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General Assembly Raised Bill No. 5374
February Session, 2020
LCO No. 2099
Referred to Committee on INSURANCE AND REAL ESTATE
Introduced by:
(INS)
AN ACT EXEMPTING CER TAIN INSUREDS FROM THE INSURANCE
PREMIUM TAX.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. Section 38a-91aa of the general statutes is repealed and the 1
following is substituted in lieu thereof (Effective July 1, 2020): 2
As used in sections 38a-91aa to 38a-91tt, inclusive, [and] sections 38a-3
91ww and 38a-91xx, and section 2 of this act: 4
(1) "Affiliated company" means any company in the same corporate 5
system as a parent, an industrial insured or a member organization by 6
virtue of common ownership, control, operation or management. 7
(2) "Agency captive insurance company" means a captive insurance 8
company that: 9
(A) Is owned or directly or indirectly controlled by one or more 10
insurance agents or insurance producers licensed in accordance with 11
sections 38a-702a to 38a-702r, inclusive; 12
(B) Only insures against risks covered by insurance policies sold, 13 Raised Bill No. 5374
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solicited or negotiated through the insurance agents or insurance 14
producers that own or control such captive insurance company; and 15
(C) Does not insure against risks covered by any health insurance 16
policy or plan. 17
(3) "Alien captive insurance company" means any insurance 18
company formed to write insurance business for its parent and affiliated 19
companies and licensed pursuant to the laws of an alien jurisdiction that 20
imposes statutory or regulatory standards on companies transacting the 21
business of insurance in such jurisdiction that the commissioner deems 22
to be acceptable. 23
(4) "Association" means any legal association of individuals, 24
corporations, limited liability companies, partnerships, associations or 25
other entities that has been in continuous existence for at least one year, 26
where the association itself or some or all of the member organizations: 27
(A) Directly or indirectly own, control or hold with power to vote all 28
of the outstanding voting securities or other voting interests of an 29
association captive insurance company incorporated as a stock insurer; 30
(B) Have complete voting control over an association captive 31
insurance company incorporated as a mutual corporation or formed as 32
a limited liability company; or 33
(C) Constitute all of the subscribers of an association captive 34
insurance company formed as a reciprocal insurer. 35
(5) "Association captive insurance company" means any company 36
that insures risks of the member organizations of an association, and 37
includes a company that also insures risks of such member 38
organizations' affiliated companies or of the association. 39
(6) "Branch business" means any insurance business transacted in this 40
state by a branch captive insurance company. 41
(7) "Branch captive insurance company" means any alien captive 42 Raised Bill No. 5374
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insurance company licensed by the commissioner to transact the 43
business of insurance in this state through a business unit with a 44
principal place of business in this state. 45
(8) "Branch operations" means any business operations in this state of 46
a branch captive insurance company. 47
(9) "Captive insurance company" means any (A) pure captive 48
insurance company, agency captive insurance company, association 49
captive insurance company, industrial insured captive insurance 50
company, risk retention group, sponsored captive insurance company 51
or special purpose financial captive insurance company that is 52
domiciled in this state and formed or licensed under the provisions of 53
sections 38a-91aa to 38a-91tt, inclusive, or (B) branch captive insurance 54
company. 55
(10) "Ceding insurer" means an insurance company, approved by the 56
commissioner and licensed or otherwise authorized to transact the 57
business of insurance or reinsurance in its state or country of domicile, 58
that cedes risk to a special purpose financial captive insurance company 59
pursuant to a reinsurance contract. 60
(11) "Commissioner" means the Insurance Commissioner. 61
(12) "Controlled unaffiliated business" means any person: 62
(A) Who, (i) in the case of a pure captive insurance company, is not 63
in the corporate system of a parent and the parent's affiliated companies, 64
or (ii) in the case of an industrial insured captive insurance company, is 65
not in the corporate system of an industrial insured and the industrial 66
insured's affiliated companies; 67
(B) Who, (i) in the case of a pure captive insurance company, has an 68
existing contractual relationship with a parent or one of the parent's 69
affiliated companies, or (ii) in the case of an industrial insured captive 70
insurance company, has an existing contractual relationship with an 71
industrial insured or one of the industrial insured's affiliated companies; 72 Raised Bill No. 5374
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and 73
(C) Whose risks are managed by a pure captive insurance company 74
or an industrial insured captive insurance company, as applicable, in 75
accordance with section 38a-91qq. 76
(13) "Excess workers' compensation insurance" means, in the case of 77
an employer that has insured or self-insured its workers' compensation 78
risks in accordance with applicable state or federal law, insurance in 79
excess of a specified per-incident or aggregate limit established by the 80
commissioner. 81
(14) "Incorporated protected cell" means a protected cell that is 82
established as a corporation or a limited liability company, separate 83
from the sponsored captive insurance company with which it has 84
entered into a participant contract. 85
(15) "Industrial insured" means an insured: 86
(A) Who procures the insurance of any risk or risks by use of the 87
services of a full-time employee acting as an insurance manager or 88
buyer; 89
(B) Whose aggregate annual premiums for insurance on all risks total 90
at least twenty-five thousand dollars; and 91
(C) Who has at least twenty-five full-time employees. 92
(16) "Industrial insured captive insurance company" means any 93
company that insures risks of the industrial insureds that comprise an 94
industrial insured group, and includes a company that also insures risks 95
of such industrial insureds' affiliated companies. 96
(17) "Industrial insured group" means any group of industrial 97
insureds that collectively: 98
(A) Directly or indirectly own, control or hold with power to vote all 99
of the outstanding voting securities or other voting interests of an 100 Raised Bill No. 5374
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industrial insured captive insurance company incorporated as a stock 101
insurer; 102
(B) Have complete voting control over an industrial insured captive 103
insurance company incorporated as a mutual corporation or formed as 104
a limited liability company; or 105
(C) Constitute all of the subscribers of an industrial insured captive 106
insurance company formed as a reciprocal insurer. 107
(18) "Insurance securitization" or "securitization" means a transaction 108
or a group of related transactions, which may include capital market 109
offerings, that are effected through related risk transfer instruments and 110
facilitating administrative agreements, in which all or part of the result 111
of such transaction is used to fund a special purpose financial captive 112
insurance company's obligations under a reinsurance contract with a 113
ceding insurer and by which: 114
(A) A special purpose financial captive insurance company directly 115
or indirectly obtains proceeds through the issuance of securities by such 116
company or any other person; or 117
(B) A person provides, for the benefit of a special purpose financial 118
captive insurance company, one or more letters of credit or other assets 119
that the commissioner has authorized such company to treat as 120
admitted assets for purposes of its annual report. "Insurance 121
securitization" or "securitization" does not include the issuance of a 122
letter of credit for the benefit of the commissioner to satisfy all or part of 123
a special purpose financial captive insurance company's capital and 124
surplus requirements under section 38a-91dd. 125
(19) "Member organization" means any individual, corporation, 126
limited liability company, partnership, association or other entity that 127
belongs to an association. 128
(20) "Mutual corporation" means a corporation organized without 129
stockholders and includes a nonprofit corporation with members. 130 Raised Bill No. 5374
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(21) "Parent" means any individual, corporation, limited liability 131
company, partnership or other entity that directly or indirectly owns, 132
controls or holds with power to vote more than fifty per cent of the 133
outstanding voting: 134
(A) Securities of a pure captive insurance company organized as a 135
stock insurer; or 136
(B) Membership interests of a pure captive insurance company 137
organized as a nonprofit corporation or as a limited liability company. 138
(22) "Participant" means any association, corporation, limited liability 139
company, partnership, trust or other entity, and any affiliated company 140
thereof, that is insured by a sponsored captive insurance company 141
pursuant to a participant contract. 142
(23) "Participant contract" means a contract entered into by a 143
sponsored captive insurance company and a participant by which the 144
sponsored captive insurance company insures the risks of the 145
participant and limits the losses of each such participant to its pro rata 146
share of the assets of one or more protected cells identified in such 147
participant contract. 148
(24) "Protected cell" means a separate account established by a 149
sponsored captive insurance company, in which assets are maintained 150
for one or more participants in accordance with the terms of one or more 151
participant contracts to fund the liability of the sponsored captive 152
insurance company assumed on behalf of such participants as set forth 153
in such participant contracts. 154
(25) "Pure captive insurance company" means any company that 155
insures risks of its parent and affiliated companies or controlled 156
unaffiliated business. 157
(26) "Reinsurance contract" means a contract entered into by a special 158
purpose financial captive insurance company and a ceding insurer by 159
which the special purpose financial captive insurance company agrees 160 Raised Bill No. 5374
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to provide reinsurance to the ceding insurer for risks associated with the 161
ceding insurer's insurance or reinsurance business. 162
(27) "Risk retention group" means a captive insurance company 163
organized under the laws of this state pursuant to the federal Liability 164
Risk Retention Act of 1986, 15 USC 3901 et seq., as amended from time 165
to time, as a stock insurer or mutual corporation, a reciprocal or other 166
limited liability entity. 167
(28) "Security" has the same meaning as provided in section 36b-3 and 168
includes any form of debt obligation, equity, surplus certificate, surplus 169
note, funding agreement, derivative or other financial instrument that 170
the commissioner designates as a security for purposes of sections 38a-171
91aa to 38a-91tt, inclusive. 172
(29) "Special purpose financial captive insurance company" means a 173
company that is licensed by the commissioner in accordance with 174
section 38a-91bb. 175
(30) "Special purpose financial captive insurance company security" 176
means a security issued by (A) a special purpose financial captive 177
insurance company, or (B) a third party, the proceeds of which are 178
obtained directly or indirectly by a special purpose financial captive 179
insurance company. 180
(31) "Sponsor" means any association, corporation, limited liability 181
company, partnership, trust or other entity that is approved by the 182
commissioner to organize and operate a sponsored captive insurance 183
company and to provide all or part of the required unimpaired paid-in 184
capital and surplus. 185
(32) "Sponsored captive insurance company" means a captive 186
insurance company: 187
(A) In which the minimum required unimpaired paid-in capital and 188
surplus are provided by one or more sponsors; 189
(B) That insures risks of its participants only through separate 190 Raised Bill No. 5374
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participant contracts; and 191
(C) That funds its liability to each participant through one or more 192
protected cells and segregates the assets of each protected cell from the 193
assets of other protected cells and from the assets of the sponsored 194
captive insurance company's general account. 195
(33) "Surplus note" means an unsecured subordinated debt obligation 196
possessing characteristics consistent with the National Association of 197
Insurance Commissioners Statement of Statutory Accounting Principles 198
No. 41, as amended from time to time, and as modified or supplemented 199
by the commissioner. 200
Sec. 2. (NEW) (Effective July 1, 2020) Notwithstanding any provision 201
of the general statutes, an insured shall be exempt from all taxes, interest 202
and penalties due under section 38a-277 of the general statutes for any 203
taxable period beginning on or after July 1, 2016, if the insured is: 204
(1) (A) A town, city, borough, consolidated town and city, 205
consolidated town and borough, regional school district, board of 206
education or regional educational service center in this state; or 207
(B) An association, or a member organization of an association, that 208
limits its membership to the entities described in subparagraph (A) of 209
this subdivision; and 210
(2) Insured by an association captive insurance company that (A) 211
insures risks of the member organizations of the association described 212
in subparagraph (B) of subdivision (1) of this section, or (B) insures the 213
risks of such member organizations and such association. 214
This act shall take effect as follows and shall amend the following
sections:
Section 1 July 1, 2020 38a-91aa
Sec. 2 July 1, 2020 New section
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Statement of Purpose:
To exempt certain insureds insured by an association captive insurance
company from the insurance premium tax.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
underlined.]