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[Introduced][Status][Bill Documents][Fiscal Note]
[Bills Directory]
H.B. 55 Enrolled
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CAPTIVE INSURANCE COMPANY
2
AMENDMENTS
3
2008 GENERAL SESSION
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STATE OF UTAH
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Chief Sponsor: James A. Dunnigan
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Senate Sponsor:
Kevin T. VanTassell
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LONG TITLE
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General Description:
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This bill modifies the Captive Insurance Companies Act and enacts the Special Purpose
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Financial Captive Insurance Company Act.
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Highlighted Provisions:
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This bill:
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. addresses fee amounts that are nonlapsing;
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. modifies and enacts definitions;
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. makes changes related to a captive insurance company formed as a limited liability
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company;
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. addresses applicable law;
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. addresses the applicability of reorganization, receivership, and injunction statutes;
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. addresses permissive areas of insurance;
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. addresses sponsored captive insurance companies;
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. addresses reporting to the commissioner;
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. enacts the Special Purpose Financial Captive Insurance Company Act including:
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. defining terms;
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. outlining applicable law;
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. imposing reporting requirements;
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. imposing requirements related to books and records;
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. providing for a transition to the new certificate of authority;
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. establishing a process to issue a certificate of authority;
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. addressing revocation, suspension, amendment, or modification of a certificate of
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authority;
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. requiring commissioner approval of certain actions;
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. addressing sponsored captives;
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. addressing the formation, assets, investments, and securities of a special purpose
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financial captive insurance company;
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. addressing reinsurance; and
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. providing for enforcement and delinquency; and
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. makes technical and conforming amendments.
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Monies Appropriated in this Bill:
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None
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Other Special Clauses:
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This bill has multiple effective dates.
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Utah Code Sections Affected:
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AMENDS:
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31A-3-304, as last amended by Laws of Utah 2006, Chapter 320
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31A-37-102, as last amended by Laws of Utah 2004, Chapter 312
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31A-37-103, as enacted by Laws of Utah 2003, Chapter 251
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31A-37-104, as last amended by Laws of Utah 2004, Chapter 312
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31A-37-106, as last amended by Laws of Utah 2004, Chapter 312
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31A-37-202, as last amended by Laws of Utah 2004, Chapter 312
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31A-37-402, as last amended by Laws of Utah 2004, Chapter 312
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31A-37-501, as last amended by Laws of Utah 2006, Chapter 177
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31A-37-502, as last amended by Laws of Utah 2007, Chapter 307
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31A-37-602, as enacted by Laws of Utah 2004, Chapter 312
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31A-37-603, as enacted by Laws of Utah 2004, Chapter 312
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ENACTS:
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31A-37a-101, Utah Code Annotated 1953
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31A-37a-102, Utah Code Annotated 1953
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31A-37a-103, Utah Code Annotated 1953
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31A-37a-104, Utah Code Annotated 1953
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31A-37a-105, Utah Code Annotated 1953
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31A-37a-201, Utah Code Annotated 1953
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31A-37a-202, Utah Code Annotated 1953
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31A-37a-203, Utah Code Annotated 1953
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31A-37a-204, Utah Code Annotated 1953
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31A-37a-205, Utah Code Annotated 1953
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31A-37a-301, Utah Code Annotated 1953
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31A-37a-302, Utah Code Annotated 1953
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31A-37a-303, Utah Code Annotated 1953
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31A-37a-304, Utah Code Annotated 1953
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31A-37a-401, Utah Code Annotated 1953
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31A-37a-402, Utah Code Annotated 1953
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31A-37a-501, Utah Code Annotated 1953
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31A-37a-502, Utah Code Annotated 1953
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Be it enacted by the Legislature of the state of Utah:
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Section 1.
Section
31A-3-304
is amended to read:
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31A-3-304. Annual fees -- Other taxes or fees prohibited.
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(1) (a) A captive insurance company shall pay an annual fee imposed under this section
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to obtain or renew a certificate of authority.
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(b) The commissioner shall:
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(i) determine the annual fee pursuant to Sections
31A-3-103
and
63-38-3.2
; and
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(ii) consider whether the annual fee is competitive with fees imposed by other states on
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captive insurance companies.
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(2) A captive insurance company that fails to pay the fee required by this section is
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subject to the relevant sanctions of this title.
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(3) (a) Except as provided in Subsection (3)(b) and notwithstanding Title 59, Chapter
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9, Taxation of Admitted Insurers, the fee provided for in this section constitutes the sole tax or
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fee under the laws of this state that may be otherwise levied or assessed on a captive insurance
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company, and no other occupation tax or other tax or fee may be levied or collected from a
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captive insurance company by the state or a county, city, or municipality within this state.
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(b) Notwithstanding Subsection (3)(a), a captive insurance company is subject to real
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and personal property taxes.
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(4) A captive insurance company shall pay the fee imposed by this section to the
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department by March 31 of each year.
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(5) (a) The funds received pursuant to Subsection (2) shall be deposited into the
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General Fund as a dedicated credit to be used by the department to:
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(i) administer and enforce Chapter 37, Captive Insurance Companies Act; and
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(ii) promote the captive insurance industry in Utah.
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(b) At the end of each fiscal year, funds received by the department in excess of
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[$250,000] $750,000 shall be treated as free revenue in the General Fund.
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Section 2.
Section
31A-37-102
is amended to read:
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31A-37-102. Definitions.
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As used in this chapter:
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(1) "Affiliated company" means a [company] business entity that because of common
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ownership, control, operation, or management is in the same corporate system as:
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(a) a parent;
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(b) an industrial insured; or
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(c) a member organization.
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(2) "Alien captive insurance company" means an [insurance company] insurer:
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(a) formed to write insurance business for [its parents and affiliates] a parent or affiliate
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of the insurer; and
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(b) licensed pursuant to the laws of an alien jurisdiction that imposes statutory or
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regulatory standards:
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(i) on [companies] a business entity transacting the business of insurance in the alien
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jurisdiction; and
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(ii) in a form acceptable to the commissioner.
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(3) "Association" means a legal association of [individuals, corporations, partnerships,
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or associations] two or more persons that has been in continuous existence for at least one year
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if:
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(a) the association or its member organizations:
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(i) own, control, or hold with power to vote all of the outstanding voting securities of
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an association captive insurance company incorporated as a stock insurer; or
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(ii) have complete voting control over an association captive insurance company
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incorporated as a mutual insurer; [or]
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(b) the association's member organizations collectively constitute all of the subscribers
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of an association captive insurance company formed as a reciprocal insurer[.]; or
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(c) the association or its member organizations have complete voting control over an
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association captive insurance company formed as a limited liability company.
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(4) "Association captive insurance company" means a [company] business entity that
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insures risks of [the]:
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(a) a member [organizations] organization of the association; [and]
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(b) [affiliates of the] an affiliate of a member [organizations] organization of the
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association[.]; and
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(c) the association.
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(5) "Branch business" means [any] an insurance business transacted by a branch captive
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insurance company in this state.
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(6) "Branch captive insurance company" means an alien captive insurance company that
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has [obtained] a certificate of authority [by] from the commissioner to transact the business of
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insurance in this state through a business unit with a principal place of business in this state.
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(7) "Branch [operations"] operation" means [any] a business [operations] operation of a
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branch captive insurance company in this state.
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(8) "Captive insurance company" means any of the following formed or holding a
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certificate of authority under this chapter:
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(a) a branch captive insurance company;
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(b) a pure captive insurance company;
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(c) an association captive insurance company;
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(d) a sponsored captive insurance company;
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(e) an industrial insured captive insurance company;
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(f) a captive reinsurance company; [or]
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(g) a special purpose captive insurance company[.]; or
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(h) a special purpose financial captive insurance company.
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(9) "Captive reinsurance company" means a [reinsurance company] reinsurer that is:
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(a) formed or [licensed] has a certificate of authority pursuant to this chapter;
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(b) wholly owned by a qualifying [reinsurance] reinsurer parent company; and
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(c) a stock corporation.
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(10) "Common ownership and control" means that two or more captive insurance
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companies are owned or controlled by the same person or group of persons as follows:
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(a) in the case of a captive insurance company that is a stock [corporations]
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corporation, the direct or indirect ownership [by the same shareholder or shareholders] of 80%
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or more of the outstanding voting stock of [two or more corporations] the stock corporation;
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[and]
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(b) in the case of a captive insurance company that is a mutual [corporations]
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corporation, the direct or indirect ownership [by the same member or members] of 80% or more
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of the surplus and the voting power of [two or more corporations.] the mutual corporation;
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(c) in the case of a captive insurance company that is a limited liability company, the
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direct or indirect ownership by the same member or members of 80% or more of the
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membership interests in the limited liability company; or
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(d) in the case of a sponsored captive insurance company, a protected cell is a separate
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captive insurance company owned and controlled by the protected cell's participant, only if:
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(i) the participant is the only participant with respect to the protected cell; and
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(ii) the participant is the sponsor or is affiliated with the sponsor of the sponsored
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captive insurance company through common ownership and control.
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(11) "Commissioner" means the Insurance Commissioner or the commissioner's
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designee.
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(12) "Consolidated debt to total capital ratio" means the ratio of Subsection (12)(a) to
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(b).
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(a) This Subsection (12)(a) is an amount equal to the sum of all debts and hybrid capital
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instruments including:
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(i) all borrowings from depository institutions;
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(ii) all senior debt;
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(iii) all subordinated debts;
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(iv) all trust preferred shares; and
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(v) all other hybrid capital instruments that are not included in the determination of
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consolidated GAAP net worth issued and outstanding.
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(b) This Subsection (12)(b) is an amount equal to the sum of:
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(i) total capital consisting of all debts and hybrid capital instruments as described in
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Subsection (12)(a); and
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(ii) shareholders' equity determined in accordance with generally accepted accounting
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principles for reporting to the United States Securities and Exchange Commission.
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(13) "Consolidated GAAP net worth" means the consolidated shareholders' equity
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determined in accordance with generally accepted accounting principles for reporting to the
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United States Securities and Exchange Commission.
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(14) "Controlled unaffiliated business" means a [company] business entity:
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(a) (i) in the case of a pure captive insurance company, that is not in the corporate
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system of a parent [and affiliates;] or the parent's affiliate; or
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(ii) in the case of an industrial insured captive insurance company, that is not in the
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corporate system of an industrial insured or an affiliated company of the industrial insured;
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(b) (i) in the case of a pure captive insurance company, that has [an existing] a
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contractual relationship with a parent or affiliate; [and] or
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(ii) in the case of an industrial insured captive insurance company, that has a contractual
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relationship with an industrial insured or an affiliated company of the industrial insured; and
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(c) whose risks are managed by [a pure captive insurance company] one of the
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following in accordance with [Section
31A-37-504
.] Subsection
31A-37-106
(1)(k):
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(i) a pure captive insurance company; or
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(ii) an industrial insured captive insurance company.
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(15) "Department" means the Insurance Department.
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(16) "Industrial insured" means an insured:
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(a) that produces insurance:
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(i) by the services of a full-time employee acting as a risk manager or insurance
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manager; or
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(ii) using the services of a regularly and continuously qualified insurance consultant;
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(b) whose aggregate annual premiums for insurance on all risks total at least $25,000;
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and
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(c) that has at least 25 full-time employees.
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(17) "Industrial insured captive insurance company" means a [company] business entity
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that:
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(a) insures risks of[: (a)] the industrial insureds that comprise the industrial insured
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group; and
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[(b) the affiliates of the industrial insured group.]
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(b) may insure the risks of:
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(i) an affiliated company of an industrial insured; or
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(ii) a controlled unaffiliated business of:
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(A) an industrial insured; or
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(B) an affiliated company of an industrial insured.
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(18) "Industrial insured group" means:
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(a) a group of industrial insureds that collectively:
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(i) own, control, or hold with power to vote all of the outstanding voting securities of
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an industrial insured captive insurance company incorporated as a stock insurer; or
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(ii) have complete voting control over an industrial insured captive insurance company
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incorporated as a mutual insurer; [or]
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(b) a group that is:
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(i) created under the Product Liability Risk Retention Act of 1981, 15 U.S.C. Section
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3901 et seq., as amended, as a corporation or other limited liability association; and
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(ii) taxable under this title as a:
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(A) stock corporation; or
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(B) mutual insurer[.]; or
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(c) a group that has complete voting control over an industrial captive insurance
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company formed as a limited liability company.
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(19) "Member organization" means [an individual, corporation, partnership, or
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association] a person that belongs to an association.
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(20) "Parent" means a [corporation, partnership, or individual] person that directly or
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indirectly owns, controls, or holds with power to vote more than 50% of:
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(a) the outstanding voting securities of a pure captive insurance company[.]; or
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(b) the pure captive insurance company, if the pure captive insurance company is
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formed as a limited liability company.
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(21) "Participant" means [any of the following] an entity that [are] is insured by a
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sponsored captive insurance company[,]:
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(a) if the losses of the participant are limited through a participant contract to the assets
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of a protected cell[:]; and
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[(a) an] (b)(i) the entity is permitted to be a participant under Section
31A-37-403
;
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[and] or
253
[(b) any] (ii) the entity is an affiliate of an entity permitted to be a participant under
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Section
31A-37-403
.
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(22) "Participant contract" means a contract by which a sponsored captive insurance
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company:
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(a) insures the risks of a participant; and
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(b) limits the losses of the participant to the assets of a protected cell.
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(23) "Protected cell" means a separate account established and maintained by a
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sponsored captive insurance company for one participant.
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(24) "Pure captive insurance company" means a [company] business entity that insures
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risks of [its parent and affiliates] a parent or affiliate of the business entity.
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(25) "Qualifying reinsurer parent company" means a reinsurer:
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(a) authorized to write reinsurance by this state; and
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(b) that has:
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(i) a consolidated GAAP net worth of not less than $500,000,000; and
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(ii) a consolidated debt to total capital ratio not greater than .50.
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(26) "Special purpose financial captive insurance company" is as defined in Section
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31A-37a-102
.
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[(26)] (27) "Sponsor" means an entity that:
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(a) meets the requirements of Section
31A-37-402
; and
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(b) is approved by the commissioner to:
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(i) provide all or part of the capital and surplus required by applicable law; and
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(ii) organize and operate a sponsored captive insurance company.
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[(27)] (28) "Sponsored captive insurance company" means a captive insurance
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company:
277
(a) in which the minimum capital and surplus required by applicable law is provided by
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one or more sponsors;
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(b) that is formed or holding a certificate of authority under this chapter;
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(c) that insures the risks of a separate [participants] participant through the contract;
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and
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(d) that segregates each participant's liability through one or more protected cells.
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[(28)] (29) "Treasury rates" means the United States Treasury strip asked yield as
284
published in the Wall Street Journal as of a balance sheet date.
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Section 3.
Section
31A-37-103
is amended to read:
286
31A-37-103. Chapter exclusivity.
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(1) Except as provided in Subsection (2) or otherwise provided in this chapter, [no
288
provisions] a provision of this title other than this chapter does not apply to a captive insurance
289
company.
290
(2) In addition to this chapter, and subject to Section
31A-37a-103
:
291
(a) Chapter 37a, Special Purpose Financial Captive Insurance Company Act, applies to
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a special purpose financial captive insurance company; and
293
(b) for purposes of a special purpose financial captive insurance company, a reference in
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this chapter to "this chapter" includes a reference to Chapter 37a.
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Section 4.
Section
31A-37-104
is amended to read:
296
31A-37-104. Applicability of reorganization, receivership, and injunction
297
authority.
298
(1) Except as provided in Chapter 37a, Special Purpose Financial Captive Insurance
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Company Act, and Subsection (2), [the provisions of this title pertaining to insurance
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reorganizations, receiverships, and injunctions apply] Chapter 27a, Insurer Receivership Act,
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applies to a captive insurance company formed or holding a certificate of authority under this
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chapter.
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(2) In the case of a sponsored captive insurance company:
304
(a) the assets of [the] a protected cell may not be used to pay [any expenses or claims]
305
an expense or claim other than [those] one attributable to the protected cell; and
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(b) the capital and surplus of the sponsored captive insurance company:
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(i) shall at all times be available to pay [any]:
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(A) [expenses] an expense of the sponsored captive insurance company; or
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(B) [claims] a claim against the sponsored captive insurance company; and
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(ii) may not be used to pay [expenses or claims] an expense or claim attributable to a
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protected cell.
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Section 5.
Section
31A-37-106
is amended to read:
313
31A-37-106. Authority to make rules -- Authority to issue orders.
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(1) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
315
commissioner may adopt rules to:
316
(a) determine circumstances under which a branch captive insurance company is not
317
required to be a pure captive insurance company;
318
(b) [determine any] require a statement, document, or information that a captive
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insurance company must provide to the commissioner to obtain a certificate of authority;
320
(c) determine [any factors] a factor a captive insurance company shall provide evidence
321
of under Subsection
31A-37-202
(4)(c);
322
(d) prescribe one or more capital requirements for a captive insurance company in
323
addition to those required under Section
31A-37-204
based on the type, volume, and nature of
324
insurance business transacted by the captive insurance company;
325
(e) establish:
326
(i) the amount of capital or surplus required to be retained under Subsection
327
31A-37-205
(4) at the payment of a dividend or other distribution by a captive insurance
328
company; or
329
(ii) a formula to determine the amount described in Subsection
31A-37-205
(4);
330
(f) waive or modify [the requirements] a requirement for public notice and hearing for
331
[any of] the following by a captive insurance company:
332
(i) merger;
333
(ii) consolidation;
334
(iii) conversion;
335
(iv) mutualization; or
336
(v) redomestication;
337
(g) approve the use of [alternative] one or more reliable methods of valuation and rating
338
for:
339
(i) an association captive insurance company;
340
(ii) a sponsored captive insurance company; or
341
(iii) an industrial insured group;
342
(h) prohibit or limit an investment that threatens the solvency or liquidity of:
343
(i) a pure captive insurance company; or
344
(ii) an industrial insured captive insurance company;
345
(i) determine the financial reports a sponsored captive insurance company shall annually
346
file with the commissioner;
347
(j) [determine] prescribe the required forms and reports under Section
31A-37-501
; and
348
(k) establish one or more standards to ensure that [a parent or affiliate of a pure captive
349
insurance company]:
350
(i) one of the following is able to exercise control of the risk management function of
351
[any] a controlled unaffiliated business to be insured by [the] a pure captive insurance
352
company[.]:
353
(A) a parent; or
354
(B) an affiliated company of a parent; or
355
(ii) one of the following is able to exercise control of the risk management function of a
356
controlled unaffiliated business to be insured by an industrial insured captive insurance
357
company:
358
(A) an industrial insured; or
359
(B) an affiliated company of the industrial insured.
360
(2) Notwithstanding Subsection (1)(k), until the commissioner adopts the rules
361
authorized under Subsection (1)(k), the commissioner may by temporary order grant authority
362
to insure risks to:
363
(a) a pure captive insurance company [to insure risks.]; or
364
(b) an industrial insured captive insurance company.
365
(3) The commissioner may issue prohibitory, mandatory, and other orders relating to a
366
captive insurance [companies] company as necessary to enable the commissioner to secure
367
compliance with this chapter.
368
Section 6.
Section
31A-37-202
is amended to read:
369
31A-37-202. Permissive areas of insurance.
370
(1) (a) Except as provided in Subsection (1)(b), when permitted by its articles of
371
incorporation or charter, a captive insurance company may apply to the commissioner for a
372
certificate of authority to do all insurance authorized by this title except workers' compensation
373
insurance.
374
(b) Notwithstanding Subsection (1)(a):
375
(i) a pure captive insurance company may not insure [any risks] a risk other than [those]
376
a risk of [its]:
377
(A) its parent [and affiliates] or affiliate;
378
(B) a controlled unaffiliated business; or
379
(C) a combination of Subsections (1)(b)(i)(A) and (B);
380
(ii) an association captive insurance company may not insure [any risks] a risk other
381
than [those] a risk of [the]:
382
(A) an affiliate;
383
[(A)] (B) a member [organizations] organization of its association; and
384
[(B) affiliates of the member organizations]
385
(C) an affiliate of a member organization of its association;
386
(iii) an industrial insured captive insurance company may not insure [any risks] a risk
387
other than [those] a risk of [the]:
388
(A) an industrial [insureds] insured that [comprise] is part of the industrial insured
389
group; [and]
390
[(B) affiliates of the industrial insureds that comprise]
391
(B) an affiliate of an industrial insured that is part of the industrial insured group; and
392
(C) a controlled unaffiliated business of:
393
(I) an industrial insured that is part of the industrial insured group; or
394
(II) an affiliate of an industrial insured that is part of the industrial insured group;
395
(iv) a special purpose captive insurance company may only insure [the] a risk of its
396
parent;
397
(v) a captive insurance company may not provide:
398
(A) personal motor vehicle [or] insurance coverage;
399
(B) homeowner's insurance coverage; or [any]
400
(C) a component of [these coverages] a coverage described in this Subsection (1)(b)(v);
401
and
402
(vi) a captive insurance company may not accept or cede reinsurance except as
403
provided in Section
31A-37-303
.
404
(c) Notwithstanding Subsection (1)(b)(iv), for [risks] a risk approved by the
405
commissioner a special purpose captive insurance company may provide:
406
(i) insurance;
407
(ii) reinsurance; or
408
(iii) both insurance and reinsurance.
409
(2) To conduct insurance business in this state a captive insurance company shall:
410
(a) obtain from the commissioner a certificate of authority authorizing it to conduct
411
insurance business in this state;
412
(b) hold at least once each year in this state:
413
(i) a board of directors meeting; or
414
(ii) in the case of a reciprocal insurer, a subscriber's advisory committee meeting;
415
(c) maintain in this state:
416
(i) the principal place of business of the captive insurance company; or
417
(ii) in the case of a branch captive insurance company, the principal place of business
418
for the branch operations of the branch captive insurance company; and
419
(d) except as provided in Subsection (3), appoint a resident registered agent to accept
420
service of process and to otherwise act on behalf of the captive insurance company in this state.
421
(3) Notwithstanding Subsection (2)(d), in the case of a captive insurance company
422
formed as a corporation or a reciprocal insurer, [whenever] if the registered agent cannot with
423
reasonable diligence be found at the registered office of the captive insurance company, the
424
commissioner [shall be an] is the agent of the captive insurance company upon whom [any]
425
process, notice, or demand may be served.
426
(4) (a) Before receiving a certificate of authority, a captive insurance company:
427
(i) formed as a corporation shall file with the commissioner:
428
(A) a certified copy of:
429
(I) articles of incorporation or the charter of the corporation; and
430
(II) bylaws of the corporation;
431
(B) a statement under oath of the president and secretary of the corporation showing
432
the financial condition of the corporation; and
433
(C) any other statement or document required by the commissioner under Section
434
31A-37-106
;
435
(ii) formed as a reciprocal shall:
436
(A) file with the commissioner:
437
(I) a certified copy of the power of attorney of the attorney-in-fact of the reciprocal;
438
(II) a certified copy of the subscribers' agreement of the reciprocal;
439
(III) a statement under oath of the attorney-in-fact of the reciprocal showing the
440
financial condition of the reciprocal; and
441
(IV) any other statement or document required by the commissioner under Section
442
31A-37-106
; and
443
(B) submit to the commissioner for approval a description of the:
444
(I) coverages;
445
(II) deductibles;
446
(III) coverage limits;
447
(IV) rates; and
448
(V) any other information the commissioner requires under Section
31A-37-106
.
449
(b) (i) If there is a subsequent material change in an item in the description required
450
under Subsection (4)(a)(ii)(B) for a reciprocal captive insurance company, the reciprocal captive
451
insurance company shall submit to the commissioner for approval an appropriate revision to the
452
description required under Subsection (4)(a)(ii)(B).
453
(ii) A reciprocal captive insurance company that is required to submit a revision under
454
Subsection (4)(b)(i) may not offer any additional [kinds] types of insurance until the
455
commissioner approves a revision of the description.
456
(iii) A reciprocal captive insurance company shall inform the commissioner of [any] a
457
material change in [rates] a rate within 30 days of the adoption of the change.
458
(c) In addition to the information required by Subsection (4)(a), an applicant captive
459
insurance company shall file with the commissioner evidence of:
460
(i) the amount and liquidity of the assets of the applicant captive insurance company
461
relative to the risks to be assumed by the applicant captive insurance company;
462
(ii) the adequacy of the expertise, experience, and character of the person who will
463
manage the applicant captive insurance company;
464
(iii) the overall soundness of the plan of operation of the applicant captive insurance
465
company;
466
(iv) the adequacy of the loss prevention programs [of] for the following of the applicant
467
captive insurance [company's] company:
468
(A) a parent[,];
469
(B) a member [organizations,] organization; or
470
(C) an industrial [insureds, as applicable] insured; and
471
(v) any other [factors] factor the commissioner:
472
(A) adopts by rule under Section
31A-37-106
; and
473
(B) considers relevant in ascertaining whether the applicant captive insurance company
474
will be able to meet the policy obligations of the applicant captive insurance company.
475
(d) In addition to the information required by Subsections (4)(a), (b), and (c), an
476
applicant sponsored captive insurance company shall file with the commissioner:
477
(i) a business plan at the level of detail required by the commissioner under Section
478
31A-37-106
demonstrating:
479
(A) the manner in which the applicant sponsored captive insurance company will
480
account for the losses and expenses of each protected cell; and
481
(B) the manner in which the applicant sponsored captive insurance company will report
482
to the commissioner the financial history, including losses and expenses, of each protected cell;
483
(ii) a statement acknowledging that the applicant sponsored captive insurance company
484
will make all financial records of the applicant sponsored captive insurance company, including
485
records pertaining to [any] a protected cell, [shall be made] available for inspection or
486
examination by the commissioner;
487
(iii) [any] a contract or sample contract between the applicant sponsored captive
488
insurance company and [any] a participant; and
489
(iv) evidence that expenses will be allocated to each protected cell in an equitable
490
manner.
491
[(e)] (5) (a) Information submitted pursuant to [this] Subsection (4) [shall be] is
492
classified as a protected record under Title 63, Chapter 2, Government Records Access and
493
Management Act.
494
[(f)] (b) Notwithstanding Title 63, Chapter 2, Government Records Access and
495
Management Act, the commissioner may disclose information submitted pursuant to [this]
496
Subsection (4) to a public official having jurisdiction over the regulation of insurance in another
497
state if:
498
(i) the public official receiving the information agrees in writing to maintain the
499
confidentiality of the information; and
500
(ii) the laws of the state in which the public official serves require the information to be
501
confidential.
502
[(g) Subsections (4)(e) and (4)(f) do]
503
(c) This Subsection (5) does not apply to information provided by an industrial insured
504
captive insurance company insuring the risks of an industrial insured group.
505
[(5)] (6) (a) A captive insurance company shall pay to the department the following
506
nonrefundable fees established by the department under Sections
31A-3-103
and
63-38-3.2
:
507
(i) a fee for examining, investigating, and processing, by a department [employees]
508
employee, of an application for a certificate of authority made by a captive insurance company;
509
(ii) a fee for obtaining a certificate of authority for the year the captive insurance
510
company is issued a certificate of authority by the department; and
511
(iii) a certificate of authority renewal fee.
512
(b) The commissioner may:
513
(i) retain legal, financial, and examination services from outside the department to
514
perform the services [under] described in:
515
(A) Subsection [(5)(a)] (6)(a); and
516
(B) Section
31A-37-502
; and
517
(ii) charge the reasonable cost of [those] services [against] described in Subsection
518
(6)(b)(i) to the applicant captive insurance company.
519
[(6)] (7) If the commissioner is satisfied that the documents and statements filed by the
520
applicant captive insurance company comply with [the provisions of] this chapter, the
521
commissioner may grant a certificate of authority authorizing the company to do insurance
522
business in this state.
523
[(7)] (8) A certificate of authority granted under this section expires annually and must
524
be renewed by July 1 of each year.
525
Section 7.
Section
31A-37-402
is amended to read:
526
31A-37-402. Sponsored captive insurance companies -- Certificate of authority
527
mandatory.
528
(1) A sponsor of a sponsored captive insurance company shall be:
529
(a) an insurer authorized or approved under the laws of [any] a state;
530
(b) a reinsurer authorized or approved under the laws of [any] a state;
531
(c) a captive insurance company holding a certificate of authority under this chapter;
532
[or]
533
(d) an insurance holding company that:
534
(i) controls an insurer licensed pursuant to the laws of [any] a state; and
535
(ii) is subject to registration pursuant to the holding company system of laws of the
536
state of domicile of the insurer described in Subsection (1)(d)(i)[.]; or
537
(e) another person approved by the commissioner after finding that the approval of the
538
person as a sponsor is not inconsistent with the purposes of this chapter.
539
(2) (a) The business written by a sponsored captive insurance company with respect to
540
[each] a protected cell shall be fronted by an [insurance company] insurer that is:
541
(i) authorized or approved:
542
(A) under the laws of [any] a state; or
543
(B) under any jurisdiction if the insurance company is a wholly owned subsidiary of an
544
insurance company licensed pursuant to the laws of [any] a state;
545
(ii) reinsured by a reinsurer authorized or approved by this state; or
546
(iii) subject to Subsection (2)(b), secured by a trust fund:
547
(A) in the United States;
548
(B) for the benefit of policyholders and claimants; and
549
(C) funded by an irrevocable letter of credit or other asset acceptable to the
550
commissioner.
551
(b) (i) The amount of security provided by the trust fund described in Subsection
552
(2)(a)(iii) may not be less than the reserves associated with the liabilities of the trust fund,
553
including:
554
(A) reserves for losses;
555
(B) allocated loss adjustment expenses;
556
(C) incurred but unreported losses; and
557
(D) unearned premiums for business written through the participant's protected cell.
558
(ii) The commissioner may require the sponsored captive insurance company to increase
559
the funding of a trust established pursuant to this Subsection (2).
560
(iii) If the form of security in the trust described in Subsection (2)(a)(iii) is a letter of
561
credit, the letter of credit must be established, issued, or confirmed by a bank that is:
562
(A) chartered in this state;
563
(B) a member of the federal reserve system; or
564
(C) chartered by another state if that state-chartered bank is acceptable to the
565
commissioner.
566
(iv) A trust and trust instrument maintained pursuant to this Subsection (2) shall be in a
567
form and upon terms approved by the commissioner.
568
(3) A risk retention group may not be either a sponsor or a participant of a sponsored
569
captive insurance company.
570
Section 8.
Section
31A-37-501
is amended to read:
571
31A-37-501. Reports to commissioner.
572
(1) A captive insurance company is not required to make [any] a report except those
573
provided in this chapter.
574
(2) (a) Before March 1 of each year, a captive insurance company shall submit to the
575
commissioner a report of the financial condition of the captive insurance company, verified by
576
oath of two of the executive officers of the captive insurance company.
577
(b) Except as provided in Sections
31A-37-204
and
31A-37-205
, a captive insurance
578
company shall report:
579
(i) [unless the commissioner approves the use of statutory accounting principles,] using
580
generally accepted accounting principles, except to the extent that the commissioner requires,
581
approves, or accepts the use of a statutory accounting principle;
582
(ii) using [any] a useful or necessary [modifications or adaptations to accounting
583
principles] modification or adaptation to an accounting principle that is required, approved, or
584
accepted by the commissioner for the type of insurance and [kinds of insurers] kind of insurer to
585
be reported upon; and
586
(iii) [any] supplemental or additional information required by the commissioner.
587
(c) Except as otherwise provided:
588
(i) an association captive insurance company and an industrial insured group shall file
589
the report required by Section
31A-4-113
; and
590
(ii) [each] an industrial insured group shall comply with Section
31A-4-113.5
.
591
(3) (a) A pure captive insurance company may make written application to file the
592
required report on a fiscal year end that is consistent with the fiscal year of the parent company
593
of the pure captive insurance company.
594
(b) If the commissioner grants an alternative reporting date for a pure captive insurance
595
company requested under Subsection (3)(a), the annual report is due 60 days after the fiscal
596
year end.
597
(4) (a) Sixty days after the fiscal year end, a branch captive insurance company shall file
598
with the commissioner a copy of all reports and statements required to be filed under the laws of
599
the jurisdiction in which the alien captive insurance company is formed, verified by oath by two
600
of [its] the alien captive insurance company's executive officers.
601
(b) If the commissioner is satisfied that the annual report filed by the alien captive
602
insurance company in the jurisdiction in which the alien captive insurance company is formed
603
provides adequate information concerning the financial condition of the alien captive insurance
604
company, the commissioner may waive the requirement for completion of the annual statement
605
required for a captive insurance company under this section with respect to business written in
606
the alien jurisdiction.
607
(c) A waiver by the commissioner under Subsection (4)(b) [shall be]:
608
(i) shall be in writing; and
609
(ii) is subject to public inspection.
610
Section 9.
Section
31A-37-502
is amended to read:
611
31A-37-502. Examination.
612
(1) (a) As provided in this section, the commissioner or a person appointed by the
613
commissioner, shall examine each captive insurance company in each three-year period.
614
(b) The three-year period described in Subsection (1)(a) shall be determined on the
615
basis of three full annual accounting periods of operation.
616
(c) The examination is to be made as of:
617
(i) December 31 of the full three-year period; or
618
(ii) the last day of the month of an annual accounting period authorized for a captive
619
insurance company under this section.
620
(d) In addition to an examination required under this Subsection (1), the commissioner,
621
or a person appointed by the commissioner may examine a captive insurance company whenever
622
the commissioner determines it to be prudent.
623
(2) During an examination under this section the commissioner, or a person appointed
624
by the commissioner, shall thoroughly inspect and examine the affairs of the captive insurance
625
company to ascertain:
626
(a) the financial condition of the captive insurance company;
627
(b) the ability of the captive insurance company to fulfill the obligations of the captive
628
insurance company; and
629
(c) whether the captive insurance company has complied with this chapter.
630
(3) The commissioner upon application may enlarge the three-year period described in
631
Subsection (1) to five years, if a captive insurance company is subject to a comprehensive
632
annual audit during that period:
633
(a) of a scope satisfactory to the commissioner; and
634
(b) performed by independent auditors approved by the commissioner.
635
(4) A captive insurance company that is inspected and examined under this section shall
636
pay, as provided in Subsection
31A-37-202
[(5)](6)(b), the expenses and charges of an
637
inspection and examination.
638
Section 10.
Section
31A-37-602
is amended to read:
639
31A-37-602. Requirements of a captive reinsurance company.
640
(1) (a) If permitted by its articles of incorporation or charter, a captive reinsurance
641
company may apply to the commissioner for a [license] certificate of authority to write
642
reinsurance covering:
643
(i) property and casualty insurance; or
644
(ii) reinsurance contracts.
645
(b) A captive reinsurance company authorized by the commissioner may write
646
reinsurance contracts covering risks in any state.
647
(2) To conduct business in this state, a captive reinsurance company shall:
648
(a) obtain from the commissioner a [license] certificate of authority authorizing [it] the
649
captive reinsurance company to conduct business as a captive reinsurance company in this state;
650
(b) hold at least one board of directors' meeting each year in this state;
651
(c) maintain its principal place of business in this state; and
652
(d) appoint a registered agent to accept service of process and act otherwise on its
653
behalf in this state.
654
(3) Before receiving a [license] certificate of authority, a captive reinsurance company
655
shall file with the commissioner:
656
(a) a certified copy of [its] the captive reinsurance company's:
657
(i) (A) articles of incorporation; or
658
(B) charter; and
659
(ii) bylaws;
660
(b) a statement under oath of its president and secretary showing its financial condition;
661
and
662
(c) other documents required by the commissioner.
663
(4) In addition to the information required by Subsection (3), the applicant captive
664
reinsurance company shall file with the commissioner evidence of:
665
(a) the amount and liquidity of the captive reinsurance company's assets relative to the
666
risks to be assumed;
667
(b) the adequacy of the expertise, experience, and character of the person who manages
668
the captive reinsurance company;
669
(c) the overall soundness of the captive reinsurance company's plan of operation; and
670
(d) other overall factors considered relevant by the commissioner in ascertaining if the
671
proposed captive reinsurance company is able to meet its policy obligations.
672
(5) (a) Notwithstanding Title 63, Chapter 2, Government Records Access and
673
Management Act, information submitted pursuant to this section is confidential and may not be
674
made public by the commissioner or an agent or employee of the commissioner without the
675
written consent of the company, except that:
676
(i) information may be discoverable by a party in a civil action or contested case to
677
which the submitting captive reinsurance company is a party, upon a showing by the party
678
seeking to discover the information that:
679
(A) the information sought is relevant to and necessary for the furtherance of the action
680
or case;
681
(B) the information sought is unavailable from other nonconfidential sources; and
682
(C) a subpoena issued by a judicial or administrative law officer of competent
683
jurisdiction has been submitted to the commissioner; and
684
(ii) the commissioner may disclose the information to the public officer having
685
jurisdiction over the regulation of insurance in another state if:
686
(A) the public official agrees in writing to maintain the confidentiality of the
687
information; and
688
(B) the laws of the state in which the public official serves require the information to be
689
confidential.
690
(b) This Subsection (5) does not apply to an industrial insured captive reinsurance
691
company insuring the risks of an industrial insured group.
692
Section 11.
Section
31A-37-603
is amended to read:
693
31A-37-603. Minimum capitalization or reserves for a captive reinsurance
694
company.
695
(1) (a) The commissioner may not issue a [license] certificate of authority to a captive
696
reinsurance company unless [the] a captive reinsurance company possesses and maintains capital
697
or free surplus of not less than the greater of:
698
(i) $300,000,000; or
699
(ii) 10% of the reserves of the captive reinsurance company.
700
(b) The surplus required by this Subsection (1) may be in the form of:
701
(i) cash; or
702
(ii) securities.
703
(2) The commissioner may prescribe additional capital or surplus based upon the type,
704
volume, and nature of the insurance business transacted.
705
(3) (a) A captive reinsurance company may not pay a dividend out of, or other
706
distribution with respect to capital or surplus without the prior approval of the commissioner.
707
(b) Approval of an ongoing plan for the payment of dividends or other distributions
708
shall be conditioned upon the retention at the time of each payment of capital or surplus in
709
excess of amounts specified by, or determined in accordance with formulas approved by, the
710
commissioner.
711
Section 12.
Section
31A-37a-101
is enacted to read:
712
CHAPTER 37a. SPECIAL PURPOSE FINANCIAL CAPTIVE INSURANCE
713
COMPANY ACT
714
Part 1. General Provisions
715
31A-37a-101. Title.
716
This chapter is known as the "Special Purpose Financial Captive Insurance Company
717
Act."
718
Section 13.
Section
31A-37a-102
is enacted to read:
719
31A-37a-102. Definitions.
720
(1) For purposes of this chapter:
721
(a) "Ceding insurer" means an insurer that:
722
(i) is approved by the commissioner;
723
(ii) is licensed or otherwise authorized to transact the business of insurance or
724
reinsurance in the insurer's state or country of domicile; and
725
(iii) cedes risk to a special purpose financial captive insurance company pursuant to a
726
reinsurance contract.
727
(b) Notwithstanding Section
31A-27a-102
, "insolvency" or "insolvent" for purposes of
728
applying Chapter 27a, Insurer Receivership Act, to a special purpose financial captive insurance
729
company, means that a special purpose financial captive insurance company:
730
(i) is unable to pay an obligation when the obligation is due, unless the obligation is the
731
subject of a bona fide dispute; or
732
(ii) fails to meet the criteria and conditions for solvency of the special purpose financial
733
captive insurance company established by the commissioner by rule or order.
734
(c) (i) "Insurance securitization" means a transaction or a group of related transactions:
735
(A) that may include a capital market offering;
736
(B) that is effected through one or more related risk transfer instruments and facilitating
737
administrative agreements;
738
(C) where all or part of the result of the transaction or group of related transactions is
739
used to fund the special purpose financial captive insurance company's obligations under a
740
reinsurance contract with a ceding insurer;
741
(D) by which:
742
(I) proceeds are obtained by a special purpose financial captive insurance company,
743
directly or indirectly, through the issuance of one or more securities by the special purpose
744
financial captive insurance company or another person; or
745
(II) a person provides one or more letters of credit or other assets for the benefit of the
746
special purpose financial captive insurance company if the commissioner authorizes the special
747
purpose financial captive insurance company to treat the letter of credit or asset as an admitted
748
asset for purposes of the special purpose financial captive insurance company's annual report;
749
and
750
(E) if all or a part of the proceeds, a letter of credit, or asset described in this
751
Subsection (1)(c) is used to fund the special purpose financial captive insurance company's
752
obligations under a reinsurance contract with a ceding insurer.
753
(ii) "Insurance securitization" does not include the issuance of a letter of credit for the
754
benefit of the commissioner to satisfy all or part of the special purpose financial captive
755
insurance company's capital and surplus requirements under Section
31A-37a-302
.
756
(d) "Management" means:
757
(i) a board of directors of a special purpose financial captive insurance company;
758
(ii) a managing board of a special purpose financial captive insurance company; or
759
(iii) one or more individuals with the overall responsibility for the management of the
760
affairs of the special purpose financial captive insurance company, including:
761
(A) an officer elected or appointed to act on behalf of the special purpose financial
762
captive insurance company; or
763
(B) an agent elected or appointed to act on behalf of the special purpose financial
764
captive insurance company.
765
(e) "Organizational document" means:
766
(i) in the case of a special purpose financial captive insurance company formed as a
767
stock corporation, the special purpose financial captive insurance company's:
768
(A) articles of incorporation; and
769
(B) bylaws; and
770
(ii) in the case of a special purpose financial captive insurance company formed as a
771
limited liability company, the special purpose financial captive insurance company's:
772
(A) articles of organization; and
773
(B) operating agreement.
774
(f) "Reinsurance contract" means a contract between a special purpose financial captive
775
insurance company and a ceding insurer pursuant to which the special purpose financial captive
776
insurance company agrees to provide reinsurance to the ceding insurer for risks associated with
777
the ceding insurer's insurance or reinsurance business.
778
(g) "Security" means:
779
(i) a security as defined in Section
31A-1-301
; or
780
(ii) one or more of the following that the commissioner designates, by rule or order, as
781
a "security" for purposes of this chapter:
782
(A) a debt obligation;
783
(B) equity;
784
(C) a surplus certificate;
785
(D) a surplus note;
786
(E) a funding agreement;
787
(F) a derivative; or
788
(G) another financial instrument.
789
(h) "Special purpose financial captive insurance company" means a captive insurance
790
company has a certificate of authority under this chapter from the commissioner to operate as a
791
special purpose financial captive insurance company pursuant to this chapter.
792
(i) "Special purpose financial captive insurance company security" means:
793
(i) a security issued by a special purpose financial captive insurance company; or
794
(ii) a security issued by a third party, the proceeds of which are obtained directly or
795
indirectly by a special purpose financial captive insurance company.
796
(j) "Surplus note" means an unsecured subordinated debt obligation that has one or
797
more characteristics that are consistent with paragraph 3 of the National Association of
798
Insurance Commissioners Statement of Statutory Accounting Principals No. 41, as amended
799
from time to time and as modified or supplemented by rule or order of the commissioner.
800
(2) The terms defined in Section
31A-37-102
shall have the same meaning for purposes
801
of this chapter.
802
Section 14.
Section
31A-37a-103
is enacted to read:
803
31A-37a-103. Applicable law.
804
(1) (a) A special purpose financial captive insurance company is subject to:
805
(i) this chapter; and
806
(ii) Chapter 37, Captive Insurance Companies Act.
807
(b) If there is a conflict between this chapter and Chapter 37, this chapter controls.
808
(2) A special purpose financial captive insurance company is subject to a rule made
809
under Section
31A-37-106
that is in effect on or after May 5, 2008.
810
(3) The commissioner may, by order, exempt a special purpose financial captive
811
insurance company from a provision of Chapter 37 or a rule made under Section
31A-37-106
if
812
the commissioner determines that the application of the provision or rule is inappropriate on the
813
basis of the special purpose financial captive insurance company's plan of operation.
814
Section 15.
Section
31A-37a-104
is enacted to read:
815
31A-37a-104. Reporting -- Books and records.
816
(1) For purposes of Section
31A-37-501
:
817
(a) the commissioner shall, by rule or order, establish the form and content of the annual
818
report to be filed by a special purpose financial captive insurance company; and
819
(b) a special purpose financial captive insurance company shall report:
820
(i) using statutory accounting principles, unless the commissioner requires, approves, or
821
accepts the use of a generally accepted accounting principle; and
822
(ii) with an appropriate or necessary modification or adaptation of the statutory or
823
generally accepted accounting principle:
824
(A) required, approved, or accepted by the commissioner; and
825
(B) as supplemented by additional information required by the commissioner.
826
(2) (a) A special purpose financial captive insurance company may make written
827
application to file its annual report on a fiscal-year basis.
828
(b) If an alternative reporting date is granted, the commissioner shall establish the due
829
date and content of the filing required by the special purpose financial captive insurance
830
company in addition to its annual report.
831
(3) (a) Unless the commissioner approves a variance before the special purpose
832
financial captive insurance company implements the variance, a special purpose financial captive
833
insurance company shall maintain in the state the following of the special purpose financial
834
captive insurance company:
835
(i) a book;
836
(ii) record;
837
(iii) a document;
838
(iv) an account;
839
(v) a voucher; or
840
(vi) an agreement.
841
(b) A special purpose financial captive insurance company shall make an item listed in
842
Subsection (3)(a) available for inspection by the commissioner at any time.
843
(c) A special purpose financial captive insurance company shall keep an item listed in
844
Subsection (3)(a) in a manner so that:
845
(i) the special purpose financial captive insurance company's financial condition, affairs,
846
and operations can be readily ascertained; and
847
(ii) the commissioner may readily:
848
(A) verify a financial statement of the special purpose financial captive insurance
849
company; and
850
(B) determine the special purpose financial captive insurance company's compliance
851
with this chapter and Chapter 37, Captive Insurance Companies Act.
852
(4) (a) Unless the commissioner approves a variance before the special purpose
853
financial captive insurance company implements the variance, a special purpose financial captive
854
insurance company shall preserve and keep an item listed in Subsection (3)(a) available in this
855
state:
856
(i) for the purpose of examination and inspection; and
857
(ii) until the commissioner approves the destruction or other disposition.
858
(b) If the commissioner approves the keeping of an item listed in Subsection (3)(a)
859
outside this state, the special purpose financial captive insurance company shall maintain a
860
complete copy of the original in the state.
861
(c) An item listed in Subsection (3)(a) may be photographed, reproduced on film, or
862
stored and reproduced electronically.
863
Section 16.
Section
31A-37a-105
is enacted to read:
864
31A-37a-105. Transition.
865
(1) (a) Except as otherwise determined by the commissioner, a captive insurance
866
company that on May 5, 2008 has a certificate of authority from the commissioner pursuant to
867
Chapter 37, Captive Insurance Companies Act, and engages in insurance securitization:
868
(i) is subject to this chapter as a special purpose financial captive insurance company;
869
and
870
(ii) is considered to have a certificate of authority issued under this chapter.
871
(b) The commissioner may require a captive insurance company described in Subsection
872
(1)(a) to take an action that the commissioner determines is reasonably necessary to bring the
873
captive insurance company into compliance with this chapter.
874
(2) The commissioner may issue an order described in Section
31A-37a-201
with
875
respect to a captive insurance company described in Subsection (1)(a) if the captive insurance
876
company is not in compliance with this chapter.
877
Section 17.
Section
31A-37a-201
is enacted to read:
878
Part 2. Certificate of Authority and Operations
879
31A-37a-201. Certificate of authority requirements.
880
(1) A person may not reinsure the risks of a ceding insurer unless the person has a
881
certificate of authority under this chapter as a special purpose financial captive insurance
882
company.
883
(2) To apply for a certificate of authority under this chapter as a special purpose
884
financial captive insurance company, a special purpose financial captive insurance company shall
885
submit an application for the certificate of authority that, in addition to complying with Chapter
886
37, Captive Insurance Companies Act, complies with the following:
887
(a) A special purpose financial captive insurance company shall submit to the
888
commissioner a plan of operation that includes:
889
(i) a complete description of:
890
(A) a significant transaction including:
891
(I) reinsurance;
892
(II) a reinsurance security arrangement;
893
(III) an insurance securitization; or
894
(IV) a transaction or arrangement related to a transaction described in Subsections
895
(2)(a)(i)(A)(I) through (III);
896
(B) to the extent not included in Subsection (2)(a)(i)(A), a party other than the special
897
purpose financial captive insurance company and the ceding insurer that is involved in the
898
issuance of a special purpose financial captive insurance company security; and
899
(C) a pledge, hypothecation, or grant of a security interest in:
900
(I) an asset of the special purpose financial captive insurance company; or
901
(II) stock or a limited liability company interest in the special purpose financial captive
902
insurance company;
903
(ii) the source and form of the special purpose financial captive insurance company's
904
capital and surplus;
905
(iii) the proposed investment policy of the special purpose financial captive insurance
906
company;
907
(iv) a description of an underwriting, reporting, and claims payment method by which
908
losses covered by a reinsurance contract are reported, accounted for, and settled;
909
(v) pro forma balance sheets and income statements illustrating one or more adverse
910
case scenarios, as determined under criteria required by the commissioner, for the performance
911
of the special purpose financial captive insurance company under a reinsurance contract; and
912
(vi) the proposed rate and method for discounting reserves, if the special purpose
913
financial captive insurance company is requesting authority to discount its reserves.
914
(b) The special purpose financial captive insurance company shall submit an affidavit:
915
(i) of the following of the special purpose financial captive insurance company:
916
(A) president;
917
(B) vice president;
918
(C) treasurer; or
919
(D) chief financial officer; and
920
(ii) that includes the following statements, to the best of knowledge and belief of the
921
person submitting the affidavit after reasonable inquiry:
922
(A) the proposed organization and operation of the special purpose financial captive
923
insurance company complies with this chapter and the applicable provisions of Chapter 37,
924
Captive Insurance Companies Act;
925
(B) the special purpose financial captive insurance company's investment policy reflects
926
and takes into account:
927
(I) the liquidity of assets; and
928
(II) the reasonable preservation, administration, and management of those assets with
929
respect to the risks associated with:
930
(Aa) a reinsurance contract; and
931
(Bb) an insurance securitization transaction; and
932
(C) the following comply with this chapter:
933
(I) a reinsurance contract; and
934
(II) an arrangement for securing an obligation of the special purpose financial captive
935
insurance company under the reinsurance contract, including an agreement or other
936
documentation to implement the arrangement.
937
(c) A special purpose financial captive insurance company shall submit to the
938
commissioner:
939
(i) a copy of an agreement or documentation described in Subsection (2)(b), unless
940
otherwise approved by the commissioner; and
941
(ii) a statement or document required by the commissioner to evaluate the special
942
purpose financial captive insurance company's application for a certificate of authority.
943
(d) (i) Subject to Subsection (2)(d)(ii), a special purpose financial captive insurance
944
company shall submit with the application an opinion of a licensed attorney, in a form
945
acceptable to the commissioner, that:
946
(A) the offer and sale of a special purpose financial captive insurance company security
947
complies with:
948
(I) the registration requirements of federal securities laws; or
949
(II) the exemptions from or exceptions to a requirement of the federal securities laws;
950
and
951
(B) the offer and sale of a security by the special purpose financial captive insurance
952
company complies with:
953
(I) the registration requirements of this state's securities laws; or
954
(II) the exemptions from or exceptions to a requirement of this state's securities laws.
955
(ii) A special purpose financial captive insurance company is not required to submit an
956
opinion described in Subsection (2)(d)(i) with an application if the special purpose financial
957
captive insurance company includes a specific statement in its plan of operation that the opinion
958
described in Subsection (2)(d)(i) will be provided to the commissioner before the offer or sale of
959
a special purpose financial captive insurance company security.
960
(3) (a) The commissioner may issue a certificate of authority to a special purpose
961
financial captive insurance company that complies with Subsection (2) authorizing the special
962
purpose financial captive insurance company to transact reinsurance business as a special
963
purpose financial captive insurance company in this state if the commissioner finds that:
964
(i) the proposed plan of operation provides for a reasonable and expected successful
965
operation;
966
(ii) the terms of the reinsurance contract or related transaction comply with this chapter;
967
(iii) the proposed plan of operation is not hazardous to a ceding insurer; and
968
(iv) subject to Subsection (3)(b), the insurance regulator of the state of domicile of a
969
ceding insurer has notified the commissioner in writing or otherwise provided assurance
970
satisfactory to the commissioner that the regulator of the state has approved or has not
971
disapproved the transaction.
972
(b) Notwithstanding Subsection (3)(a)(iv), the commissioner may issue a certificate of
973
authority to a special purpose financial captive insurance company if the insurance regulator of
974
the state of domicile of a ceding insurer does not respond with respect to all or a part of the
975
transaction.
976
(c) (i) A certificate of authority issued under this section is valid through the June 30
977
after the day on which the certificate of authority is issued.
978
(ii) A special purpose financial captive insurance company may renew its certificate of
979
authority annually by, before the certificate of authority expires:
980
(A) submitting the affidavit required by Subsection (2); and
981
(B) paying a renewal fee.
982
(4) In conjunction with issuing a certificate of authority to a special purpose financial
983
captive insurance company, the commissioner may issue an order that includes a provision,
984
term, or condition regarding the organization, issuance of a certificate of authority, and
985
operation of the special purpose financial captive insurance company that:
986
(a) the commissioner considers appropriate; and
987
(b) is not inconsistent with this chapter and Chapter 37, Captive Insurance Companies
988
Act.
989
Section 18.
Section
31A-37a-202
is enacted to read:
990
31A-37a-202. Revocation, suspension, amendment, or modification of a certificate
991
of authority.
992
Except as provided in Sections
31A-37a-501
and
31A-37a-502
, the commissioner may
993
not revoke, suspend, amend, or modify a certificate of authority issued to a special purpose
994
financial captive insurance company under this chapter or an order issued under Subsection
995
31A-37a-201
(4) unless:
996
(1) the special purpose financial captive insurance company consents to the revocation,
997
suspension, amendment, or modification; or
998
(2) the commissioner shows by clear and convincing evidence that the revocation,
999
suspension, amendment, or modification is necessary to avoid irreparable harm to:
1000
(a) a special purpose financial captive insurance company; or
1001
(b) a ceding insurer.
1002
Section 19.
Section
31A-37a-203
is enacted to read:
1003
31A-37a-203. Reporting related to transactions.
1004
(1) A special purpose financial captive insurance company shall provide the
1005
commissioner with a copy of a complete set of executed documentation of an insurance
1006
securitization no later than 30 days after the day on which the insurance securitization
1007
transaction closes.
1008
(2) Section
31A-37-503
applies to:
1009
(a) information submitted pursuant to Subsection (1);
1010
(b) information submitted pursuant to Subsection
31A-37a-201
(2); or
1011
(c) an order issued to a special purpose financial captive insurance company pursuant to
1012
Subsection
31A-37a-201
(4).
1013
Section 20.
Section
31A-37a-204
is enacted to read:
1014
31A-37a-204. Prior approval of a change in plan of operation and other
1015
transactions.
1016
(1) A special purpose financial captive insurance company may not change its plan of
1017
operation without the prior approval of the commissioner.
1018
(2) (a) Subject to Subsection (2)(b), a special purpose financial captive insurance
1019
company may not engage in a transaction or series of transactions without the prior approval of
1020
the commissioner if the transaction or series of transactions:
1021
(i) is undertaken to dissolve the special purpose financial captive insurance company; or
1022
(ii) results in the termination of all or a part of a special purpose financial captive
1023
insurance company's business.
1024
(b) A special purpose financial captive insurance company is not required to obtain the
1025
prior approval of the commissioner for a transaction or series of transactions described in
1026
Subsection (2)(a)(ii) if:
1027
(i) the transaction or series of transactions is done in accordance with a document or
1028
agreement described in the special purpose financial captive insurance company's plan of
1029
operation; and
1030
(ii) the special purpose financial captive insurance company notifies the commissioner
1031
prior to the transaction or series of transactions.
1032
(3) A special purpose financial captive insurance company shall notify the commissioner
1033
before a change in the legal ownership of a security issued by the special purpose financial
1034
captive insurance company.
1035
Section 21.
Section
31A-37a-205
is enacted to read:
1036
31A-37a-205. Sponsored captives.
1037
In addition to the other provisions of this chapter, this section applies to a sponsored
1038
captive insurance company under Chapter 37, Captive Insurance Companies Act, that has a
1039
certificate of authority as a special purpose financial captive insurance company pursuant to this
1040
chapter.
1041
(1) A sponsored captive insurance company may have a certificate of authority as a
1042
special purpose financial captive insurance company under this chapter.
1043
(2) (a) For purposes of a sponsored captive insurance company having a certificate of
1044
authority as a special purpose financial captive insurance company, "general account" means the
1045
assets and liabilities of the sponsored captive insurance company not attributable to a protected
1046
cell.
1047
(b) For purposes of applying Chapter 27a, Insurer Receivership Act, to a sponsored
1048
captive insurance company having a certificate of authority as a special purpose financial captive
1049
insurance company, the definition of "insolvency" and "insolvent" in Section
31A-37a-102
shall
1050
be applied separately to:
1051
(i) each protected cell; and
1052
(ii) the special purpose financial captive insurance company's general account.
1053
(3) (a) A participant in a sponsored captive insurance company having a certificate of
1054
authority as a special purpose financial captive insurance company must be a ceding insurer,
1055
unless approved by the commissioner before a person becomes a participant.
1056
(b) A change in a participant in a sponsored captive insurance company having a
1057
certificate of authority as a special purpose financial captive insurance company is subject to
1058
prior approval by the commissioner.
1059
(4) Notwithstanding Section
31A-37-401
, a special purpose financial captive insurance
1060
company that is a sponsored captive insurance company may issue a security to a person not
1061
described in Section
31A-37-401
if the issuance to that person is approved by the commissioner
1062
before the issuance of the security.
1063
(5) Notwithstanding Section
31A-37a-302
, a sponsored captive insurance company
1064
having a certificate of authority as a special purpose financial captive insurance company shall:
1065
(a) at the time of initial application for a certificate of authority as a special purpose
1066
financial captive insurance company, possess unimpaired paid-in capital and surplus of not less
1067
than $500,000; and
1068
(b) maintain at least $500,000 of unimpaired paid-in capital and surplus of not less than
1069
$500,000 during the time that it holds a certificate of authority under this chapter.
1070
(6) (a) For purposes of a sponsored captive insurance company having a certificate of
1071
authority as a special purpose financial captive insurance company, this Subsection (6) applies
1072
to:
1073
(i) a security issued by the special purpose financial captive insurance company with
1074
respect to a protected cell; or
1075
(ii) a contract or obligation of the special purpose financial captive insurance company
1076
with respect to a protected cell.
1077
(b) A sponsored captive insurance company having a certificate of authority as a special
1078
purpose financial captive insurance company shall include with a security, contract, or
1079
obligation described in Subsection (6)(a):
1080
(i) the designation of the protected cell; and
1081
(ii) a disclosure in a form and content satisfactory to the commissioner to the effect that
1082
the holder of the security or a counterparty to the contract or obligation has no right or recourse
1083
against the special purpose financial captive insurance company and its assets other than against
1084
an asset properly attributable to the protected cell.
1085
(c) Notwithstanding the requirements of this Subsection (6) and subject to other
1086
statutes or rules including this chapter and Chapter 37, Captive Insurance Companies Act, a
1087
creditor, ceding insurer, or another person may not use a failure to include a disclosure
1088
described in Subsection (6)(b), in whole or part, as the sole basis to have recourse against:
1089
(i) the general account of the special purpose financial captive insurance company; or
1090
(ii) the assets of another protected cell of the special financial captive insurance
1091
company.
1092
(7) In addition to Section
31A-37-401
, a sponsored captive insurance company having
1093
a certificate of authority as a special purpose financial captive insurance company is subject to
1094
the following with respect to a protected cell:
1095
(a) (i) A sponsored captive insurance company having a certificate of authority as a
1096
special purpose financial captive insurance company shall establish a protected cell only for the
1097
purpose of insuring or reinsuring risks of one or more reinsurance contracts with a ceding
1098
insurer with the intent of facilitating an insurance securitization.
1099
(ii) Subject to Subsection (7)(a)(iii), a sponsored captive insurance company having a
1100
certificate of authority as a special purpose financial captive insurance company shall establish a
1101
separate protected cell with respect to a ceding insurer described in Subsection (7)(a)(i).
1102
(iii) A sponsored captive insurance company having a certificate of authority as a
1103
special purpose financial captive insurance company shall establish a separate protected cell with
1104
respect to each reinsurance contract that is funded in whole or in part by a separate insurance
1105
securitization transaction.
1106
(b) A sponsored captive insurance company having a certificate of authority as a special
1107
purpose financial captive insurance company may not sale, exchange, or transfer an asset by,
1108
between, or among any of its protected cells without the prior approval of the commissioner.
1109
(8) (a) A sponsored captive insurance company having a certificate of authority as a
1110
special purpose financial captive insurance company shall attribute an asset or liability to a
1111
protected cell and to the general account in accordance with the plan of operation approved by
1112
the commissioner.
1113
(b) Except as provided by Subsection (8)(a), a sponsored captive insurance company
1114
having a certificate of authority as a special purpose financial captive insurance company may
1115
not attribute an asset or liability between:
1116
(i) its general account and a protected cell; or
1117
(ii) its protected cells.
1118
(c) A sponsored captive insurance company having a certificate of authority as a special
1119
purpose financial captive insurance company shall attribute:
1120
(i) an insurance obligation, asset, or liability relating to a reinsurance contract entered
1121
into with respect to a protected cell; and
1122
(ii) an insurance securitization transaction related to the obligation, asset, or liability
1123
described in Subsection (8)(c)(i), including a security issued by the special purpose financial
1124
captive insurance company as part of the insurance securitization, to the protected cell.
1125
(d) The following shall reflect an insurance obligation, asset, or liability relating to a
1126
reinsurance contract and the insurance securitization transaction that are attributed to a
1127
protected cell:
1128
(i) a right, benefit, obligation, or a liability of a security attributable to a protected cell
1129
described in Subsection (8)(c);
1130
(ii) the performance under a reinsurance contract and the related insurance
1131
securitization transaction; and
1132
(iii) a tax benefit, loss, refund, or credit allocated pursuant to a tax allocation agreement
1133
to which the special purpose financial captive insurance company is a party, including a payment
1134
made by or due to be made to the special purpose financial captive insurance company pursuant
1135
to the terms of the tax allocation agreement.
1136
(9) In addition to Section
31A-37a-502
:
1137
(a) Chapter 27a, Insurer Receivership Act, applies to each protected cell of a sponsored
1138
captive insurance company having a certificate of authority as a special purpose financial captive
1139
insurance company.
1140
(b) A proceeding or action taken by the commissioner pursuant to Chapter 27a, Insurer
1141
Receivership Act, with respect to a protected cell of a sponsored captive insurance company
1142
having a certificate of authority as a special purpose financial captive insurance company may
1143
not be the sole basis for a proceeding pursuant to Chapter 27a, Insurer Receivership Act, with
1144
respect to:
1145
(i) another protected cell of the special purpose financial captive insurance company; or
1146
(ii) the special purpose financial captive insurance company's general account.
1147
(c) (i) Except as provided in Subsection (9)(c)(ii), the receiver of a special purpose
1148
financial captive insurance company shall ensure that the assets attributable to one protected cell
1149
are not applied to the liabilities attributable to:
1150
(A) another protected cell; or
1151
(B) the special purpose financial captive insurance company's general account.
1152
(ii) Notwithstanding Subsection (9)(c)(i), if an asset or liability is attributable to more
1153
than one protected cell, the receiver shall deal with the asset or liability in accordance with the
1154
terms of a relevant governing instrument or contract.
1155
(d) The insolvency of a protected cell of a sponsored captive insurance company having
1156
a certificate of authority as a special purpose financial captive insurance company may not be
1157
the sole basis for the commissioner to prohibit:
1158
(i) a payment by the special purpose financial captive insurance company made pursuant
1159
to a special purpose financial captive insurance company security or reinsurance contract with
1160
respect to another protected cell; or
1161
(ii) an action required to make a payment described in Subsection (9)(d)(i).
1162
Section 22.
Section
31A-37a-301
is enacted to read:
1163
Part 3. Formation and Assets
1164
31A-37a-301. Formation.
1165
(1) A special purpose financial captive insurance company may be:
1166
(a) incorporated as a stock insurer with its capital divided into shares and held by its
1167
stockholders; or
1168
(b) organized as a manager-managed limited liability company.
1169
(2) A special purpose financial captive insurance company's organizational documents
1170
shall limit the special purpose financial captive insurance company's authority to transact the
1171
business of insurance or reinsurance to those activities that the special purpose financial captive
1172
insurance company conducts to accomplish its purposes as expressed in this chapter.
1173
Section 23.
Section
31A-37a-302
is enacted to read:
1174
31A-37a-302. Minimum capital and surplus.
1175
(1) The commissioner may not issue a special purpose financial captive insurance
1176
company a certificate of authority under this chapter unless it possesses unimpaired paid-in
1177
capital and surplus of not less than $250,000 on the day on which the certificate of authority is
1178
issued.
1179
(2) A special purpose financial captive insurance company shall maintain unimpaired
1180
paid-in capital and surplus of not less than $250,000 at all times when having a certificate of
1181
authority under this chapter.
1182
Section 24.
Section
31A-37a-303
is enacted to read:
1183
31A-37a-303. Disposition of assets -- Investments.
1184
(1) A special purpose financial captive insurance company or a person on its behalf shall
1185
preserve and administer an asset of the special purpose financial captive insurance company to
1186
satisfy the liabilities and obligations of the special purpose financial captive insurance company
1187
incident to:
1188
(a) the reinsurance contract;
1189
(b) an insurance securitization; and
1190
(c) an agreement related to Subsection (1)(a) or (b).
1191
(2) In a special purpose financial captive insurance company insurance securitization, a
1192
security offering memorandum or other document issued to a prospective investor regarding the
1193
offer and sale of a surplus note or other security shall include a disclosure that all or part of the
1194
proceeds of the insurance securitization will be used to fund the special purpose financial
1195
captive insurance company's obligations to the ceding insurer.
1196
(3) A special purpose financial captive insurance company is not subject to a restriction
1197
on investments other than the following:
1198
(a) A special purpose financial captive insurance company may not make a loan to a
1199
person other than:
1200
(i) as permitted under its plan of operation; or
1201
(ii) as otherwise approved in advance of the loan by the commissioner.
1202
(b) The commissioner may prohibit or limit an investment that threatens the solvency or
1203
liquidity of a special purpose financial captive insurance company unless the investment is
1204
otherwise approved in:
1205
(i) the special purpose financial captive insurance company's plan of operation; or
1206
(ii) an order issued to the special purpose financial captive insurance company pursuant
1207
to Section
31A-37a-201
.
1208
Section 25.
Section
31A-37a-304
is enacted to read:
1209
31A-37a-304. Securities.
1210
(1) (a) A special purpose financial captive insurance company may:
1211
(i) subject to the prior approval of the commissioner, account for the proceeds of a
1212
surplus note issued by the special purpose financial captive insurance company as surplus; and
1213
(ii) except as provided in Subsection (1)(b), submit for prior approval of the
1214
commissioner a periodic written request for authorization to make a payment of interest on or a
1215
repayment of principal of a surplus note or other debt obligation issued by the special purpose
1216
financial captive insurance company.
1217
(b) (i) The commissioner may not approve a payment described in Subsection (1)(a)(i)
1218
if the commissioner determines that the payment would jeopardize the ability of the special
1219
purpose financial captive insurance company or another person to fulfill its respective
1220
obligations pursuant to a special purpose financial captive insurance company insurance
1221
securitization agreement, reinsurance contract, or a related transaction.
1222
(ii) In lieu of approval of a periodic written request for authorization to make a payment
1223
of interest on or repayment of principal of a surplus note or other debt obligation issued by the
1224
special purpose financial captive insurance company, the commissioner may approve a formula
1225
or plan for payment of interest, principal, or both with respect to the surplus note or debt
1226
obligation.
1227
(iii) A special purpose financial captive insurance company shall include a formula or
1228
plan approved under Subsection (1)(b)(ii) in the special purpose financial captive insurance
1229
company's plan of operation.
1230
(2) In addition to Section
31A-37-302
, a special purpose financial captive insurance
1231
company may not declare or pay a dividend or distribution if the dividend or distribution
1232
jeopardizes the ability of the special purpose financial captive insurance company or another
1233
person to fulfill the special purpose financial captive insurance company's or other person's
1234
respective obligations pursuant to a special purpose financial captive insurance company
1235
insurance securitization agreement, a reinsurance contract, or a related transaction.
1236
(3) (a) A special purpose financial captive insurance company security is not subject to
1237
regulation as an insurance or reinsurance contract.
1238
(b) An investor in a special purpose financial captive insurance company security or a
1239
holder of a special purpose financial captive insurance company security may not be considered
1240
to be transacting the business of insurance in this state solely by reason of having an interest in
1241
the security.
1242
(c) The following people involved in an insurance securitization by a special purpose
1243
financial captive insurance company may not be considered to be an insurance producer or
1244
broker, or to be conducting business as an insurer, reinsurer, insurance agency, brokerage,
1245
intermediary, advisory, or consulting business solely by virtue of the person's underwriting
1246
activities in connection with the insurance securitization:
1247
(i) an underwriter's placement;
1248
(ii) a selling agent; or
1249
(iii) a partner, commissioner, officer, member, manager, employee, agent,
1250
representative, or advisor of a person listed in Subsection (3)(c)(i) or (ii).
1251
Section 26.
Section
31A-37a-401
is enacted to read:
1252
Part 4. Reinsurance
1253
31A-37a-401. Purchase of reinsurance.
1254
Subject to the prior approval of the commissioner, a special purpose financial captive
1255
insurance company may purchase reinsurance to cede the risks assumed under a reinsurance
1256
contract.
1257
Section 27.
Section
31A-37a-402
is enacted to read:
1258
31A-37a-402. Permitted reinsurance.
1259
(1) (a) A special purpose financial captive insurance company may reinsure only the
1260
risks of a ceding insurer, pursuant to a reinsurance contract.
1261
(b) A special purpose financial captive insurance company may not issue a contract of
1262
insurance or a contract for assumption of risk or indemnification of loss other than a reinsurance
1263
contract described in Subsection (1)(a).
1264
(2) Unless otherwise approved in advance by the commissioner, a special purpose
1265
financial captive insurance company may not assume or retain exposure to insurance or
1266
reinsurance losses for its own account that are not funded by:
1267
(a) proceeds from a special purpose financial captive insurance company insurance
1268
securitization;
1269
(b) a letter of credit; or
1270
(c) an asset described in Subsection
31A-37a-102
(1)(c);
1271
(d) a premium or another amount payable by the ceding insurer to the special purpose
1272
financial captive insurance company pursuant to the reinsurance contract; and
1273
(e) a return on investment of an item described in Subsections (2)(a) through (d).
1274
(3) (a) A reinsurance contract shall contain a provision reasonably required or approved
1275
by the commissioner.
1276
(b) A requirement described in Subsection (3)(a) shall take into account the laws
1277
applicable to the ceding insurer regarding the ceding insurer taking credit for the reinsurance
1278
provided under the reinsurance contract.
1279
(4) Subject to the prior approval of the commissioner, a special purpose financial
1280
captive insurance company may cede risks assumed through a reinsurance contract to one or
1281
more reinsurers through the purchase of reinsurance.
1282
(5) (a) This Subsection (5) applies to a contract or commercial activity that:
1283
(i) relates to or is incidental to a reinsurance contract; and
1284
(ii) is necessary to fulfill the purposes of:
1285
(A) a reinsurance contract;
1286
(B) insurance securitization; and
1287
(C) this chapter.
1288
(b) A special purpose financial captive insurance company may engage in a contract or
1289
commercial activity described in Subsection (5)(a) if the contract or commercial activity is:
1290
(i) in the special purpose financial captive insurance company's plan of operation; or
1291
(ii) approved in advance by the commissioner.
1292
(c) A contract or commercial activity described in Subsection (5)(a) includes:
1293
(i) entering into a reinsurance contract;
1294
(ii) issuing a special purpose financial captive insurance company security;
1295
(iii) complying with a term of a contract or security described in Subsection (5)(c)(i) or
1296
(ii);
1297
(iv) entering into:
1298
(A) a trust;
1299
(B) a guaranteed investment contract;
1300
(C) a swap;
1301
(D) a derivative transaction;
1302
(E) a tax transaction;
1303
(F) an administration transaction;
1304
(G) a reimbursement transaction; or
1305
(H) a fiscal agent transaction;
1306
(v) complying with a trust indenture, reinsurance, or retrocession; and
1307
(vi) another agreement necessary or incidental to effect an insurance securitization in
1308
compliance with:
1309
(A) the special purpose financial captive insurance company's plan of operation; and
1310
(B) this chapter.
1311
(6) Unless otherwise approved in advance by the commissioner, a reinsurance contract
1312
may not contain a provision for payment by the special purpose financial captive insurance
1313
company in discharge of its obligations under the reinsurance contract to a person other than the
1314
ceding insurer or any receiver of the ceding insurer.
1315
(7) A special purpose financial captive insurance company shall notify the commissioner
1316
immediately of an action by a ceding insurer or another person to foreclose on or otherwise take
1317
possession of collateral provided by the special purpose financial captive insurance company to
1318
secure an obligation of the special purpose financial captive insurance company.
1319
Section 28.
Section
31A-37a-501
is enacted to read:
1320
Part 5. Enforcement and Delinquency
1321
31A-37a-501. Suspension and revocation.
1322
(1) (a) The commissioner shall notify a special purpose financial captive insurance
1323
company not less than 30 days before suspending or revoking the special purpose financial
1324
captive insurance company's certificate of authority pursuant to Section
31A-37-505
.
1325
(b) In the notice required by Subsection (1)(a) the commissioner shall state the basis for
1326
the suspension or revocation.
1327
(c) The commissioner shall give a special purpose financial captive insurance company
1328
described in this Subsection (1) an opportunity for a hearing pursuant to Title 63, Chapter 46b,
1329
Administrative Procedures Act.
1330
(2) Notwithstanding Subsection (1) and Title 63, Chapter 46b, Administrative
1331
Procedures Act, the commissioner is not required to provide prior notice or a hearing if the
1332
grounds for suspension or revocation of a special purpose financial captive insurance company's
1333
certificate of authority pursuant to Section
31A-37-505
relate primarily to:
1334
(a) the financial condition or soundness of the special purpose financial captive
1335
insurance company; or
1336
(b) a deficiency in the assets of the special purpose financial captive insurance company.
1337
Section 29.
Section
31A-37a-502
is enacted to read:
1338
31A-37a-502. Delinquency.
1339
(1) Except as otherwise provided in this section, Chapter 27a, Insurer Receivership Act,
1340
applies to a special purpose financial captive insurance company.
1341
(2) Upon an order of supervision, rehabilitation, or liquidation of a special purpose
1342
financial captive insurance company, the receiver shall manage the assets and liabilities of the
1343
special purpose financial captive insurance company pursuant to this chapter.
1344
(3) An amount recoverable by the receiver of a special purpose financial captive
1345
insurance company under a reinsurance contract may not be reduced or diminished as a result of
1346
the entry of an order of conservation, rehabilitation, or liquidation with respect to a ceding
1347
insurer, notwithstanding a contract or other documentation governing the special purpose
1348
financial captive insurance company insurance securitization.
1349
(4) The following applies notwithstanding Chapter 27a, Insurer Receivership Act, or
1350
another law of this state:
1351
(a) An application, petition, a temporary restraining order, or injunction issued pursuant
1352
to Chapter 27a, Insurer Receivership Act, with respect to a ceding insurer does not prohibit the
1353
transaction of business by a special purpose financial captive insurance company, including:
1354
(i) a payment by a special purpose financial captive insurance company made with
1355
respect to a special purpose financial captive insurance company security; or
1356
(ii) an action or proceeding against a special purpose financial captive insurance
1357
company or its assets.
1358
(b) (i) Subject to Subsection (4)(b)(ii), the commencement of a summary proceeding
1359
with respect to a special purpose financial captive insurance company and an order issued by the
1360
court in the summary proceeding may not prohibit:
1361
(A) a payment by a special purpose financial captive insurance company; or
1362
(B) the special purpose financial captive insurance company from taking an action
1363
required to make a payment described in this Subsection (4)(b)(i).
1364
(ii) Subsection (4)(b)(i) applies only if the payment is made:
1365
(A) pursuant to a special purpose financial captive insurance company security or
1366
reinsurance contract; and
1367
(B) consistent with the special purpose financial captive insurance company's plan of
1368
operation and any order issued to the special purpose financial captive insurance company
1369
pursuant to Section
31A-37a-201
.
1370
(c) A receiver of a ceding insurer may not void a nonfraudulent transfer by a ceding
1371
insurer to a special purpose financial captive insurance company of money or other property
1372
made pursuant to a reinsurance contract.
1373
(d) A receiver of a special purpose financial captive insurance company may not void a
1374
nonfraudulent transfer by the special purpose financial captive insurance company of money or
1375
other property:
1376
(i) (A) made to a ceding insurer pursuant to a reinsurance contract; or
1377
(B) made to or for the benefit of a holder of a special purpose financial captive
1378
insurance company security with respect to the special purpose financial captive insurance
1379
company security; and
1380
(ii) made consistent with the special purpose financial captive insurance company's plan
1381
of operation and an order issued to the special purpose financial captive insurance company
1382
pursuant to Section
31A-37a-201
.
1383
(5) (a) Except to fulfill an obligation under a reinsurance contract and notwithstanding
1384
another provision of this chapter, Chapter 37, Captive Insurance Companies Act, or other laws
1385
of this state, the assets of a special purpose financial captive insurance company may not be
1386
consolidated with or included in the estate of a ceding insurer in a delinquency proceeding
1387
against the ceding insurer pursuant to this chapter for any purpose including a distribution to a
1388
creditor of the ceding insurer.
1389
(b) This Subsection (5) applies to assets that include an asset held in trust:
1390
(i) on a funds-withheld basis; or
1391
(ii) under another arrangement to secure the special purpose financial captive insurance
1392
company's obligations under a reinsurance contract.
1393
Section 30. Effective date.
1394
This bill takes effect on May 5, 2008, except that the amendments to Section
31A-3-304
1395
in this bill takes effect on July 1, 2010.
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