real study would depend on the company, the regulator and the carriers involved. ## Forming and Licensing a Texas Captive A Texas captive is formed through the Secretary of State and cannot be a general partnership. Its board needs at least three members, one of them a Texas resident. The company then applies to the Texas Department of Insurance for a certificate of authority, with the application, biographical affidavits, projections and an agent for service; captive managers register separately. Section 964.056 sets capital and surplus at no less than $250,000 and lets the commissioner set the actual amount from factors in the statute. After licensing, the captive files an annual report by March 1 and audited financial statements by June 1, and dividends need the commissioner's approval. Where licensing falls in the overall sequence is shown in our [captive feasibility review and timeline](https://mycontractorsinsurancequote.com/resources/construction-captive-feasibility). ## Premium Tax and the Independently Procured Insurance Tax Under Insurance Code section 223A.003, a licensed Texas captive pays 0.5 percent of taxable premium receipts, with a $7,500 minimum and a $200,000 maximum, regardless of where the insured property or risk sits. Returns are due March 1. Chapter 964 also applies a maintenance tax on premiums for Texas risks. A Texas insured that buys coverage from an insurer not authorized in Texas, including a captive domiciled elsewhere, generally owes the independently procured insurance tax of 4.85 percent of the premium under section 226.053. A feasibility study comparing a Texas captive with an out-of-state program should include both taxes, and the owners' tax advisor should confirm how each applies. ## Texas Workers' Compensation Beside a Captive Labor Code section 406.002 lets most private employers elect whether to carry workers' compensation. An employer that does not carry it must notify the Division and its employees and loses common-law defenses such as contributory negligence and assumed risk under section 406.033. Contractors on public building or construction projects must certify coverage for employees on the project under section 406.096. Coverage comes from a licensed insurer or through certified self-insurance under chapter 407, which sets premium and security thresholds. Group self-insurance under chapter 407A is closed to new certificates on or after September 1, 2025. Because a Texas captive may not write workers' compensation, a contractor's comp decision usually runs separately from its captive decision. How public-project comp certification affects civil work is covered in [Texas civil contractor insurance requirements](https://mycontractorsinsurancequote.com/texas/audiences/civil-infrastructure-contractors). ## Before You Ask for a Quote ### What to Gather - Loss runs for GL, auto, excess and comp for five or more years - A chart of affiliates and any controlled unaffiliated businesses - Permits and contracts that require coverage from an authorized insurer - Financial statements for capital planning - Current workers' compensation status, including any public-project certifications ### What to Ask the Insurer or Surety - Which of our risks fit chapter 964's affiliate and controlled-business limits? - What capital will the commissioner likely require above $250,000? - How do the 0.5 percent premium tax and maintenance tax compare with an out-of-state program's 4.85 percent tax? - Which coverages must stay with authorized insurers? - Who will serve as captive manager and Texas-resident director? ## Broker Notes **Quick Answer:** Texas licenses captives under Insurance Code chapter 964 to insure affiliates' operational risks and controlled unaffiliated businesses. They need at least $250,000 of capital, pay a 0.5 percent premium tax and may not write workers' compensation, personal auto or coverage a law requires from an authorized insurer. **Common Mistake:** Planning to move required auto liability or workers' compensation into a Texas captive. Section 964.051 bars both, so those lines typically stay with licensed carriers. **Broker Perspective:** We map each Texas risk against chapter 964's limits first, then compare a Texas captive with an out-of-state program on tax, capital and control. **Coverage Impact:** The captive finances the retained layer; the coverage terms come from the policies and reinsurance issued, and lines the statute bars remain with authorized insurers. ## Questions Buyers Ask ### Can a Texas captive insure our subcontractors? Only within chapter 964's limits. A captive may insure controlled unaffiliated businesses, meaning businesses under contract with an affiliate whose risks the captive manages. Whether a subcontractor fits that definition depends on the facts and the regulator. ### Can a Texas captive write our workers' compensation? No. Section 964.051(b) bars a Texas captive from writing workers' compensation. Coverage comes from a licensed insurer or certified self-insurance. ### What tax does a Texas captive pay? A licensed captive pays 0.5 percent of taxable premium receipts, with a $7,500 minimum and a $200,000 maximum, plus maintenance tax on Texas-risk premiums. Coverage bought from an unauthorized insurer is generally taxed at 4.85 percent. ### Can we start a new workers' compensation self-insurance group in Texas? Not under current law. Labor Code section 407A.0521 bars new group self-insurance certificates on or after September 1, 2025. ## Official Sources 1. [Texas Insurance Code chapter 964 (captive insurance companies)](https://tcss.legis.texas.gov/resources/IN/htm/IN.964.htm), Texas Legislature. A captive may insure only the operational risks of its affiliates and controlled unaffiliated businesses, may not write listed lines including workers' compensation, personal auto and residential property, and needs at least $250,000 of capital and surplus. Verified 2026-10-25. 2. [Texas Insurance Code chapter 223A (captive insurance premium tax)](https://tcss.legis.texas.gov/resources/IN/htm/IN.223A.htm), Texas Legislature. Licensed captives pay 0.5 percent of taxable premium receipts, with a $7,500 minimum and a $200,000 maximum. Verified 2026-10-25. 3. [Texas Insurance Code chapter 226 (unauthorized and independently procured insurance taxes)](https://tcss.legis.texas.gov/resources/IN/htm/IN.226.htm), Texas Legislature. An insured that independently procures insurance pays 4.85 percent of the premium. Verified 2026-10-25. 4. [Texas Labor Code chapter 406 (workers' compensation coverage)](https://tcss.legis.texas.gov/resources/LA/htm/LA.406.htm), Texas Legislature. Private employers may elect coverage; non-covered employers lose common-law defenses; contractors on public building or construction projects certify coverage. Verified 2026-10-25. 5. [Texas Labor Code chapter 407A (group self-insurance)](https://tcss.legis.texas.gov/resources/LA/htm/LA.407A.htm), Texas Legislature. Group self-insurance for five or more private employers in similar businesses, with joint and several liability; no new certificates on or after September 1, 2025. Verified 2026-10-25. 6. [Captive insurance companies](https://www.tdi.texas.gov/insurer/captives.html), Texas Department of Insurance. Formation with the Secretary of State, then a certificate of authority application package to TDI. Verified 2026-10-25. ## Related Decisions - [risk retention groups for contractors](https://mycontractorsinsurancequote.com/resources/risk-retention-groups-for-contractors) - [captive programs for general contractors](https://mycontractorsinsurancequote.com/construction-captive-insurance-programs/general-contractors) - [construction captive programs](https://mycontractorsinsurancequote.com/construction-captive-insurance-programs) - [Texas developer insurance and bonds](https://mycontractorsinsurancequote.com/texas/audiences/developers) - [Texas construction insurance rules](https://mycontractorsinsurancequote.com/texas) - [group or single-parent captive](https://mycontractorsinsurancequote.com/resources/group-vs-single-parent-captive) --- Start a quote request: https://mycontractorsinsurancequote.com/get-a-quote · Call 844-978-7283 Contract and insurance reviews are a courtesy service that may be available at times, depending on our workload and on the size, timing and complexity of the project. A review is not guaranteed and is limited to insurance considerations. It is not legal advice and is not a substitute for advice from your own legal counsel, which you may need before signing a contract or obtaining coverage. Insurance and surety services are provided through Gleason Insurance Brokers, LLC. Site information is educational and does not constitute legal advice, a binder, an offer of coverage, a guarantee of eligibility or confirmation of policy terms. Insurance conditions are governed by actual issued policies; surety rights and obligations are governed by bond and indemnity documents.