Texas has become the latest US state to adopt captive insurance legislation.Governor Rick Perry this month signed a law that allows the Texas Department of Insurance to license and regulate captive insurance companies in the Lone Star State.Texas joins around 30 US states that now authorise the formation of captive insurance companies.“Vermont is by far the largest, being in fact the second largest captive insurance domicile in the world, and not far behind the leader, Bermuda,” Forbes said yesterday.“A captive insurance company is as it sounds: An insurance company formed by a parent company to underwrite the insurance needs of the parent company’s various subsidiaries, with the insurance company being restricted (the “captive” part) to underwriting no other business than that of the operating subsidiaries. This is what the new Texas law will allow when it goes into effect on September 1.”Forbes added: “Since the IRS finally gave their blessing to captive insurance companies in 2002 (after losing years of court challenges against captive arrangements), captives have substantially changed the business insurance landscape.“Now, relatively few large companies do not have captives, and captives have proven to be extremely popular with middle-market companies. Captives allow companies to underwrite substantial pieces of their own risks, and now even allow companies to take on certain of the risks inherent in employee benefit plans and the like.“Although a majority of states have passed captive legislation, not all of these states actively support captives. Some states passed legislation but never funded it, for whatever good that accomplished, while other states’ insurance commissions or departments never got on board with the concept and so it was stillborn in those states.”