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H.B. 55
1
CAPTIVE INSURANCE COMPANY
2
AMENDMENTS
3
2008 GENERAL SESSION
4
STATE OF UTAH
5
Chief Sponsor: James A. Dunnigan
6
Senate Sponsor:
____________
7
8
LONG TITLE
9
Committee Note:
10
The Business and Labor Interim Committee recommended this bill.
11
General Description:
12
This bill modifies the Captive Insurance Companies Act and enacts the Special Purpose
13
Financial Captive Insurance Company Act.
14
Highlighted Provisions:
15
This bill:
16
. addresses fee amounts that are nonlapsing;
17
. modifies and enacts definitions;
18
. makes changes related to a captive insurance company formed as a limited liability
19
company;
20
. addresses applicable law;
21
. addresses the applicability of reorganization, receivership, and injunction statutes;
22
. addresses permissive areas of insurance;
23
. addresses sponsored captive insurance companies;
24
. addresses reporting to the commissioner;
25
. enacts the Special Purpose Financial Captive Insurance Company Act including:
26
. defining terms;
27
. outlining applicable law;
28
. imposing reporting requirements;
29
. imposing requirements related to books and records;
30
. providing for a transition to the new certificate of authority;
31
. establishing a process to issue a certificate of authority;
32
. addressing revocation, suspension, amendment, or modification of a certificate
33
of authority;
34
. requiring commissioner approval of certain actions;
35
. addressing sponsored captives;
36
. addressing the formation, assets, investments, and securities of a special purpose
37
financial captive insurance company;
38
. addressing reinsurance; and
39
. providing for enforcement and delinquency; and
40
. makes technical and conforming amendments.
41
Monies Appropriated in this Bill:
42
None
43
Other Special Clauses:
44
None
45
Utah Code Sections Affected:
46
AMENDS:
47
31A-3-304, as last amended by Laws of Utah 2006, Chapter 320
48
31A-37-102, as last amended by Laws of Utah 2004, Chapter 312
49
31A-37-103, as enacted by Laws of Utah 2003, Chapter 251
50
31A-37-104, as last amended by Laws of Utah 2004, Chapter 312
51
31A-37-106, as last amended by Laws of Utah 2004, Chapter 312
52
31A-37-202, as last amended by Laws of Utah 2004, Chapter 312
53
31A-37-402, as last amended by Laws of Utah 2004, Chapter 312
54
31A-37-501, as last amended by Laws of Utah 2006, Chapter 177
55
31A-37-502, as last amended by Laws of Utah 2007, Chapter 307
56
31A-37-602, as enacted by Laws of Utah 2004, Chapter 312
57
31A-37-603, as enacted by Laws of Utah 2004, Chapter 312
58
ENACTS:
59
31A-37a-101, Utah Code Annotated 1953
60
31A-37a-102, Utah Code Annotated 1953
61
31A-37a-103, Utah Code Annotated 1953
62
31A-37a-104, Utah Code Annotated 1953
63
31A-37a-105, Utah Code Annotated 1953
64
31A-37a-201, Utah Code Annotated 1953
65
31A-37a-202, Utah Code Annotated 1953
66
31A-37a-203, Utah Code Annotated 1953
67
31A-37a-204, Utah Code Annotated 1953
68
31A-37a-205, Utah Code Annotated 1953
69
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
75
31A-37a-501, Utah Code Annotated 1953
76
31A-37a-502, Utah Code Annotated 1953
77
78
Be it enacted by the Legislature of the state of Utah:
79
Section 1.
Section
31A-3-304
is amended to read:
80
31A-3-304. Annual fees -- Other taxes or fees prohibited.
81
(1) (a) A captive insurance company shall pay an annual fee imposed under this section
82
to obtain or renew a certificate of authority.
83
(b) The commissioner shall:
84
(i) determine the annual fee pursuant to Sections
31A-3-103
and
63-38-3.2
; and
85
(ii) consider whether the annual fee is competitive with fees imposed by other states on
86
captive insurance companies.
87
(2) A captive insurance company that fails to pay the fee required by this section is
88
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
92
company, and no other occupation tax or other tax or fee may be levied or collected from a
93
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
95
and personal property taxes.
96
(4) A captive insurance company shall pay the fee imposed by this section to the
97
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
99
General Fund as a dedicated credit to be used by the department to:
100
(i) administer and enforce Chapter 37, Captive Insurance Companies Act; and
101
(ii) promote the captive insurance industry in Utah.
102
(b) At the end of each fiscal year, funds received by the department in excess of
103
[$250,000] $750,000 shall be treated as free revenue in the General Fund.
104
Section 2.
Section
31A-37-102
is amended to read:
105
31A-37-102. Definitions.
106
As used in this chapter:
107
(1) "Affiliated company" means a [company] business entity that because of common
108
ownership, control, operation, or management is in the same corporate system as:
109
(a) a parent;
110
(b) an industrial insured; or
111
(c) a member organization.
112
(2) "Alien captive insurance company" means an [insurance company] insurer:
113
(a) formed to write insurance business for [its parents and affiliates] a parent or
114
affiliate of the insurer; and
115
(b) licensed pursuant to the laws of an alien jurisdiction that imposes statutory or
116
regulatory standards:
117
(i) on [companies] a business entity transacting the business of insurance in the alien
118
jurisdiction; and
119
(ii) in a form acceptable to the commissioner.
120
(3) "Association" means a legal association of [individuals, corporations, partnerships,
121
or associations] two or more persons that has been in continuous existence for at least one year
122
if:
123
(a) the association or its member organizations:
124
(i) own, control, or hold with power to vote all of the outstanding voting securities of
125
an association captive insurance company incorporated as a stock insurer; or
126
(ii) have complete voting control over an association captive insurance company
127
incorporated as a mutual insurer; [or]
128
(b) the association's member organizations collectively constitute all of the subscribers
129
of an association captive insurance company formed as a reciprocal insurer[.]; or
130
(c) the association or its member organizations have complete voting control over an
131
association captive insurance company formed as a limited liability company.
132
(4) "Association captive insurance company" means a [company] business entity that
133
insures risks of [the]:
134
(a) a member [organizations] organization of the association; [and]
135
(b) [affiliates of the] an affiliate of a member [organizations] organization of the
136
association[.]; and
137
(c) the association.
138
(5) "Branch business" means [any] an insurance business transacted by a branch
139
captive insurance company in this state.
140
(6) "Branch captive insurance company" means an alien captive insurance company
141
that has [obtained] a certificate of authority [by] from the commissioner to transact the business
142
of insurance in this state through a business unit with a principal place of business in this state.
143
(7) "Branch [operations"] operation" means [any] a business [operations] operation of a
144
branch captive insurance company in this state.
145
(8) "Captive insurance company" means any of the following formed or holding a
146
certificate of authority under this chapter:
147
(a) a branch captive insurance company;
148
(b) a pure captive insurance company;
149
(c) an association captive insurance company;
150
(d) a sponsored captive insurance company;
151
(e) an industrial insured captive insurance company;
152
(f) a captive reinsurance company; [or]
153
(g) a special purpose captive insurance company[.]; or
154
(h) a special purpose financial captive insurance company.
155
(9) "Captive reinsurance company" means a [reinsurance company] reinsurer that is:
156
(a) formed or [licensed] has a certificate of authority pursuant to this chapter;
157
(b) wholly owned by a qualifying [reinsurance] reinsurer parent company; and
158
(c) a stock corporation.
159
(10) "Common ownership and control" means that two or more captive insurance
160
companies are owned or controlled by the same person or group of persons as follows:
161
(a) in the case of a captive insurance company that is a stock [corporations]
162
corporation, the direct or indirect ownership [by the same shareholder or shareholders] of 80%
163
or more of the outstanding voting stock of [two or more corporations] the stock corporation;
164
[and]
165
(b) in the case of a captive insurance company that is a mutual [corporations]
166
corporation, the direct or indirect ownership [by the same member or members] of 80% or
167
more of the surplus and the voting power of [two or more corporations.] the mutual
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corporation;
169
(c) in the case of a captive insurance company that is a limited liability company, the
170
direct or indirect ownership by the same member or members of 80% or more of the
171
membership interests in the limited liability company; or
172
(d) in the case of a sponsored captive insurance company, a protected cell is a separate
173
captive insurance company owned and controlled by the protected cell's participant, only if:
174
(i) the participant is the only participant with respect to the protected cell; and
175
(ii) the participant is the sponsor or is affiliated with the sponsor of the sponsored
176
captive insurance company through common ownership and control.
177
(11) "Commissioner" means the Insurance Commissioner or the commissioner's
178
designee.
179
(12) "Consolidated debt to total capital ratio" means the ratio of Subsection (12)(a) to
180
(b).
181
(a) This Subsection (12)(a) is an amount equal to the sum of all debts and hybrid
182
capital instruments including:
183
(i) all borrowings from depository institutions;
184
(ii) all senior debt;
185
(iii) all subordinated debts;
186
(iv) all trust preferred shares; and
187
(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.
189
(b) This Subsection (12)(b) is an amount equal to the sum of:
190
(i) total capital consisting of all debts and hybrid capital instruments as described in
191
Subsection (12)(a); and
192
(ii) shareholders' equity determined in accordance with generally accepted accounting
193
principles for reporting to the United States Securities and Exchange Commission.
194
(13) "Consolidated GAAP net worth" means the consolidated shareholders' equity
195
determined in accordance with generally accepted accounting principles for reporting to the
196
United States Securities and Exchange Commission.
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(14) "Controlled unaffiliated business" means a [company] business entity:
198
(a) (i) in the case of a pure captive insurance company, that is not in the corporate
199
system of a parent [and affiliates;] or the parent's affiliate; or
200
(ii) in the case of an industrial insured captive insurance company, that is not in the
201
corporate system of an industrial insured or an affiliated company of the industrial insured;
202
(b) (i) in the case of a pure captive insurance company, that has [an existing] a
203
contractual relationship with a parent or affiliate; [and] or
204
(ii) in the case of an industrial insured captive insurance company, that has a
205
contractual relationship with an industrial insured or an affiliated company of the industrial
206
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):
209
(i) a pure captive insurance company; or
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(ii) an industrial insured captive insurance company.
211
(15) "Department" means the Insurance Department.
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(16) "Industrial insured" means an insured:
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(a) that produces insurance:
214
(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
221
entity that:
222
(a) insures risks of[: (a)] the industrial insureds that comprise the industrial insured
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group; and
224
[(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
229
(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
233
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
235
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
243
company formed as a limited liability company.
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(19) "Member organization" means [an individual, corporation, partnership, or
245
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
249
(b) the pure captive insurance company, if the pure captive insurance company is
250
formed as a limited liability company.
251
(21) "Participant" means [any of the following] an entity that [are] is insured by a
252
sponsored captive insurance company[,]:
253
(a) if the losses of the participant are limited through a participant contract to the assets
254
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
257
[(b) any] (ii) the entity is an affiliate of an entity permitted to be a participant under
258
Section
31A-37-403
.
259
(22) "Participant contract" means a contract by which a sponsored captive insurance
260
company:
261
(a) insures the risks of a participant; and
262
(b) limits the losses of the participant to the assets of a protected cell.
263
(23) "Protected cell" means a separate account established and maintained by a
264
sponsored captive insurance company for one participant.
265
(24) "Pure captive insurance company" means a [company] business entity that insures
266
risks of [its parent and affiliates] a parent or affiliate of the business entity.
267
(25) "Qualifying reinsurer parent company" means a reinsurer:
268
(a) authorized to write reinsurance by this state; and
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(b) that has:
270
(i) a consolidated GAAP net worth of not less than $500,000,000; and
271
(ii) a consolidated debt to total capital ratio not greater than .50.
272
(26) "Special purpose financial captive insurance company" is as defined in Section
273
31A-37a-102
.
274
[(26)] (27) "Sponsor" means an entity that:
275
(a) meets the requirements of Section
31A-37-402
; and
276
(b) is approved by the commissioner to:
277
(i) provide all or part of the capital and surplus required by applicable law; and
278
(ii) organize and operate a sponsored captive insurance company.
279
[(27)] (28) "Sponsored captive insurance company" means a captive insurance
280
company:
281
(a) in which the minimum capital and surplus required by applicable law is provided by
282
one or more sponsors;
283
(b) that is formed or holding a certificate of authority under this chapter;
284
(c) that insures the risks of a separate [participants] participant through the contract;
285
and
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(d) that segregates each participant's liability through one or more protected cells.
287
[(28)] (29) "Treasury rates" means the United States Treasury strip asked yield as
288
published in the Wall Street Journal as of a balance sheet date.
289
Section 3.
Section
31A-37-103
is amended to read:
290
31A-37-103. Chapter exclusivity.
291
(1) Except as provided in Subsection (2) or otherwise provided in this chapter, [no
292
provisions] a provision of this title other than this chapter does not apply to a captive insurance
293
company.
294
(2) In addition to this chapter, and subject to Section
31A-37a-103
:
295
(a) Chapter 37a, Special Purpose Financial Captive Insurance Company Act, applies to
296
a special purpose financial captive insurance company; and
297
(b) for purposes of a special purpose financial captive insurance company, a reference
298
in this chapter to "this chapter" includes a reference to Chapter 37a.
299
Section 4.
Section
31A-37-104
is amended to read:
300
31A-37-104. Applicability of reorganization, receivership, and injunction
301
authority.
302
(1) Except as provided in Chapter 37a, Special Purpose Financial Captive Insurance
303
Company Act, and Subsection (2), [the provisions of this title pertaining to insurance
304
reorganizations, receiverships, and injunctions apply] Chapter 27a, Insurer Receivership Act,
305
applies to a captive insurance company formed or holding a certificate of authority under this
306
chapter.
307
(2) In the case of a sponsored captive insurance company:
308
(a) the assets of [the] a protected cell may not be used to pay [any expenses or claims]
309
an expense or claim other than [those] one attributable to the protected cell; and
310
(b) the capital and surplus of the sponsored captive insurance company:
311
(i) shall at all times be available to pay [any]:
312
(A) [expenses] an expense of the sponsored captive insurance company; or
313
(B) [claims] a claim against the sponsored captive insurance company; and
314
(ii) may not be used to pay [expenses or claims] an expense or claim attributable to a
315
protected cell.
316
Section 5.
Section
31A-37-106
is amended to read:
317
31A-37-106. Authority to make rules -- Authority to issue orders.
318
(1) In accordance with Title 63, Chapter 46a, Utah Administrative Rulemaking Act, the
319
commissioner may adopt rules to:
320
(a) determine circumstances under which a branch captive insurance company is not
321
required to be a pure captive insurance company;
322
(b) [determine any] require a statement, document, or information that a captive
323
insurance company must provide to the commissioner to obtain a certificate of authority;
324
(c) determine [any factors] a factor a captive insurance company shall provide evidence
325
of under Subsection
31A-37-202
(4)(c);
326
(d) prescribe one or more capital requirements for a captive insurance company in
327
addition to those required under Section
31A-37-204
based on the type, volume, and nature of
328
insurance business transacted by the captive insurance company;
329
(e) establish:
330
(i) the amount of capital or surplus required to be retained under Subsection
331
31A-37-205
(4) at the payment of a dividend or other distribution by a captive insurance
332
company; or
333
(ii) a formula to determine the amount described in Subsection
31A-37-205
(4);
334
(f) waive or modify [the requirements] a requirement for public notice and hearing for
335
[any of] the following by a captive insurance company:
336
(i) merger;
337
(ii) consolidation;
338
(iii) conversion;
339
(iv) mutualization; or
340
(v) redomestication;
341
(g) approve the use of [alternative] one or more reliable methods of valuation and
342
rating for:
343
(i) an association captive insurance company;
344
(ii) a sponsored captive insurance company; or
345
(iii) an industrial insured group;
346
(h) prohibit or limit an investment that threatens the solvency or liquidity of:
347
(i) a pure captive insurance company; or
348
(ii) an industrial insured captive insurance company;
349
(i) determine the financial reports a sponsored captive insurance company shall
350
annually file with the commissioner;
351
(j) [determine] prescribe the required forms and reports under Section
31A-37-501
; and
352
(k) establish one or more standards to ensure that [a parent or affiliate of a pure captive
353
insurance company]:
354
(i) one of the following is able to exercise control of the risk management function of
355
[any] a controlled unaffiliated business to be insured by [the] a pure captive insurance
356
company[.]:
357
(A) a parent; or
358
(B) an affiliated company of a parent; or
359
(ii) one of the following is able to exercise control of the risk management function of
360
a controlled unaffiliated business to be insured by an industrial insured captive insurance
361
company:
362
(A) an industrial insured; or
363
(B) an affiliated company of the industrial insured.
364
(2) Notwithstanding Subsection (1)(k), until the commissioner adopts the rules
365
authorized under Subsection (1)(k), the commissioner may by temporary order grant authority
366
to insure risks to:
367
(a) a pure captive insurance company [to insure risks.]; or
368
(b) an industrial insured captive insurance company.
369
(3) The commissioner may issue prohibitory, mandatory, and other orders relating to a
370
captive insurance [companies] company as necessary to enable the commissioner to secure
371
compliance with this chapter.
372
Section 6.
Section
31A-37-202
is amended to read:
373
31A-37-202. Permissive areas of insurance.
374
(1) (a) Except as provided in Subsection (1)(b), when permitted by its articles of
375
incorporation or charter, a captive insurance company may apply to the commissioner for a
376
certificate of authority to do all insurance authorized by this title except workers' compensation
377
insurance.
378
(b) Notwithstanding Subsection (1)(a):
379
(i) a pure captive insurance company may not insure [any risks] a risk other than
380
[those] a risk of [its]:
381
(A) its parent [and affiliates] or affiliate;
382
(B) a controlled unaffiliated business; or
383
(C) a combination of Subsections (1)(b)(i)(A) and (B);
384
(ii) an association captive insurance company may not insure [any risks] a risk other
385
than [those] a risk of [the]:
386
(A) an affiliate;
387
[(A)] (B) a member [organizations] organization of its association; and
388
[(B) affiliates of the member organizations]
389
(C) an affiliate of a member organization of its association;
390
(iii) an industrial insured captive insurance company may not insure [any risks] a risk
391
other than [those] a risk of [the]:
392
(A) an industrial [insureds] insured that [comprise] is part of the industrial insured
393
group; [and]
394
[(B) affiliates of the industrial insureds that comprise]
395
(B) an affiliate of an industrial insured that is part of the industrial insured group; and
396
(C) a controlled unaffiliated business of:
397
(I) an industrial insured that is part of the industrial insured group; or
398
(II) an affiliate of an industrial insured that is part of the industrial insured group;
399
(iv) a special purpose captive insurance company may only insure [the] a risk of its
400
parent;
401
(v) a captive insurance company may not provide:
402
(A) personal motor vehicle [or] insurance coverage;
403
(B) homeowner's insurance coverage; or [any]
404
(C) a component of [these coverages] a coverage described in this Subsection (1)(b)(v);
405
and
406
(vi) a captive insurance company may not accept or cede reinsurance except as
407
provided in Section
31A-37-303
.
408
(c) Notwithstanding Subsection (1)(b)(iv), for [risks] a risk approved by the
409
commissioner a special purpose captive insurance company may provide:
410
(i) insurance;
411
(ii) reinsurance; or
412
(iii) both insurance and reinsurance.
413
(2) To conduct insurance business in this state a captive insurance company shall:
414
(a) obtain from the commissioner a certificate of authority authorizing it to conduct
415
insurance business in this state;
416
(b) hold at least once each year in this state:
417
(i) a board of directors meeting; or
418
(ii) in the case of a reciprocal insurer, a subscriber's advisory committee meeting;
419
(c) maintain in this state:
420
(i) the principal place of business of the captive insurance company; or
421
(ii) in the case of a branch captive insurance company, the principal place of business
422
for the branch operations of the branch captive insurance company; and
423
(d) except as provided in Subsection (3), appoint a resident registered agent to accept
424
service of process and to otherwise act on behalf of the captive insurance company in this state.
425
(3) Notwithstanding Subsection (2)(d), in the case of a captive insurance company
426
formed as a corporation or a reciprocal insurer, [whenever] if the registered agent cannot with
427
reasonable diligence be found at the registered office of the captive insurance company, the
428
commissioner [shall be an] is the agent of the captive insurance company upon whom [any]
429
process, notice, or demand may be served.
430
(4) (a) Before receiving a certificate of authority, a captive insurance company:
431
(i) formed as a corporation shall file with the commissioner:
432
(A) a certified copy of:
433
(I) articles of incorporation or the charter of the corporation; and
434
(II) bylaws of the corporation;
435
(B) a statement under oath of the president and secretary of the corporation showing
436
the financial condition of the corporation; and
437
(C) any other statement or document required by the commissioner under Section
438
31A-37-106
;
439
(ii) formed as a reciprocal shall:
440
(A) file with the commissioner:
441
(I) a certified copy of the power of attorney of the attorney-in-fact of the reciprocal;
442
(II) a certified copy of the subscribers' agreement of the reciprocal;
443
(III) a statement under oath of the attorney-in-fact of the reciprocal showing the
444
financial condition of the reciprocal; and
445
(IV) any other statement or document required by the commissioner under Section
446
31A-37-106
; and
447
(B) submit to the commissioner for approval a description of the:
448
(I) coverages;
449
(II) deductibles;
450
(III) coverage limits;
451
(IV) rates; and
452
(V) any other information the commissioner requires under Section
31A-37-106
.
453
(b) (i) If there is a subsequent material change in an item in the description required
454
under Subsection (4)(a)(ii)(B) for a reciprocal captive insurance company, the reciprocal
455
captive insurance company shall submit to the commissioner for approval an appropriate
456
revision to the description required under Subsection (4)(a)(ii)(B).
457
(ii) A reciprocal captive insurance company that is required to submit a revision under
458
Subsection (4)(b)(i) may not offer any additional [kinds] types of insurance until the
459
commissioner approves a revision of the description.
460
(iii) A reciprocal captive insurance company shall inform the commissioner of [any] a
461
material change in [rates] a rate within 30 days of the adoption of the change.
462
(c) In addition to the information required by Subsection (4)(a), an applicant captive
463
insurance company shall file with the commissioner evidence of:
464
(i) the amount and liquidity of the assets of the applicant captive insurance company
465
relative to the risks to be assumed by the applicant captive insurance company;
466
(ii) the adequacy of the expertise, experience, and character of the person who will
467
manage the applicant captive insurance company;
468
(iii) the overall soundness of the plan of operation of the applicant captive insurance
469
company;
470
(iv) the adequacy of the loss prevention programs [of] for the following of the
471
applicant captive insurance [company's] company:
472
(A) a parent[,];
473
(B) a member [organizations,] organization; or
474
(C) an industrial [insureds, as applicable] insured; and
475
(v) any other [factors] factor the commissioner:
476
(A) adopts by rule under Section
31A-37-106
; and
477
(B) considers relevant in ascertaining whether the applicant captive insurance company
478
will be able to meet the policy obligations of the applicant captive insurance company.
479
(d) In addition to the information required by Subsections (4)(a), (b), and (c), an
480
applicant sponsored captive insurance company shall file with the commissioner:
481
(i) a business plan at the level of detail required by the commissioner under Section
482
31A-37-106
demonstrating:
483
(A) the manner in which the applicant sponsored captive insurance company will
484
account for the losses and expenses of each protected cell; and
485
(B) the manner in which the applicant sponsored captive insurance company will report
486
to the commissioner the financial history, including losses and expenses, of each protected cell;
487
(ii) a statement acknowledging that the applicant sponsored captive insurance company
488
will make all financial records of the applicant sponsored captive insurance company,
489
including records pertaining to [any] a protected cell, [shall be made] available for inspection
490
or examination by the commissioner;
491
(iii) [any] a contract or sample contract between the applicant sponsored captive
492
insurance company and [any] a participant; and
493
(iv) evidence that expenses will be allocated to each protected cell in an equitable
494
manner.
495
[(e)] (5) (a) Information submitted pursuant to [this] Subsection (4) [shall be] is
496
classified as a protected record under Title 63, Chapter 2, Government Records Access and
497
Management Act.
498
[(f)] (b) Notwithstanding Title 63, Chapter 2, Government Records Access and
499
Management Act, the commissioner may disclose information submitted pursuant to [this]
500
Subsection (4) to a public official having jurisdiction over the regulation of insurance in
501
another state if:
502
(i) the public official receiving the information agrees in writing to maintain the
503
confidentiality of the information; and
504
(ii) the laws of the state in which the public official serves require the information to be
505
confidential.
506
[(g) Subsections (4)(e) and (4)(f) do]
507
(c) This Subsection (5) does not apply to information provided by an industrial insured
508
captive insurance company insuring the risks of an industrial insured group.
509
[(5)] (6) (a) A captive insurance company shall pay to the department the following
510
nonrefundable fees established by the department under Sections
31A-3-103
and
63-38-3.2
:
511
(i) a fee for examining, investigating, and processing, by a department [employees]
512
employee, of an application for a certificate of authority made by a captive insurance company;
513
(ii) a fee for obtaining a certificate of authority for the year the captive insurance
514
company is issued a certificate of authority by the department; and
515
(iii) a certificate of authority renewal fee.
516
(b) The commissioner may:
517
(i) retain legal, financial, and examination services from outside the department to
518
perform the services [under] described in:
519
(A) Subsection [(5)(a)] (6)(a); and
520
(B) Section
31A-37-502
; and
521
(ii) charge the reasonable cost of [those] services [against] described in Subsection
522
(6)(b)(i) to the applicant captive insurance company.
523
[(6)] (7) If the commissioner is satisfied that the documents and statements filed by the
524
applicant captive insurance company comply with [the provisions of] this chapter, the
525
commissioner may grant a certificate of authority authorizing the company to do insurance
526
business in this state.
527
[(7)] (8) A certificate of authority granted under this section expires annually and must
528
be renewed by July 1 of each year.
529
Section 7.
Section
31A-37-402
is amended to read:
530
31A-37-402. Sponsored captive insurance companies -- Certificate of authority
531
mandatory.
532
(1) A sponsor of a sponsored captive insurance company shall be:
533
(a) an insurer authorized or approved under the laws of [any] a state;
534
(b) a reinsurer authorized or approved under the laws of [any] a state;
535
(c) a captive insurance company holding a certificate of authority under this chapter;
536
[or]
537
(d) an insurance holding company that:
538
(i) controls an insurer licensed pursuant to the laws of [any] a state; and
539
(ii) is subject to registration pursuant to the holding company system of laws of the
540
state of domicile of the insurer described in Subsection (1)(d)(i)[.]; or
541
(e) another person approved by the commissioner after finding that the approval of the
542
person as a sponsor is not inconsistent with the purposes of this chapter.
543
(2) (a) The business written by a sponsored captive insurance company with respect to
544
[each] a protected cell shall be fronted by an [insurance company] insurer that is:
545
(i) authorized or approved:
546
(A) under the laws of [any] a state; or
547
(B) under any jurisdiction if the insurance company is a wholly owned subsidiary of an
548
insurance company licensed pursuant to the laws of [any] a state;
549
(ii) reinsured by a reinsurer authorized or approved by this state; or
550
(iii) subject to Subsection (2)(b), secured by a trust fund:
551
(A) in the United States;
552
(B) for the benefit of policyholders and claimants; and
553
(C) funded by an irrevocable letter of credit or other asset acceptable to the
554
commissioner.
555
(b) (i) The amount of security provided by the trust fund described in Subsection
556
(2)(a)(iii) may not be less than the reserves associated with the liabilities of the trust fund,
557
including:
558
(A) reserves for losses;
559
(B) allocated loss adjustment expenses;
560
(C) incurred but unreported losses; and
561
(D) unearned premiums for business written through the participant's protected cell.
562
(ii) The commissioner may require the sponsored captive insurance company to
563
increase the funding of a trust established pursuant to this Subsection (2).
564
(iii) If the form of security in the trust described in Subsection (2)(a)(iii) is a letter of
565
credit, the letter of credit must be established, issued, or confirmed by a bank that is:
566
(A) chartered in this state;
567
(B) a member of the federal reserve system; or
568
(C) chartered by another state if that state-chartered bank is acceptable to the
569
commissioner.
570
(iv) A trust and trust instrument maintained pursuant to this Subsection (2) shall be in a
571
form and upon terms approved by the commissioner.
572
(3) A risk retention group may not be either a sponsor or a participant of a sponsored
573
captive insurance company.
574
Section 8.
Section
31A-37-501
is amended to read:
575
31A-37-501. Reports to commissioner.
576
(1) A captive insurance company is not required to make [any] a report except those
577
provided in this chapter.
578
(2) (a) Before March 1 of each year, a captive insurance company shall submit to the
579
commissioner a report of the financial condition of the captive insurance company, verified by
580
oath of two of the executive officers of the captive insurance company.
581
(b) Except as provided in Sections
31A-37-204
and
31A-37-205
, a captive insurance
582
company shall report:
583
(i) [unless the commissioner approves the use of statutory accounting principles,] using
584
generally accepted accounting principles, except to the extent that the commissioner requires,
585
approves, or accepts the use of a statutory accounting principle;
586
(ii) using [any] a useful or necessary [modifications or adaptations to accounting
587
principles] modification or adaptation to an accounting principle that is required, approved, or
588
accepted by the commissioner for the type of insurance and [kinds of insurers] kind of insurer
589
to be reported upon; and
590
(iii) [any] supplemental or additional information required by the commissioner.
591
(c) Except as otherwise provided:
592
(i) an association captive insurance company and an industrial insured group shall file
593
the report required by Section
31A-4-113
; and
594
(ii) [each] an industrial insured group shall comply with Section
31A-4-113.5
.
595
(3) (a) A pure captive insurance company may make written application to file the
596
required report on a fiscal year end that is consistent with the fiscal year of the parent company
597
of the pure captive insurance company.
598
(b) If the commissioner grants an alternative reporting date for a pure captive insurance
599
company requested under Subsection (3)(a), the annual report is due 60 days after the fiscal
600
year end.
601
(4) (a) Sixty days after the fiscal year end, a branch captive insurance company shall
602
file with the commissioner a copy of all reports and statements required to be filed under the
603
laws of the jurisdiction in which the alien captive insurance company is formed, verified by
604
oath by two of [its] the alien captive insurance company's executive officers.
605
(b) If the commissioner is satisfied that the annual report filed by the alien captive
606
insurance company in the jurisdiction in which the alien captive insurance company is formed
607
provides adequate information concerning the financial condition of the alien captive insurance
608
company, the commissioner may waive the requirement for completion of the annual statement
609
required for a captive insurance company under this section with respect to business written in
610
the alien jurisdiction.
611
(c) A waiver by the commissioner under Subsection (4)(b) [shall be]:
612
(i) shall be in writing; and
613
(ii) is subject to public inspection.
614
Section 9.
Section
31A-37-502
is amended to read:
615
31A-37-502. Examination.
616
(1) (a) As provided in this section, the commissioner or a person appointed by the
617
commissioner, shall examine each captive insurance company in each three-year period.
618
(b) The three-year period described in Subsection (1)(a) shall be determined on the
619
basis of three full annual accounting periods of operation.
620
(c) The examination is to be made as of:
621
(i) December 31 of the full three-year period; or
622
(ii) the last day of the month of an annual accounting period authorized for a captive
623
insurance company under this section.
624
(d) In addition to an examination required under this Subsection (1), the commissioner,
625
or a person appointed by the commissioner may examine a captive insurance company
626
whenever the commissioner determines it to be prudent.
627
(2) During an examination under this section the commissioner, or a person appointed
628
by the commissioner, shall thoroughly inspect and examine the affairs of the captive insurance
629
company to ascertain:
630
(a) the financial condition of the captive insurance company;
631
(b) the ability of the captive insurance company to fulfill the obligations of the captive
632
insurance company; and
633
(c) whether the captive insurance company has complied with this chapter.
634
(3) The commissioner upon application may enlarge the three-year period described in
635
Subsection (1) to five years, if a captive insurance company is subject to a comprehensive
636
annual audit during that period:
637
(a) of a scope satisfactory to the commissioner; and
638
(b) performed by independent auditors approved by the commissioner.
639
(4) A captive insurance company that is inspected and examined under this section
640
shall pay, as provided in Subsection
31A-37-202
[(5)](6)(b), the expenses and charges of an
641
inspection and examination.
642
Section 10.
Section
31A-37-602
is amended to read:
643
31A-37-602. Requirements of a captive reinsurance company.
644
(1) (a) If permitted by its articles of incorporation or charter, a captive reinsurance
645
company may apply to the commissioner for a [license] certificate of authority to write
646
reinsurance covering:
647
(i) property and casualty insurance; or
648
(ii) reinsurance contracts.
649
(b) A captive reinsurance company authorized by the commissioner may write
650
reinsurance contracts covering risks in any state.
651
(2) To conduct business in this state, a captive reinsurance company shall:
652
(a) obtain from the commissioner a [license] certificate of authority authorizing [it] the
653
captive reinsurance company to conduct business as a captive reinsurance company in this
654
state;
655
(b) hold at least one board of directors' meeting each year in this state;
656
(c) maintain its principal place of business in this state; and
657
(d) appoint a registered agent to accept service of process and act otherwise on its
658
behalf in this state.
659
(3) Before receiving a [license] certificate of authority, a captive reinsurance company
660
shall file with the commissioner:
661
(a) a certified copy of [its] the captive reinsurance company's:
662
(i) (A) articles of incorporation; or
663
(B) charter; and
664
(ii) bylaws;
665
(b) a statement under oath of its president and secretary showing its financial
666
condition; and
667
(c) other documents required by the commissioner.
668
(4) In addition to the information required by Subsection (3), the applicant captive
669
reinsurance company shall file with the commissioner evidence of:
670
(a) the amount and liquidity of the captive reinsurance company's assets relative to the
671
risks to be assumed;
672
(b) the adequacy of the expertise, experience, and character of the person who manages
673
the captive reinsurance company;
674
(c) the overall soundness of the captive reinsurance company's plan of operation; and
675
(d) other overall factors considered relevant by the commissioner in ascertaining if the
676
proposed captive reinsurance company is able to meet its policy obligations.
677
(5) (a) Notwithstanding Title 63, Chapter 2, Government Records Access and
678
Management Act, information submitted pursuant to this section is confidential and may not be
679
made public by the commissioner or an agent or employee of the commissioner without the
680
written consent of the company, except that:
681
(i) information may be discoverable by a party in a civil action or contested case to
682
which the submitting captive reinsurance company is a party, upon a showing by the party
683
seeking to discover the information that:
684
(A) the information sought is relevant to and necessary for the furtherance of the action
685
or case;
686
(B) the information sought is unavailable from other nonconfidential sources; and
687
(C) a subpoena issued by a judicial or administrative law officer of competent
688
jurisdiction has been submitted to the commissioner; and
689
(ii) the commissioner may disclose the information to the public officer having
690
jurisdiction over the regulation of insurance in another state if:
691
(A) the public official agrees in writing to maintain the confidentiality of the
692
information; and
693
(B) the laws of the state in which the public official serves require the information to
694
be confidential.
695
(b) This Subsection (5) does not apply to an industrial insured captive reinsurance
696
company insuring the risks of an industrial insured group.
697
Section 11.
Section
31A-37-603
is amended to read:
698
31A-37-603. Minimum capitalization or reserves for a captive reinsurance
699
company.
700
(1) (a) The commissioner may not issue a [license] certificate of authority to a captive
701
reinsurance company unless [the] a captive reinsurance company possesses and maintains
702
capital or free surplus of not less than the greater of:
703
(i) $300,000,000; or
704
(ii) 10% of the reserves of the captive reinsurance company.
705
(b) The surplus required by this Subsection (1) may be in the form of:
706
(i) cash; or
707
(ii) securities.
708
(2) The commissioner may prescribe additional capital or surplus based upon the type,
709
volume, and nature of the insurance business transacted.
710
(3) (a) A captive reinsurance company may not pay a dividend out of, or other
711
distribution with respect to capital or surplus without the prior approval of the commissioner.
712
(b) Approval of an ongoing plan for the payment of dividends or other distributions
713
shall be conditioned upon the retention at the time of each payment of capital or surplus in
714
excess of amounts specified by, or determined in accordance with formulas approved by, the
715
commissioner.
716
Section 12.
Section
31A-37a-101
is enacted to read:
717
CHAPTER 37a. SPECIAL PURPOSE FINANCIAL CAPTIVE INSURANCE
718
COMPANY ACT
719
Part 1. General Provisions
720
31A-37a-101. Title.
721
This chapter is known as the "Special Purpose Financial Captive Insurance Company
722
Act."
723
Section 13.
Section
31A-37a-102
is enacted to read:
724
31A-37a-102. Definitions.
725
(1) For purposes of this chapter:
726
(a) "Ceding insurer" means an insurer that:
727
(i) is approved by the commissioner;
728
(ii) is licensed or otherwise authorized to transact the business of insurance or
729
reinsurance in the insurer's state or country of domicile; and
730
(iii) cedes risk to a special purpose financial captive insurance company pursuant to a
731
reinsurance contract.
732
(b) Notwithstanding Section
31A-27a-102
, "insolvency" or "insolvent" for purposes of
733
applying Chapter 27a, Insurer Receivership Act, to a special purpose financial captive
734
insurance company, means that a special purpose financial captive insurance company:
735
(i) is unable to pay an obligation when the obligation is due, unless the obligation is the
736
subject of a bona fide dispute; or
737
(ii) fails to meet the criteria and conditions for solvency of the special purpose financial
738
captive insurance company established by the commissioner by rule or order.
739
(c) (i) "Insurance securitization" means a transaction or a group of related transactions:
740
(A) that may include a capital market offering;
741
(B) that is effected through one or more related risk transfer instruments and
742
facilitating administrative agreements;
743
(C) where all or part of the result of the transaction or group of related transactions is
744
used to fund the special purpose financial captive insurance company's obligations under a
745
reinsurance contract with a ceding insurer;
746
(D) by which:
747
(I) proceeds are obtained by a special purpose financial captive insurance company,
748
directly or indirectly, through the issuance of one or more securities by the special purpose
749
financial captive insurance company or another person; or
750
(II) a person provides one or more letters of credit or other assets for the benefit of the
751
special purpose financial captive insurance company if the commissioner authorizes the special
752
purpose financial captive insurance company to treat the letter of credit or asset as an admitted
753
asset for purposes of the special purpose financial captive insurance company's annual report;
754
and
755
(E) if all or a part of the proceeds, a letter of credit, or asset described in this
756
Subsection (1)(c) is used to fund the special purpose financial captive insurance company's
757
obligations under a reinsurance contract with a ceding insurer.
758
(ii) "Insurance securitization" does not include the issuance of a letter of credit for the
759
benefit of the commissioner to satisfy all or part of the special purpose financial captive
760
insurance company's capital and surplus requirements under Section
31A-37a-302
.
761
(d) "Management" means:
762
(i) a board of directors of a special purpose financial captive insurance company;
763
(ii) a managing board of a special purpose financial captive insurance company; or
764
(iii) one or more individuals with the overall responsibility for the management of the
765
affairs of the special purpose financial captive insurance company, including:
766
(A) an officer elected or appointed to act on behalf of the special purpose financial
767
captive insurance company; or
768
(B) an agent elected or appointed to act on behalf of the special purpose financial
769
captive insurance company.
770
(e) "Organizational document" means:
771
(i) in the case of a special purpose financial captive insurance company formed as a
772
stock corporation, the special purpose financial captive insurance company's:
773
(A) articles of incorporation; and
774
(B) bylaws; and
775
(ii) in the case of a special purpose financial captive insurance company formed as a
776
limited liability company, the special purpose financial captive insurance company's:
777
(A) articles of organization; and
778
(B) operating agreement.
779
(f) "Reinsurance contract" means a contract between a special purpose financial captive
780
insurance company and a ceding insurer pursuant to which the special purpose financial captive
781
insurance company agrees to provide reinsurance to the ceding insurer for risks associated with
782
the ceding insurer's insurance or reinsurance business.
783
(g) "Security" means:
784
(i) a security as defined in Section
31A-1-301
; or
785
(ii) one or more of the following that the commissioner designates, by rule or order, as
786
a "security" for purposes of this chapter:
787
(A) a debt obligation;
788
(B) equity;
789
(C) a surplus certificate;
790
(D) a surplus note;
791
(E) a funding agreement;
792
(F) a derivative; or
793
(G) another financial instrument.
794
(h) "Special purpose financial captive insurance company" means a captive insurance
795
company has a certificate of authority under this chapter from the commissioner to operate as a
796
special purpose financial captive insurance company pursuant to this chapter.
797
(i) "Special purpose financial captive insurance company security" means:
798
(i) a security issued by a special purpose financial captive insurance company; or
799
(ii) a security issued by a third party, the proceeds of which are obtained directly or
800
indirectly by a special purpose financial captive insurance company.
801
(j) "Surplus note" means an unsecured subordinated debt obligation that has one or
802
more characteristics that are consistent with paragraph 3 of the National Association of
803
Insurance Commissioners Statement of Statutory Accounting Principals No. 41, as amended
804
from time to time and as modified or supplemented by rule or order of the commissioner.
805
(2) The terms defined in Section
31A-37-102
shall have the same meaning for
806
purposes of this chapter.
807
Section 14.
Section
31A-37a-103
is enacted to read:
808
31A-37a-103. Applicable law.
809
(1) (a) A special purpose financial captive insurance company is subject to:
810
(i) this chapter; and
811
(ii) Chapter 37, Captive Insurance Companies Act.
812
(b) If there is a conflict between this chapter and Chapter 37, this chapter controls.
813
(2) A special purpose financial captive insurance company is subject to a rule made
814
under Section
31A-37-106
that is in effect on or after May 5, 2008.
815
(3) The commissioner may, by order, exempt a special purpose financial captive
816
insurance company from a provision of Chapter 37 or a rule made under Section
31A-37-106
if
817
the commissioner determines that the application of the provision or rule is inappropriate on
818
the basis of the special purpose financial captive insurance company's plan of operation.
819
Section 15.
Section
31A-37a-104
is enacted to read:
820
31A-37a-104. Reporting -- Books and records.
821
(1) For purposes of Section
31A-37-501
:
822
(a) the commissioner shall, by rule or order, establish the form and content of the
823
annual report to be filed by a special purpose financial captive insurance company; and
824
(b) a special purpose financial captive insurance company shall report:
825
(i) using statutory accounting principles, unless the commissioner requires, approves,
826
or accepts the use of a generally accepted accounting principle; and
827
(ii) with an appropriate or necessary modification or adaptation of the statutory or
828
generally accepted accounting principle:
829
(A) required, approved, or accepted by the commissioner; and
830
(B) as supplemented by additional information required by the commissioner.
831
(2) (a) A special purpose financial captive insurance company may make written
832
application to file its annual report on a fiscal-year basis.
833
(b) If an alternative reporting date is granted, the commissioner shall establish the due
834
date and content of the filing required by the special purpose financial captive insurance
835
company in addition to its annual report.
836
(3) (a) Unless the commissioner approves a variance before the special purpose
837
financial captive insurance company implements the variance, a special purpose financial
838
captive insurance company shall maintain in the state the following of the special purpose
839
financial captive insurance company:
840
(i) a book;
841
(ii) record;
842
(iii) a document;
843
(iv) an account;
844
(vi) a voucher; or
845
(vii) an agreement.
846
(b) A special purpose financial captive insurance company shall make an item listed in
847
Subsection (3)(a) available for inspection by the commissioner at any time.
848
(c) A special purpose financial captive insurance company shall keep an item listed in
849
Subsection (3)(a) in a manner so that:
850
(i) the special purpose financial captive insurance company's financial condition,
851
affairs, and operations can be readily ascertained; and
852
(ii) the commissioner may readily:
853
(A) verify a financial statement of the special purpose financial captive insurance
854
company; and
855
(B) determine the special purpose financial captive insurance company's compliance
856
with this chapter and Chapter 37, Captive Insurance Companies Act.
857
(4) (a) Unless the commissioner approves a variance before the special purpose
858
financial captive insurance company implements the variance, a special purpose financial
859
captive insurance company shall preserve and keep an item listed in Subsection (3)(a) available
860
in this state:
861
(i) for the purpose of examination and inspection; and
862
(ii) until the commissioner approves the destruction or other disposition.
863
(b) If the commissioner approves the keeping of an item listed in Subsection (3)(a)
864
outside this state, the special purpose financial captive insurance company shall maintain a
865
complete copy of the original in the state.
866
(c) An item listed in Subsection (3)(a) may be photographed, reproduced on film, or
867
stored and reproduced electronically.
868
Section 16.
Section
31A-37a-105
is enacted to read:
869
31A-37a-105. Transition.
870
(1) (a) Except as otherwise determined by the commissioner, a captive insurance
871
company that on May 5, 2008 has a certificate of authority from the commissioner pursuant to
872
Chapter 37, Captive Insurance Companies Act, and engages in insurance securitization:
873
(i) is subject to this chapter as a special purpose financial captive insurance company;
874
and
875
(ii) is considered to have a certificate of authority issued under this chapter.
876
(b) The commissioner may require a captive insurance company described in
877
Subsection (1)(a) to take an action that the commissioner determines is reasonably necessary to
878
bring the captive insurance company into compliance with this chapter.
879
(2) The commissioner may issue an order described in Section
31A-37a-201
with
880
respect to a captive insurance company described in Subsection (1)(a) if the captive insurance
881
company is not in compliance with this chapter.
882
Section 17.
Section
31A-37a-201
is enacted to read:
883
Part 2. Certificate of Authority and Operations
884
31A-37a-201. Certificate of authority requirements.
885
(1) A person may not reinsure the risks of a ceding insurer unless the person has a
886
certificate of authority under this chapter as a special purpose financial captive insurance
887
company.
888
(2) To apply for a certificate of authority under this chapter as a special purpose
889
financial captive insurance company, a special purpose financial captive insurance company
890
shall submit an application for the certificate of authority that, in addition to complying with
891
Chapter 37, Captive Insurance Companies Act, complies with the following:
892
(a) A special purpose financial captive insurance company shall submit to the
893
commissioner a plan of operation that includes:
894
(i) a complete description of:
895
(A) a significant transaction including:
896
(I) reinsurance;
897
(II) a reinsurance security arrangement;
898
(III) an insurance securitization; or
899
(IV) a transaction or arrangement related to a transaction described in Subsections
900
(2)(a)(i)(A)(I) through (II);
901
(B) to the extent not included in Subsection (2)(a)(i)(A), a party other than the special
902
purpose financial captive insurance company and the ceding insurer that is involved in the
903
issuance of a special purpose financial captive insurance company security; and
904
(C) a pledge, hypothecation, or grant of a security interest in:
905
(I) an asset of the special purpose financial captive insurance company; or
906
(II) stock or a limited liability company interest in the special purpose financial captive
907
insurance company;
908
(ii) the source and form of the special purpose financial captive insurance company's
909
capital and surplus;
910
(iii) the proposed investment policy of the special purpose financial captive insurance
911
company;
912
(iv) a description of an underwriting, reporting, and claims payment method by which
913
losses covered by a reinsurance contract are reported, accounted for, and settled;
914
(v) pro forma balance sheets and income statements illustrating one or more adverse
915
case scenarios, as determined under criteria required by the commissioner, for the performance
916
of the special purpose financial captive insurance company under a reinsurance contract; and
917
(vi) the proposed rate and method for discounting reserves, if the special purpose
918
financial captive insurance company is requesting authority to discount its reserves.
919
(b) The special purpose financial captive insurance company shall submit an affidavit:
920
(i) of the following of the special purpose financial captive insurance company:
921
(A) president;
922
(B) vice president;
923
(C) treasurer; or
924
(D) chief financial officer; and
925
(ii) that includes the following statements, to the best of knowledge and belief of the
926
person submitting the affidavit after reasonable inquiry:
927
(A) the proposed organization and operation of the special purpose financial captive
928
insurance company complies with this chapter and the applicable provisions of Chapter 37,
929
Captive Insurance Companies Act;
930
(B) the special purpose financial captive insurance company's investment policy
931
reflects and takes into account:
932
(I) the liquidity of assets; and
933
(II) the reasonable preservation, administration, and management of those assets with
934
respect to the risks associated with:
935
(Aa) a reinsurance contract; and
936
(Bb) an insurance securitization transaction; and
937
(C) the following comply with this chapter:
938
(I) a reinsurance contract; and
939
(II) an arrangement for securing an obligation of the special purpose financial captive
940
insurance company under the reinsurance contract, including an agreement or other
941
documentation to implement the arrangement.
942
(c) A special purpose financial captive insurance company shall submit to the
943
commissioner:
944
(i) a copy of an agreement or documentation described in Subsection (2)(b), unless
945
otherwise approved by the commissioner; and
946
(ii) a statement or document required by the commissioner to evaluate the special
947
purpose financial captive insurance company's application for a certificate of authority.
948
(d) (i) Subject to Subsection (2)(d)(ii), a special purpose financial captive insurance
949
company shall submit with the application an opinion of a licensed attorney, in a form
950
acceptable to the commissioner, that:
951
(A) the offer and sale of a special purpose financial captive insurance company security
952
complies with:
953
(I) the registration requirements of federal securities laws; or
954
(II) the exemptions from or exceptions to a requirement of the federal securities laws;
955
and
956
(B) the offer and sale of a security by the special purpose financial captive insurance
957
company complies with:
958
(I) the registration requirements of this state's securities laws; or
959
(II) the exemptions from or exceptions to a requirement of this state's securities laws.
960
(ii) A special purpose financial captive insurance company is not required to submit an
961
opinion described in Subsection (2)(d)(i) with an application if the special purpose financial
962
captive insurance company includes a specific statement in its plan of operation that the
963
opinion described in Subsection (2)(d)(i) will be provided to the commissioner before the offer
964
or sale of a special purpose financial captive insurance company security.
965
(3) (a) The commissioner may issue a certificate of authority to a special purpose
966
financial captive insurance company that complies with Subsection (2) authorizing the special
967
purpose financial captive insurance company to transact reinsurance business as a special
968
purpose financial captive insurance company in this state if the commissioner finds that:
969
(i) the proposed plan of operation provides for a reasonable and expected successful
970
operation;
971
(ii) the terms of the reinsurance contract or related transaction comply with this
972
chapter;
973
(iii) the proposed plan of operation is not hazardous to a ceding insurer; and
974
(iv) subject to Subsection (3)(b), the insurance regulator of the state of domicile of a
975
ceding insurer has notified the commissioner in writing or otherwise provided assurance
976
satisfactory to the commissioner that the regulator of the state has approved or has not
977
disapproved the transaction.
978
(b) Notwithstanding Subsection (3)(a)(iv), the commissioner may issue a certificate of
979
authority to a special purpose financial captive insurance company if the insurance regulator of
980
the state of domicile of a ceding insurer does not responded with respect to all or a part of the
981
transaction.
982
(c) (i) A certificate of authority issued under this section is valid through the June 30
983
after the day on which the certificate of authority is issued.
984
(ii) A special purpose financial captive insurance company may renew its certificate of
985
authority annually by, before the certificate of authority expires:
986
(A) submitting the affidavit required by Subsection (2); and
987
(B) paying a renewal fee.
988
(4) In conjunction with issuing a certificate of authority to a special purpose financial
989
captive insurance company, the commissioner may issue an order that includes a provision,
990
term, or condition regarding the organization, issuance of a certificate of authority, and
991
operation of the special purpose financial captive insurance company that:
992
(a) the commissioner considers appropriate; and
993
(b) is not inconsistent with this chapter and Chapter 37, Captive Insurance Companies
994
Act.
995
Section 18.
Section
31A-37a-202
is enacted to read:
996
31A-37a-202. Revocation, suspension, amendment, or modification of a certificate
997
of authority.
998
Except as provided in Sections
31A-37a-501
and
31A-37a-502
, the commissioner may
999
not revoke, suspend, amend, or modify a certificate of authority issued to a special purpose
1000
financial captive insurance company under this chapter or an order issued under Subsection
1001
31A-37a-201
(4) unless:
1002
(1) the special purpose financial captive insurance company consents to the revocation,
1003
suspension, amendment, or modification; or
1004
(2) the commissioner shows by clear and convincing evidence that the revocation,
1005
suspension, amendment, or modification is necessary to avoid irreparable harm to:
1006
(a) a special purpose financial captive insurance company; or
1007
(b) a ceding insurer.
1008
Section 19.
Section
31A-37a-203
is enacted to read:
1009
31A-37a-203. Reporting related to transactions.
1010
(1) A special purpose financial captive insurance company shall provide the
1011
commissioner with a copy of a complete set of executed documentation of an insurance
1012
securitization no later than 30 days after the day on which the insurance securitization
1013
transaction closes.
1014
(2) Section
31A-37-503
applies to:
1015
(a) information submitted pursuant to Subsection (1);
1016
(b) information submitted pursuant to Subsection
31A-37a-201
(2); or
1017
(c) an order issued to a special purpose financial captive insurance company pursuant
1018
to Subsection
31A-37a-201
(4).
1019
Section 20.
Section
31A-37a-204
is enacted to read:
1020
31A-37a-204. Prior approval of a change in plan of operation and other
1021
transactions.
1022
(1) A special purpose financial captive insurance company may not change its plan of
1023
operation without the prior approval of the commissioner.
1024
(2) (a) Subject to Subsection (2)(b), a special purpose financial captive insurance
1025
company may not engage in a transaction or series of transactions without the prior approval of
1026
the commissioner if the transaction or series of transactions:
1027
(i) is undertaken to dissolve the special purpose financial captive insurance company;
1028
or
1029
(ii) results in the termination of all or a part of a special purpose financial captive
1030
insurance company's business.
1031
(b) A special purpose financial captive insurance company is not required to obtain the
1032
prior approval of the commissioner for a transaction or series of transactions described in
1033
Subsection (2)(a)(ii) if:
1034
(i) the transaction or series of transactions is done in accordance with a document or
1035
agreement described in the special purpose financial captive insurance company's plan of
1036
operation; and
1037
(ii) the special purpose financial captive insurance company notifies the commissioner
1038
prior to the transaction or series of transactions.
1039
(3) A special purpose financial captive insurance company shall notify the
1040
commissioner before a change in the legal ownership of a security issued by the special
1041
purpose financial captive insurance company.
1042
Section 21.
Section
31A-37a-205
is enacted to read:
1043
31A-37a-205. Sponsored captives.
1044
In addition to the other provisions of this chapter, this section applies to a sponsored
1045
captive insurance company under Chapter 37, Captive Insurance Companies Act, that has a
1046
certificate of authority as a special purpose financial captive insurance company pursuant to
1047
this chapter.
1048
(1) A sponsored captive insurance company may have a certificate of authority as a
1049
special purpose financial captive insurance company under this chapter.
1050
(2) (a) For purposes of a sponsored captive insurance company having a certificate of
1051
authority as a special purpose financial captive insurance company, "general account" means
1052
the assets and liabilities of the sponsored captive insurance company not attributable to a
1053
protected cell.
1054
(b) For purposes of applying Title 31A, Chapter 27a, Insurer Receivership Act, to a
1055
sponsored captive insurance company having a certificate of authority as a special purpose
1056
financial captive insurance company, the definition of "insolvency" and "insolvent" in Section
1057
31A-37a-102
shall be applied separately to:
1058
(i) each protected cell; and
1059
(ii) the special purpose financial captive insurance company's general account.
1060
(3) (a) A participant in a sponsored captive insurance company having a certificate of
1061
authority as a special purpose financial captive insurance company must be a ceding insurer,
1062
unless approved by the commissioner before a person becomes a participant.
1063
(b) A change in a participant in a sponsored captive insurance company having a
1064
certificate of authority as a special purpose financial captive insurance company is subject to
1065
prior approval by the commissioner.
1066
(4) Notwithstanding Section
31A-37-401
, a special purpose financial captive insurance
1067
company that is a sponsored captive insurance company may issue a security to a person not
1068
described in Section
31A-37-401
if the issuance to that person is approved by the
1069
commissioner before the issuance of the security.
1070
(5) Notwithstanding Section
31A-37a-302
, a sponsored captive insurance company
1071
having a certificate of authority as a special purpose financial captive insurance company shall:
1072
(a) at the time of initial application for a certificate of authority as a special purpose
1073
financial captive insurance company, possess unimpaired paid-in capital and surplus of not less
1074
than $500,000; and
1075
(b) maintain at least $500,000 of unimpaired paid-in capital and surplus of not less
1076
than $500,000 during the time that it holds a certificate of authority under this chapter.
1077
(6) (a) For purposes of a sponsored captive insurance company having a certificate of
1078
authority as a special purpose financial captive insurance company, this Subsection (6) applies
1079
to:
1080
(i) a security issued by the special purpose financial captive insurance company with
1081
respect to a protected cell; or
1082
(ii) a contract or obligation of the special purpose financial captive insurance company
1083
with respect to a protected cell.
1084
(b) A sponsored captive insurance company having a certificate of authority as a
1085
special purpose financial captive insurance company shall include with a security, contract, or
1086
obligation described in Subsection (6)(a):
1087
(i) the designation of the protected cell; and
1088
(ii) a disclosure in a form and content satisfactory to the commissioner to the effect that
1089
the holder of the security or a counterparty to the contract or obligation has no right or recourse
1090
against the special purpose financial captive insurance company and its assets other than
1091
against an asset properly attributable to the protected cell.
1092
(c) Notwithstanding the requirements of this Subsection (6) and subject to other
1093
statutes or rules including this chapter and Chapter 37, Captive Insurance Companies Act, a
1094
creditor, ceding insurer, or another person may not use a failure to include a disclosure
1095
described in Subsection (6)(b), in whole or part, as the sole basis to have recourse against:
1096
(i) the general account of the special purpose financial captive insurance company; or
1097
(ii) the assets of another protected cell of the special financial captive insurance
1098
company.
1099
(7) In addition to Section
31A-37-401
, a sponsored captive insurance company having
1100
a certificate of authority as a special purpose financial captive insurance company is subject to
1101
the following with respect to a protected cell:
1102
(a) (i) A sponsored captive insurance company having a certificate of authority as a
1103
special purpose financial captive insurance company shall establish a protected cell only for the
1104
purpose of insuring or reinsuring risks of one or more reinsurance contracts with a ceding
1105
insurer with the intent of facilitating an insurance securitization.
1106
(ii) Subject to Subsection (7)(a)(iii), a sponsored captive insurance company having a
1107
certificate of authority as a special purpose financial captive insurance company shall establish
1108
a separate protected cell with respect to a ceding insurer described in Subsection (7)(a)(i).
1109
(iii) A sponsored captive insurance company having a certificate of authority as a
1110
special purpose financial captive insurance company shall establish a separate protected cell
1111
with respect to each reinsurance contract that is funded in whole or in part by a separate
1112
insurance securitization transaction.
1113
(b) A sponsored captive insurance company having a certificate of authority as a
1114
special purpose financial captive insurance company may not sale, exchange, or transfer an
1115
asset by, between, or among any of its protected cells without the prior approval of the
1116
commissioner.
1117
(8) (a) A sponsored captive insurance company having a certificate of authority as a
1118
special purpose financial captive insurance company shall attribute an asset or liability to a
1119
protected cell and to the general account in accordance with the plan of operation approved by
1120
the commissioner.
1121
(b) Except as provided by Subsection (8)(a), a sponsored captive insurance company
1122
having a certificate of authority as a special purpose financial captive insurance company may
1123
not attribute an asset or liability between:
1124
(i) its general account and a protected cell; or
1125
(ii) its protected cells.
1126
(c) A sponsored captive insurance company having a certificate of authority as a
1127
special purpose financial captive insurance company shall attribute:
1128
(i) an insurance obligation, asset, or liability relating to a reinsurance contract entered
1129
into with respect to a protected cell; and
1130
(ii) an insurance securitization transaction related to the obligation, asset, or liability
1131
described in Subsection (8)(c)(i), including a security issued by the special purpose financial
1132
captive insurance company as part of the insurance securitization, to the protected cell.
1133
(d) The following shall reflect an insurance obligation, asset, or liability relating to a
1134
reinsurance contract and the insurance securitization transaction that are attributed to a
1135
protected cell:
1136
(i) a right, benefit, obligation, or a liability of a security attributable to a protected cell
1137
described in Subsection (8)(c);
1138
(ii) the performance under a reinsurance contract and the related insurance
1139
securitization transaction; and
1140
(iii) a tax benefit, loss, refund, or credit allocated pursuant to a tax allocation
1141
agreement to which the special purpose financial captive insurance company is a party,
1142
including a payment made by or due to be made to the special purpose financial captive
1143
insurance company pursuant to the terms of the tax allocation agreement.
1144
(9) In addition to Section
31A-37a-502
:
1145
(a) Title 31A, Chapter 27a, Insurer Receivership Act, applies to each protected cell of a
1146
sponsored captive insurance company having a certificate of authority as a special purpose
1147
financial captive insurance company.
1148
(b) A proceeding or action taken by the commissioner pursuant to Title 31A, Chapter
1149
27a, Insurer Receivership Act, with respect to a protected cell of a sponsored captive insurance
1150
company having a certificate of authority as a special purpose financial captive insurance
1151
company may not be the sole basis for a proceeding pursuant to Title 31A, Chapter 27a, Insurer
1152
Receivership Act, with respect to:
1153
(i) another protected cell of the special purpose financial captive insurance company;
1154
or
1155
(ii) the special purpose financial captive insurance company's general account.
1156
(c) (i) Except as provided in Subsection (9)(c)(ii), the receiver of a special purpose
1157
financial captive insurance company shall ensure that the assets attributable to one protected
1158
cell are not applied to the liabilities attributable to:
1159
(A) another protected cell; or
1160
(B) the special purpose financial captive insurance company's general account.
1161
(ii) Notwithstanding Subsection (9)(c)(i), if an asset or liability is attributable to more
1162
than one protected cell, the receiver shall deal with the asset or liability in accordance with the
1163
terms of a relevant governing instrument or contract.
1164
(d) The insolvency of a protected cell of a sponsored captive insurance company
1165
having a certificate of authority as a special purpose financial captive insurance company may
1166
not be the sole basis for the commissioner to prohibit:
1167
(i) a payment by the special purpose financial captive insurance company made
1168
pursuant to a special purpose financial captive insurance company security or reinsurance
1169
contract with respect to another protected cell; or
1170
(ii) an action required to make a payment described in Subsection (9)(d)(i).
1171
Section 22.
Section
31A-37a-301
is enacted to read:
1172
Part 3. Formation and Assets
1173
31A-37a-301. Formation.
1174
(1) A special purpose financial captive insurance company may be:
1175
(a) incorporated as a stock insurer with its capital divided into shares and held by its
1176
stockholders; or
1177
(b) organized as a manager-managed limited liability company.
1178
(2) A special purpose financial captive insurance company's organizational documents
1179
shall limit the special purpose financial captive insurance company's authority to transact the
1180
business of insurance or reinsurance to those activities that the special purpose financial
1181
captive insurance company conducts to accomplish its purposes as expressed in this chapter.
1182
Section 23.
Section
31A-37a-302
is enacted to read:
1183
31A-37a-302. Minimum capital and surplus.
1184
(1) The commissioner may not issue a special purpose financial captive insurance
1185
company a certificate of authority under this chapter unless it possesses unimpaired paid-in
1186
capital and surplus of not less than $250,000 on the day on which the certificate of authority is
1187
issued.
1188
(2) A special purpose financial captive insurance company shall maintain unimpaired
1189
paid-in capital and surplus of not less than $250,000 at all times when having a certificate of
1190
authority under this chapter.
1191
Section 24.
Section
31A-37a-303
is enacted to read:
1192
31A-37a-303. Disposition of assets -- Investments.
1193
(1) A special purpose financial captive insurance company or a person on its behalf
1194
shall preserve and administer an asset of the special purpose financial captive insurance
1195
company to satisfy the liabilities and obligations of the special purpose financial captive
1196
insurance company incident to:
1197
(a) the reinsurance contract;
1198
(b) an insurance securitization; and
1199
(c) an agreement related to Subsection (1)(a) or (b).
1200
(2) In a special purpose financial captive insurance company insurance securitization, a
1201
security offering memorandum or other document issued to a prospective investor regarding
1202
the offer and sale of a surplus note or other security shall include a disclosure that all or part of
1203
the proceeds of the insurance securitization will be used to fund the special purpose financial
1204
captive insurance company's obligations to the ceding insurer.
1205
(3) A special purpose financial captive insurance company is not subject to a restriction
1206
on investments other than the following:
1207
(a) A special purpose financial captive insurance company may not make a loan to a
1208
person other than:
1209
(i) as permitted under its plan of operation; or
1210
(ii) as otherwise approved in advance of the loan by the commissioner.
1211
(b) The commissioner may prohibit or limit an investment that threatens the solvency
1212
or liquidity of a special purpose financial captive insurance company unless the investment is
1213
otherwise approved in:
1214
(i) the special purpose financial captive insurance company's plan of operation; or
1215
(ii) an order issued to the special purpose financial captive insurance company pursuant
1216
to Section
31A-37a-201
.
1217
Section 25.
Section
31A-37a-304
is enacted to read:
1218
31A-37a-304. Securities.
1219
(1) (a) A special purpose financial captive insurance company may:
1220
(i) subject to the prior approval of the commissioner, account for the proceeds of a
1221
surplus note issued by the special purpose financial captive insurance company as surplus; and
1222
(ii) except as provided in Subsection (1)(b), submit for prior approval of the
1223
commissioner a periodic written request for authorization to make a payment of interest on or a
1224
repayment of principal of a surplus note or other debt obligation issued by the special purpose
1225
financial captive insurance company.
1226
(b) (i) The commissioner may not approve a payment described in Subsection (1)(a)(i)
1227
if the commissioner determines that the payment would jeopardize the ability of the special
1228
purpose financial captive insurance company or another person to fulfill its respective
1229
obligations pursuant to a special purpose financial captive insurance company insurance
1230
securitization agreement, reinsurance contract, or a related transaction.
1231
(ii) In lieu of approval of a periodic written request for authorization to make a
1232
payment of interest on or repayment of principal of a surplus note or other debt obligation
1233
issued by the special purpose financial captive insurance company, the commissioner may
1234
approve a formula or plan for payment of interest, principal, or both with respect to the surplus
1235
note or debt obligation.
1236
(iii) A special purpose financial captive insurance company shall include a formula or
1237
plan approved under Subsection (1)(b)(ii) in the special purpose financial captive insurance
1238
company's plan of operation.
1239
(2) In addition to Section
31A-37-302
, a special purpose financial captive insurance
1240
company may not declare or pay a dividend or distribution if the dividend or distribution
1241
jeopardizes the ability of the special purpose financial captive insurance company or another
1242
person to fulfill the special purpose financial captive insurance company's or other person's
1243
respective obligations pursuant to a special purpose financial captive insurance company
1244
insurance securitization agreement, a reinsurance contract, or a related transaction.
1245
(3) (a) A special purpose financial captive insurance company security is not subject to
1246
regulation as an insurance or reinsurance contract.
1247
(b) An investor in a special purpose financial captive insurance company security or a
1248
holder of a special purpose financial captive insurance company security may not be considered
1249
to be transacting the business of insurance in this state solely by reason of having an interest in
1250
the security.
1251
(c) The following people involved in an insurance securitization by a special purpose
1252
financial captive insurance company may not be considered to be an insurance producer or
1253
broker, or to be conducting business as an insurer, reinsurer, insurance agency, brokerage,
1254
intermediary, advisory, or consulting business solely by virtue of the person's underwriting
1255
activities in connection with the insurance securitization:
1256
(i) an underwriter's placement;
1257
(ii) a selling agent; or
1258
(iii) a partner, commissioner, officer, member, manager, employee, agent,
1259
representative, or advisor of a person listed in Subsection (3)(c)(i) or (ii).
1260
Section 26.
Section
31A-37a-401
is enacted to read:
1261
Part 4. Reinsurance
1262
31A-37a-401. Purchase of reinsurance.
1263
Subject to the prior approval of the commissioner, a special purpose financial captive
1264
insurance company may purchase reinsurance to cede the risks assumed under a reinsurance
1265
contract.
1266
Section 27.
Section
31A-37a-402
is enacted to read:
1267
31A-37a-402. Permitted reinsurance.
1268
(1) (a) A special purpose financial captive insurance company may reinsure only the
1269
risks of a ceding insurer, pursuant to a reinsurance contract.
1270
(b) A special purpose financial captive insurance company may not issue a contract of
1271
insurance or a contract for assumption of risk or indemnification of loss other than a
1272
reinsurance contract described in Subsection (1)(a).
1273
(2) Unless otherwise approved in advance by the commissioner, a special purpose
1274
financial captive insurance company may not assume or retain exposure to insurance or
1275
reinsurance losses for its own account that are not funded by:
1276
(a) proceeds from a special purpose financial captive insurance company insurance
1277
securitization;
1278
(b) a letter of credit; or
1279
(c) an asset described in Subsection
31A-37a-102
(1)(c);
1280
(d) a premium or another amount payable by the ceding insurer to the special purpose
1281
financial captive insurance company pursuant to the reinsurance contract; and
1282
(e) a return on investment of an item described in Subsections (2)(a) through (d).
1283
(3) (a) A reinsurance contract shall contain a provision reasonably required or
1284
approved by the commissioner.
1285
(b) A requirement described in Subsection (3)(a) shall take into account the laws
1286
applicable to the ceding insurer regarding the ceding insurer taking credit for the reinsurance
1287
provided under the reinsurance contract.
1288
(4) Subject to the prior approval of the commissioner, a special purpose financial
1289
captive insurance company may cede risks assumed through a reinsurance contract to one or
1290
more reinsurers through the purchase of reinsurance.
1291
(5) (a) This Subsection (5) applies to a contract or commercial activity that:
1292
(i) relates to or is incidental to a reinsurance contract; and
1293
(ii) is necessary to fulfill the purposes of:
1294
(A) a reinsurance contract;
1295
(B) insurance securitization; and
1296
(C) this chapter.
1297
(b) A special purpose financial captive insurance company may engage in a contract or
1298
commercial activity described in Subsection (5)(a) if the contract or commercial activity is:
1299
(i) in the special purpose financial captive insurance company's plan of operation; or
1300
(ii) approved in advance by the commissioner.
1301
(c) A contract or commercial activity described in Subsection (5)(a) include:
1302
(i) entering into a reinsurance contract;
1303
(ii) issuing a special purpose financial captive insurance company security;
1304
(iii) complying with a term of a contract or security described in Subsection (5)(c)(i) or
1305
(ii);
1306
(iv) entering into:
1307
(A) a trust;
1308
(B) a guaranteed investment contract;
1309
(C) a swap;
1310
(D) a derivative transaction;
1311
(E) a tax transaction;
1312
(F) an administration transaction;
1313
(G) a reimbursement transaction; or
1314
(H) a fiscal agent transaction;
1315
(v) complying with a trust indenture, reinsurance, or retrocession; and
1316
(vi) another agreement necessary or incidental to effect an insurance securitization in
1317
compliance with:
1318
(A) the special purpose financial captive insurance company's plan of operation; and
1319
(B) this chapter.
1320
(6) Unless otherwise approved in advance by the commissioner, a reinsurance contract
1321
may not contain a provision for payment by the special purpose financial captive insurance
1322
company in discharge of its obligations under the reinsurance contract to a person other than
1323
the ceding insurer or any receiver of the ceding insurer.
1324
(7) A special purpose financial captive insurance company shall notify the
1325
commissioner immediately of an action by a ceding insurer or another person to foreclose on or
1326
otherwise take possession of collateral provided by the special purpose financial captive
1327
insurance company to secure an obligation of the special purpose financial captive insurance
1328
company.
1329
Section 28.
Section
31A-37a-501
is enacted to read:
1330
Part 5. Enforcement and Delinquency
1331
31A-37a-501. Suspension and revocation.
1332
(1) (a) The commissioner shall notify a special purpose financial captive insurance
1333
company not less than 30 days before suspending or revoking the special purpose financial
1334
captive insurance company's certificate of authority pursuant to Section
31A-37-505
.
1335
(b) In the notice required by Subsection (1)(a) the commissioner shall state the basis
1336
for the suspension or revocation.
1337
(c) The commissioner shall give a special purpose financial captive insurance company
1338
described in this Subsection (1) an opportunity for a hearing pursuant to Title 63, Chapter 46b,
1339
Administrative Procedures Act.
1340
(2) Notwithstanding Subsection (1) and Title 63, Chapter 46b, Administrative
1341
Procedures Act, the commissioner is not required to provide prior notice or a hearing if the
1342
grounds for suspension or revocation of a special purpose financial captive insurance
1343
company's certificate of authority pursuant to Section
31A-37-505
relate primarily to:
1344
(a) the financial condition or soundness of the special purpose financial captive
1345
insurance company; or
1346
(b) a deficiency in the assets of the special purpose financial captive insurance
1347
company.
1348
Section 29.
Section
31A-37a-502
is enacted to read:
1349
31A-37a-502. Delinquency.
1350
(1) Except as otherwise provided in this section, Title 31A, Chapter 27a, Insurer
1351
Receivership Act, applies to a special purpose financial captive insurance company.
1352
(2) Upon an order of supervision, rehabilitation, or liquidation of a special purpose
1353
financial captive insurance company, the receiver shall manage the assets and liabilities of the
1354
special purpose financial captive insurance company pursuant to this chapter.
1355
(3) An amount recoverable by the receiver of a special purpose financial captive
1356
insurance company under a reinsurance contract may not be reduced or diminished as a result
1357
of the entry of an order of conservation, rehabilitation, or liquidation with respect to a ceding
1358
insurer, notwithstanding a contract or other documentation governing the special purpose
1359
financial captive insurance company insurance securitization.
1360
(4) The following applies notwithstanding Title 31A, Chapter 27a, Insurer
1361
Receivership Act, or another law of this state:
1362
(a) An application or petition or a temporary restraining order or injunction issued
1363
pursuant to Title 31A, Chapter 27a, Insurer Receivership Act, with respect to a ceding insurer
1364
does not prohibit the transaction of business by a special purpose financial captive insurance
1365
company, including:
1366
(i) a payment by a special purpose financial captive insurance company made with
1367
respect to a special purpose financial captive insurance company security; or
1368
(ii) an action or proceeding against a special purpose financial captive insurance
1369
company or its assets.
1370
(b) (i) Subject to Subsection (4)(b)(ii), the commencement of a summary proceeding
1371
with respect to a special purpose financial captive insurance company and an order issued by
1372
the court in the summary proceeding may not prohibit:
1373
(A) a payment by a special purpose financial captive insurance company; or
1374
(B) the special purpose financial captive insurance company from taking an action
1375
required to make a payment described in this Subsection (4)(b)(i).
1376
(ii) Subsection (4)(b)(i) applies only if the payment is made:
1377
(A) pursuant to a special purpose financial captive insurance company security or
1378
reinsurance contract; and
1379
(B) consistent with the special purpose financial captive insurance company's plan of
1380
operation and any order issued to the special purpose financial captive insurance company
1381
pursuant to Section
31A-37a-201
.
1382
(c) A receiver of a ceding insurer may not void a nonfraudulent transfer by a ceding
1383
insurer to a special purpose financial captive insurance company of money or other property
1384
made pursuant to a reinsurance contract.
1385
(d) A receiver of a special purpose financial captive insurance company may not void a
1386
nonfraudulent transfer by the special purpose financial captive insurance company of money or
1387
other property:
1388
(i) (A) made to a ceding insurer pursuant to a reinsurance contract; or
1389
(B) made to or for the benefit of a holder of a special purpose financial captive
1390
insurance company security with respect to the special purpose financial captive insurance
1391
company security; and
1392
(ii) made consistent with the special purpose financial captive insurance company's
1393
plan of operation and an order issued to the special purpose financial captive insurance
1394
company pursuant to Section
31A-37a-201
.
1395
(5) (a) Except to fulfill an obligation under a reinsurance contract and notwithstanding
1396
another provision of this chapter, Chapter 37, Captive Insurance Companies Act, or other laws
1397
of this state, the assets of a special purpose financial captive insurance company may not be
1398
consolidated with or included in the estate of a ceding insurer in a delinquency proceeding
1399
against the ceding insurer pursuant to this chapter for any purpose including a distribution to a
1400
creditor of the ceding insurer.
1401
(b) This Subsection (5) applies to assets that include an asset held in trust:
1402
(i) on a funds-withheld basis; or
1403
(ii) under another arrangement to secure the special purpose financial captive insurance
1404
company's obligations under a reinsurance contract.
Legislative Review Note
as of 11-15-07 8:48 AM