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General Assembly Raised Bill No. 339
February Session, 2020
LCO No. 1825
Referred to Committee on INSURANCE AND REAL ESTATE
Introduced by:
(INS)
AN ACT CONCERNING TH E INSURANCE DEPARTME NT'S
RECOMMENDATIONS REGA RDING CAPTIVE INSURANCE
COMPANIES.
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 Section 38a-91aa of the general statutes is repealed and the 1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] 38a-91uu, inclusive, [and] 3
as amended by this act, sections 38a-91ww and 38a-91xx and section 2 4
of this act: 5
(1) "Affiliated company" means any company in the same corporate 6
system as a parent, an industrial insured or a member organization by 7
virtue of common ownership, control, operation or management. 8
(2) "Agency captive insurance company" means a captive insurance 9
company that: 10
(A) Is owned or directly or indirectly controlled by one or more 11
insurance agents or insurance producers licensed in accordance with 12 Raised Bill No. 339
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sections 38a-702a to 38a-702r, inclusive; 13
(B) Only insures against risks covered by insurance policies sold, 14
solicited or negotiated through the insurance agents or insurance 15
producers that own or control such captive insurance company; and 16
(C) Does not insure against risks covered by any health insurance 17
policy or plan. 18
(3) "Alien captive insurance company" means any insurance 19
company formed to write insurance business for its parent and affiliated 20
companies and licensed pursuant to the laws of an alien jurisdiction that 21
imposes statutory or regulatory standards on companies transacting the 22
business of insurance in such jurisdiction that the commissioner deems 23
to be acceptable. 24
(4) "Association" means any legal association of individuals, 25
corporations, limited liability companies, partnerships, associations or 26
other entities [that has been in continuous existence for at least one 27
year,] where the association itself or some or all of the member 28
organizations: 29
(A) Directly or indirectly own, control or hold with power to vote all 30
of the outstanding voting securities or other voting interests of an 31
association captive insurance company incorporated as a stock insurer; 32
(B) Have complete voting control over an association captive 33
insurance company incorporated as a mutual corporation or formed as 34
a limited liability company; or 35
(C) Constitute all of the subscribers of an association captive 36
insurance company formed as a reciprocal insurer. 37
(5) "Association captive insurance company" means any company 38
that insures risks of the member organizations of an association, and 39
includes a company that also insures risks of such member 40
organizations' affiliated companies or of the association. 41 Raised Bill No. 339
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(6) "Branch business" means any insurance business transacted in this 42
state by a branch captive insurance company. 43
(7) "Branch captive insurance company" means any alien captive 44
insurance company or foreign captive insurance company licensed by 45
the commissioner to transact the business of insurance in this state 46
through a business unit with a principal place of business in this state. 47
(8) "Branch operations" means any business operations in this state of 48
a branch captive insurance company. 49
(9) "Captive insurance company" means any (A) pure captive 50
insurance company, agency captive insurance company, association 51
captive insurance company, industrial insured captive insurance 52
company, risk retention group, sponsored captive insurance company 53
or special purpose financial captive insurance company that is 54
domiciled in this state and formed or licensed under the provisions of 55
sections 38a-91aa to 38a-91tt, inclusive, as amended by this act, or (B) 56
branch captive insurance company. 57
(10) "Ceding insurer" means an insurance company, approved by the 58
commissioner and licensed or otherwise authorized to transact the 59
business of insurance or reinsurance in its state or country of domicile, 60
that cedes risk to a special purpose financial captive insurance company 61
pursuant to a reinsurance contract. 62
(11) "Commissioner" means the Insurance Commissioner. 63
(12) "Controlled unaffiliated business" means any person: 64
(A) Who, (i) in the case of a pure captive insurance company, is not 65
in the corporate system of a parent and the parent's affiliated companies, 66
or (ii) in the case of an industrial insured captive insurance company, is 67
not in the corporate system of an industrial insured and the industrial 68
insured's affiliated companies; 69
(B) Who, (i) in the case of a pure captive insurance company, has an 70
existing contractual relationship with a parent or one of the parent's 71 Raised Bill No. 339
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affiliated companies, or (ii) in the case of an industrial insured captive 72
insurance company, has an existing contractual relationship with an 73
industrial insured or one of the industrial insured's affiliated companies; 74
and 75
(C) Whose risks are managed by a pure captive insurance company 76
or an industrial insured captive insurance company, as applicable, in 77
accordance with section 38a-91qq. 78
(13) "Excess workers' compensation insurance" means, in the case of 79
an employer that has insured or self-insured its workers' compensation 80
risks in accordance with applicable state or federal law, insurance in 81
excess of a specified per-incident or aggregate limit established by the 82
commissioner. 83
(14) "Foreign captive insurance company" means any insurance 84
company formed to write insurance business for its parent and affiliated 85
companies and licensed pursuant to the laws of a foreign jurisdiction 86
that imposes statutory or regulatory standards on comp anies 87
transacting the business of insurance in such jurisdiction that the 88
commissioner deems to be acceptable. 89
[(14)] (15) "Incorporated protected cell" means a protected cell that is 90
established as a corporation or a limited liability company, separate 91
from the sponsored captive insurance company, with which [it] such 92
sponsored captive insurance company has entered into a participant 93
contract. 94
[(15)] (16) "Industrial insured" means an insured: 95
(A) Who procures the insurance of any risk or risks by use of the 96
services of a full-time employee acting as an insurance manager or 97
buyer; 98
(B) Whose aggregate annual premiums for insurance on all risks total 99
at least twenty-five thousand dollars; and 100
(C) Who has at least twenty-five full-time employees. 101 Raised Bill No. 339
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[(16)] (17) "Industrial insured captive insurance company" means any 102
company that insures risks of the industrial insureds that comprise an 103
industrial insured group, and includes a company that also insures risks 104
of such industrial insureds' affiliated companies. 105
[(17)] (18) "Industrial insured group" means any group of industrial 106
insureds that collectively: 107
(A) Directly or indirectly own, control or hold with power to vote all 108
of the outstanding voting securities or other voting interests of an 109
industrial insured captive insurance company incorporated as a stock 110
insurer; 111
(B) Have complete voting control over an industrial insured captive 112
insurance company incorporated as a mutual corporation or formed as 113
a limited liability company; or 114
(C) Constitute all of the subscribers of an industrial insured captive 115
insurance company formed as a reciprocal insurer. 116
[(18)] (19) "Insurance securitization" or "securitization" means a 117
transaction or a group of related transactions, which may include capital 118
market offerings, that are effected through related risk transfer 119
instruments and facilitating administrative agreements, in which all or 120
part of the result of such transaction is used to fund a special purpose 121
financial captive insurance company's obligations under a reinsurance 122
contract with a ceding insurer and by which: 123
(A) A special purpose financial captive insurance company directly 124
or indirectly obtains proceeds through the issuance of securities by such 125
company or any other person; or 126
(B) A person provides, for the benefit of a special purpose financial 127
captive insurance company, one or more letters of credit or other assets 128
that the commissioner has authorized such company to treat as 129
admitted assets for purposes of its annual report. "Insurance 130
securitization" or "securitization" does not include the issuance of a 131 Raised Bill No. 339
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letter of credit for the benefit of the commissioner to satisfy all or part of 132
a special purpose financial captive insurance company's capital and 133
surplus requirements under section 38a-91dd, as amended by this act. 134
[(19)] (20) "Member organization" means any individual, corporation, 135
limited liability company, partnership, association or other entity that 136
belongs to an association. 137
[(20)] (21) "Mutual corporation" means a corporation organized 138
without stockholders and includes a nonprofit corporation with 139
members. 140
[(21)] (22) "Parent" means any individual, corporation, limited 141
liability company, partnership or other entity that directly or indirectly 142
owns, controls or holds with power to vote more than fifty per cent of 143
the outstanding voting: 144
(A) Securities of a pure captive insurance company organized as a 145
stock insurer; or 146
(B) Membership interests of a pure captive insurance company 147
organized as a nonprofit corporation or as a limited liability company. 148
[(22)] (23) "Participant" means any association, corporation, limited 149
liability company, partnership, trust or other entity, and any affiliated 150
company thereof, that is insured by a sponsored captive insurance 151
company pursuant to a participant contract. 152
[(23)] (24) "Participant contract" means a contract entered into by a 153
sponsored captive insurance company and a participant by which the 154
sponsored captive insurance company insures the risks of the 155
participant and limits the losses of each such participant to its pro rata 156
share of the assets of one or more protected cells identified in such 157
participant contract. 158
[(24)] (25) "Protected cell" means a separate account established by a 159
sponsored captive insurance company, in which assets are maintained 160
for one or more participants in accordance with the terms of one or more 161 Raised Bill No. 339
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participant contracts to fund the liability of the sponsored captive 162
insurance company assumed on behalf of such participants as set forth 163
in such participant contracts. 164
[(25)] (26) "Pure captive insurance company" means any company 165
that insures risks of its parent and affiliated companies or controlled 166
unaffiliated business. 167
[(26)] (27) "Reinsurance contract" means a contract entered into by a 168
special purpose financial captive insurance company and a ceding 169
insurer by which the special purpose financial captive insurance 170
company agrees to provide reinsurance to the ceding insurer for risks 171
associated with the ceding insurer's insurance or reinsurance business. 172
[(27)] (28) "Risk retention group" means a captive insurance company 173
organized under the laws of this state pursuant to the federal Liability 174
Risk Retention Act of 1986, 15 USC 3901 et seq., as amended from time 175
to time, as a stock insurer or mutual corporation, a reciprocal or other 176
limited liability entity. 177
[(28)] (29) "Security" has the same meaning as provided in section 178
36b-3 and includes any form of debt obligation, equity, surplus 179
certificate, surplus note, funding agreement, derivative or other 180
financial instrument that the commissioner designates as a security for 181
purposes of sections 38a-91aa to 38a-91tt, inclusive, as amended by this 182
act. 183
[(29)] (30) "Special purpose financial captive insurance company" 184
means a company that is licensed by the commissioner in accordance 185
with section 38a-91bb, as amended by this act. 186
[(30)] (31) "Special purpose financial captive insurance company 187
security" means a security issued by (A) a special purpose financial 188
captive insurance company, or (B) a third party, the proceeds of which 189
are obtained directly or indirectly by a special purpose financial captive 190
insurance company. 191 Raised Bill No. 339
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[(31)] (32) "Sponsor" means any association, corporation, limited 192
liability company, partnership, trust or other entity that is approved by 193
the commissioner to organize and operate a sponsored captive 194
insurance company and to provide all or part of the required 195
unimpaired paid-in capital and surplus. 196
[(32)] (33) "Sponsored captive insurance company" means a captive 197
insurance company: 198
(A) In which the minimum required unimpaired paid-in capital and 199
surplus are provided by one or more sponsors; 200
(B) That insures risks of its participants only through separate 201
participant contracts; and 202
(C) That funds its liability to each participant through one or more 203
protected cells and segregates the assets of each protected cell from the 204
assets of other protected cells and from the assets of the sponsored 205
captive insurance company's general account. 206
[(33)] (34) "Surplus note" means an unsecured subordinated debt 207
obligation possessing characteristics consistent with the National 208
Association of Insurance Commissioners Statement of Statutory 209
Accounting Principles No. 41, as amended from time to time, and as 210
modified or supplemented by the commissioner. 211
Sec. 2. (NEW) (Effective July 1, 2020) (a) The Commissioner of Revenue 212
Services shall waive any and all penalties that would otherwise be due 213
under section 38a-277 of the general statutes for any taxable period 214
beginning on or after July 1, 2017, and ending prior to July 1, 2020, if the 215
insured: 216
(1) Establishes a branch captive insurance company in this state, or 217
transfers the domicile of its alien captive insurance company or foreign 218
captive insurance company to this state in accordance with the 219
provisions of section 38a-58a of the general statutes, not later than July 220
1, 2021; and 221 Raised Bill No. 339
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(2) Pays all taxes and interest due and outstanding under section 38a-222
277 of the general statutes for all taxable periods ending on or after July 223
1, 2017, but before July 1, 2020, not later than forty-five days after such 224
insured satisfies the provisions of subdivision (1) of this subsection. 225
(b) Any insured that satisfies the provisions of subsection (a) of this 226
section shall not be liable for any taxes, interest and penalties that would 227
otherwise be due under section 38a-277 of the general statutes for any 228
taxable period ending prior to July 1, 2017. 229
Sec. 3. Section 38a-91bb of the general statutes is repealed and the 230
following is substituted in lieu thereof (Effective July 1, 2020): 231
(a) Any captive insurance company, when permitted by its articles of 232
association, charter or other organizational document, may apply to the 233
[Insurance Commissioner] commissioner for a license to do the business 234
of insurance against any kind of loss, damage or liability properly a 235
subject of insurance, if such insurance is not prohibited by law or [is not] 236
disapproved by the commissioner as being contrary to public policy, 237
including life insurance, annuities, health insurance, as defined in 238
section 38a-469, and commercial risk insurance, as defined in section 239
38a-663, provided: 240
(1) No pure captive insurance company may insure any risks other 241
than those of its parent and affiliated companies or controlled 242
unaffiliated business; 243
(2) No association captive insurance company may insure any risks 244
other than those of its association, the member organizations of its 245
association, and the member organizations' affiliated companies; 246
(3) No industrial insured captive insurance company may insure any 247
risks other than those of (A) the industrial insureds that comprise the 248
industrial insured group, (B) the industrial insureds' affiliated 249
companies, or (C) the industrial insureds' controlled unaffiliated 250
businesses; 251 Raised Bill No. 339
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(4) No risk retention group may insure any risks other than those of 252
its members and owners; 253
(5) No captive insurance company may provide personal risk 254
insurance, as defined in section 38a-663, for private passenger motor 255
vehicle or homeowners insurance coverage or any component thereof; 256
(6) No captive insurance company may accept or cede reinsurance 257
except as provided in section 38a-91kk; 258
(7) Any captive insurance company may provide excess workers' 259
compensation insurance to its parent and affiliated companies, unless 260
prohibited by the laws of the state having jurisdiction over the 261
transaction or by federal law. Any captive insurance company may 262
reinsure a workers' compensation qualified self-insured plan of its 263
parent and affiliated companies, unless prohibited by federal law; 264
(8) Any captive insurance company that provides life insurance, 265
annuities or health insurance shall comply with all applicable state and 266
federal laws. 267
(b) No captive insurance company shall do any insurance business in 268
this state unless: 269
(1) [It] The captive insurance company first obtains from the 270
[Insurance Commissioner] commissioner (A) a license authorizing [it] 271
the captive insurance company to do insurance business in this state, or 272
(B) a conditional certificate of authority under subsection (f) of this 273
section; 274
[(2) Its board of directors or committee of managers or, in the case of 275
a reciprocal insurer, its subscribers' advisory committee holds at least 276
one meeting each year in this state;] 277
[(3) It] (2) The captive insurance company maintains its principal 278
place of business in this state; and 279
[(4) It] (3) The captive insurance company appoints a registered agent 280 Raised Bill No. 339
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to accept service of process and to otherwise act on its behalf in this state. 281
Whenever such registered agent cannot with reasonable diligence be 282
found at the registered office of the captive insurance company, the 283
[Insurance Commissioner] commissioner shall be an agent of [such] the 284
captive insurance company upon whom any process, notice or demand 285
may be served. 286
(c) (1) To be considered for a license, a captive insurance company 287
shall: 288
(A) File with the commissioner a certified copy of its organizational 289
documents, a statement under oath of its president and secretary 290
showing its financial condition, and any other statements or documents 291
required by the commissioner; and 292
(B) Submit to the commissioner for approval a description of the 293
coverages, deductibles, coverage limits and rates and such additional 294
information as the commissioner may require. In the event of any 295
subsequent material change in any item in such description, the captive 296
insurance company shall submit to the commissioner for approval an 297
appropriate revision and shall not offer any additional kinds of 298
insurance until a revision of such description is approved by the 299
commissioner. The captive insurance company shall inform the 300
commissioner of any material change in rates not later than thirty days 301
after the adoption of such change. 302
(2) Each applicant captive insurance company shall also file with the 303
commissioner evidence of the following: 304
(A) The amount and liquidity of the company's assets relative to the 305
risks to be assumed; 306
(B) The adequacy of the expertise, experience and character of the 307
persons who will manage the company; 308
(C) The overall soundness of the company's plan of operation; 309
(D) The adequacy of the loss prevention programs of the company's 310 Raised Bill No. 339
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insureds; and 311
(E) Such other factors deemed relevant by the commissioner in 312
ascertaining whether the proposed captive insurance company will be 313
able to meet its policy obligations. 314
(3) Each applicant sponsored captive insurance company shall also 315
file with the commissioner: 316
(A) Materials demonstrating how the applicant will account for the 317
loss and expense experience of each protected cell at a level of detail 318
deemed sufficient by the commissioner, and how [it] such applicant will 319
report such experience to the commissioner; 320
(B) A statement acknowledging that all financial records of the 321
sponsored captive insurance company, including records pertaining to 322
any protected cells, shall be made available for examination or 323
inspection or by the commissioner or the commissioner's designee; 324
(C) All contracts or sample contracts between the sponsored captive 325
insurance company and any participants; and 326
(D) Evidence that expenses shall be allocated to each protected cell in 327
a fair and equitable manner. 328
(4) Each applicant special purpose financial captive insurance 329
company shall also: 330
(A) Include with its plan of operation: 331
(i) A complete description of all significant transactions, including 332
reinsurance, reinsurance security arrangements, securitizations, related 333
transactions or arrangements, and to the extent not included in the 334
transactions listed in this clause, a complete description of all parties 335
other than the special purpose financial captive insurance company and 336
the ceding insurer that will be involved in the issuance of special 337
purpose financial captive insurance company securities and a 338
description of any pledge, hypothecation or grant of a security interest 339 Raised Bill No. 339
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in any of the special purpose financial captive insurance company's 340
assets and in any stock or limited liability company interest in the 341
special purpose financial captive insurance company; 342
(ii) The source and form of the special purpose financial captive 343
insurance company's capital and surplus; 344
(iii) The proposed investment policy of the special purpose financial 345
captive insurance company; 346
(iv) A description of the underwriting, reporting and claims payment 347
methods by which losses covered by the reinsurance contract will be 348
reported, accounted for and settled; 349
(v) Pro forma balance sheets and income statements illustrating one 350
or more adverse case scenarios, as determined under criteria required 351
by the commissioner, for the performance of the special purpose 352
financial captive insurance company under all reinsurance contracts; 353
and 354
(vi) The proposed rate and method for discounting reserves, if the 355
special purpose financial captive insurance company is requesting 356
authority to discount its reserves; 357
(B) Submit an affidavit of its president, a vice president, its treasurer 358
or its chief financial officer that includes the following statements, that 359
to the best of such person's knowledge and belief after reasonable 360
inquiry: 361
(i) The proposed organization and operation of the special purpose 362
financial captive insurance company comply with all applicable 363
provisions of this chapter; 364
(ii) The special purpose financial captive insurance company's 365
investment policy reflects and takes into account the liquidity of assets 366
and the reasonable preservation, administration and management of 367
such assets with respect to the risks associated with the reinsurance 368
contract and the insurance securitization transaction. With respect to a 369 Raised Bill No. 339
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special purpose financial captive insurance company, "management" 370
means the board of directors, managing board or other individual or 371
individuals vested with overall responsibility for the management of the 372
affairs of such company, including, but not limited to, officers or other 373
agents elected or appointed to act on behalf of such company; and 374
(iii) The reinsurance contract and any arrangement for securing the 375
special purpose financial captive insurance company's obligations 376
under such reinsurance contract, including, but not limited to, any 377
agreements or other documentation to implement such arrangement, 378
comply with the provisions of this chapter; and 379
(C) Include with its application: 380
(i) Copies of all agreements and documentation described in 381
subparagraph (A) of this subdivision unless otherwise approved by the 382
commissioner, and any other statements or documents required by the 383
commissioner to evaluate the special purpose financial captive 384
insurance company's application for licensure; and 385
(ii) An opinion of qualified legal counsel, in a form acceptable to the 386
commissioner, that the offer and sale of any special purpose financial 387
captive insurance company securities complies with all applicable 388
registration requirements or applicable exemptions from or exceptions 389
to such requirements of the federal securities laws and that the offer and 390
sale of securities by the special purpose financial captive insurance 391
company itself comply with all registration requirements or applicable 392
exemptions from or exceptions to such requirements of the securities 393
laws of this state. Such opinion shall not be required as part of the 394
application if the special purpose financial captive insurance company 395
includes a specific statement in its plan of operation that such opinions 396
will be provided to the commissioner in advance of the offer or sale of 397
any special purpose financial captive insurance company securities. 398
(5) A sponsored captive insurance company may apply to be licensed 399
as a special purpose financial captive insurance company. Such 400
company shall be subject to the provisions of sections 38a-91aa to 38a-401 Raised Bill No. 339
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91tt, inclusive, as amended by this act, applicable to a sponsored captive 402
insurance company and to a special purpose financial captive insurance 403
company. In the event of conflict between such provisions applicable to 404
a sponsored captive insurance company and to a special purpose 405
financial captive insurance company, the provisions applicable to a 406
special purpose financial captive insurance company shall control. 407
(6) Information submitted pursuant to this subsection shall be and 408
shall remain confidential and shall not be made public by the 409
commissioner or an employee or agent of the commissioner without the 410
written consent of the company, except that: 411
(A) Such information may be discoverable by a party in a civil action 412
or contested case to which the captive insurance company that 413
submitted such information is a party upon a showing by the party 414
seeking to discover such information that: 415
(i) The information sought is relevant to and necessary for the 416
furtherance of such action or case; 417
(ii) The information sought is unavailable from other nonconfidential 418
sources; and 419
(iii) A subpoena issued by a judicial or administrative officer of 420
competent jurisdiction has been submitted to the commissioner, 421
provided such submission requirement shall not apply to a risk 422
retention group; and 423
(B) The commissioner may, in the commissioner's discretion, disclose 424
such information to a public official having jurisdiction over the 425
regulation of insurance in another state, provided: 426
(i) Such public official agrees, in writing, to maintain the 427
confidentiality of such information; and 428
(ii) The laws of the state in which such public official serves require 429
such information to be and [to] remain confidential. 430 Raised Bill No. 339
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(d) (1) Each captive insurance company shall pay to the commissioner 431
a nonrefundable fee of eight hundred dollars for examining, 432
investigating and processing its application for a license. The 433
commissioner may retain legal, financial and examination services from 434
outside the department for the licensing and financial oversight of a 435
captive insurance company, the reasonable cost of which may be 436
charged against such company. The provisions of subdivisions (2) to (5), 437
inclusive, of subsection (k) of section 38a-14 shall apply to this 438
subdivision. 439
(2) Each captive insurance company shall pay a license fee for the first 440
year of licensure and a renewal fee for each year thereafter as set forth 441
in section 38a-11. 442
(e) (1) If the commissioner finds that the documents and statements 443
that a captive insurance company, other than a special purpose financial 444
captive insurance company, has filed comply with the provisions of 445
sections 38a-91aa to 38a-91tt, inclusive, as amended by this act, the 446
commissioner may grant a license authorizing the company to do 447
insurance business in this state until April first thereafter. The captive 448
insurance company may apply to renew such license on such forms as 449
the commissioner prescribes. 450
(2) (A) The commissioner may grant a license authorizing a special 451
purpose financial captive insurance company to do reinsurance 452
business in this state until April first thereafter upon the commissioner's 453
finding that (i) the proposed plan of operation provides for a reasonable 454
and expected successful operation, (ii) the terms of the reinsurance 455
contract and related transactions comply with sections 38a-91aa to 38a-456
91tt, inclusive, as amended by this act, (iii) the proposed plan of 457
operation is not hazardous to any ceding insurer, and (iv) the insurance 458
regulator of the state of domicile of each ceding insurer has notified the 459
commissioner in writing or has otherwise provided assurance 460
satisfactory to the commissioner that such regulator has approved or 461
has not disapproved the transaction, provided the commissioner shall 462
not be precluded from issuing a license to a special purpose financial 463 Raised Bill No. 339
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captive insurance company if such regulator has not responded with 464
respect to all or any part of the transaction. 465
(B) In conjunction with granting such license, the commissioner may 466
issue an order to the special purpose financial captive insurance 467
company of any additional provisions, terms or conditions regarding 468
the organization, licensing or operation of such company that are not 469
inconsistent with the provisions of this chapter and are deemed 470
appropriate by the commissioner. 471
(3) The commissioner shall not grant a license to a branch captive 472
insurance company unless the alien captive insurance company or 473
foreign captive insurance company grants the commissioner authority 474
to examine the alien captive insurance company or foreign captive 475
insurance company in the jurisdiction in which the alien captive 476
insurance company or foreign captive insurance company is formed, 477
operates or maintains books and records. 478
(f) (1) The commissioner may, in the commissioner's sole discretion, 479
grant to a captive insurance company a conditional certificate of 480
authority to do insurance business in this state until the commissioner 481
completes examining, investigating and processing the captive 482
insurance company's application for a license if the captive insurance 483
company submits to the commissioner: 484
(A) Evidence that the captive insurance company possesses capital 485
and surplus that satisfies the requirements under section 38a-91dd, as 486
amended by this act; 487
(B) Such application and all other materials necessary for the 488
commissioner to grant a license to the captive insurance company 489
pursuant to this section; and 490
(C) A statement of compliance by all persons who hold an ownership 491
interest in the captive insurance company stating that, to the best of their 492
knowledge and belief, such application and the materials described in 493
subparagraph (B) of this subdivision satisfy: 494 Raised Bill No. 339
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(i) All provisions of sections 38a-91aa to 38a-91tt, inclusive, as 495
amended by this act, and 38a-91ww to 38a-91xx, inclusive, that the 496
captive insurance company must satisfy in order for the commissioner 497
to grant a license to the captive insurance company pursuant to this 498
section; and 499
(ii) Any other requirements established by the commissioner that the 500
captive insurance company must satisfy in order for the commissioner 501
to grant to the captive insurance company a conditional certificate of 502
authority pursuant to this section. 503
(2) The commissioner may, in the commissioner's sole discretion, 504
summarily revoke a conditional certificate of authority granted to a 505
captive insurance company pursuant to subdivision (1) of this 506
subsection if the commissioner: 507
(A) Is unable to verify, within the six-month period beginning on the 508
date that the commissioner granted such conditional certificate of 509
authority to the captive insurance company, that the captive insurance 510
company possesses capital and surplus that satisfies the requirements 511
of section 38a-91dd, as amended by this act; or 512
(B) Determines that the application and all other materials that the 513
captive insurance company submitted to the commissioner to receive a 514
license pursuant to this section: 515
(i) Does not satisfy all provisions of sections 38a-91aa to 38a-91tt, 516
inclusive, as amended by this act, and 38a-91ww to 38a-91xx, inclusive, 517
that the captive insurance company must satisfy in order for the 518
commissioner to grant to such captive insurance company a license 519
pursuant to this section; or 520
(ii) Any other requirements established by the commissioner that the 521
captive insurance company must satisfy in order for the commissioner 522
to grant to the captive insurance company a conditional certificate of 523
authority pursuant to this subsection. 524 Raised Bill No. 339
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(3) Each captive insurance company that receives from the 525
commissioner a conditional certificate of authority to do insurance 526
business in this state under this subsection shall comply with, and be 527
subject to, all provisions of sections 38a-91aa to 38a-91tt, inclusive, as 528
amended by this act, and 38a-91ww to 38a-91xx, inclusive, that are 529
applicable to the captive insurance company. 530
Sec. 4. Section 38a-91dd of the general statutes is repealed and the 531
following is substituted in lieu thereof (Effective July 1, 2020): 532
(a) (1) [The Insurance Commissioner] Except as provided in 533
subdivision (3) of this subsection, the commissioner shall not issue a 534
license to a captive insurance company or allow the company to retain 535
such license unless the company has and maintains unimpaired paid-in 536
capital and surplus of: 537
(A) In the case of a pure captive insurance company, not less than the 538
greater of: 539
(i) [two hundred fifty] Fifty thousand dollars; or 540
(ii) An amount that the commissioner determines is necessary for the 541
pure captive insurance company to meet such pure captive insurance 542
company's policy obligations; 543
(B) In the case of an association captive insurance company, not less 544
than five hundred thousand dollars; 545
(C) In the case of an industrial insured captive insurance company, 546
not less than five hundred thousand dollars; 547
(D) In the case of a risk retention group, not less than one million 548
dollars; 549
(E) In the case of a sponsored captive insurance company, not less 550
than two hundred twenty-five thousand dollars; 551
(F) In the case of a special purpose financial captive insurance 552 Raised Bill No. 339
LCO No. 1825 20 of 28
company, not less than two hundred fifty thousand dollars; 553
(G) In the case of a sponsored captive insurance company licensed as 554
a special purpose financial captive insurance company, not less than five 555
hundred thousand dollars; and 556
(H) In the case of an agency captive insurance company, not less than 557
five hundred thousand dollars. 558
(2) (A) The [Insurance Commissioner] commissioner shall not issue a 559
license to a branch captive insurance company or allow the branch 560
captive insurance company to retain such license unless the branch 561
captive insurance company has and maintains, as security for the 562
payment of liabilities attributable to the branch operations: 563
(i) Not less than the greater of: 564
(I) [two hundred fifty] Fifty thousand dollars; or 565
(II) An amount that the commissioner determines is necessary to 566
secure the payment of liabilities attributable to the branch captive 567
insurance company's operations; and 568
(ii) Reserves on such insurance policies or such reinsurance contracts 569
as may be issued or assumed by the branch captive insurance company 570
through its branch operations, including reserves for losses, allocated 571
loss adjustment expenses, incurred but not reported losses and 572
unearned premiums with regard to business written through the branch 573
operations. The commissioner may permit a branch captive insurance 574
company to credit against any such reserves any [security for loss 575
reserves that the branch captive insurance company posts with a ceding 576
insurer or is posted by a reinsurer with the branch captive insurance 577
company, so long as such security remains posted.] assets belonging to: 578
(I) The branch captive insurance company that are held in trust for, 579
or otherwise segregated or controlled by, a ceding insurer that secure 580
the branch captive insurance company's reinsurance obligations to the 581
ceding insurer; or 582 Raised Bill No. 339
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(II) A reinsurer that are held in trust for, or otherwise under the 583
control of, the branch captive insurance company and secure the 584
reinsurer's reinsurance obligations to the branch captive insurance 585
company. 586
(B) The amounts required under subparagraph (A) of this 587
subdivision may be held, with the prior approval of the commissioner, 588
in the form of: 589
(i) [a] A trust formed under a trust agreement and funded by assets 590
acceptable to the commissioner; [,] 591
(ii) [an] An irrevocable letter of credit issued or confirmed by a bank 592
approved by the commissioner; [,] 593
(iii) [with] With respect to the amount required under subparagraph 594
(A)(i) of this subdivision only, cash on deposit with the commissioner; 595
[,] or 596
(iv) [any] Any combination [thereof] of the forms described in 597
subparagraphs (B)(i) to (B)(iii), inclusive, of this subdivision. 598
(3) The commissioner may exempt a branch captive insurance 599
company from the provisions of subdivisions (1) and (2) of this 600
subsection if the branch captive insurance company is a foreign captive 601
insurance company and the commissioner, in the commissioner's 602
discretion, determines that the branch captive insurance company is 603
financially stable. 604
[(b) The commissioner may adopt regulations, in accordance with 605
chapter 54, to establish additional capital and surplus requirements 606
based upon the type, volume and nature of insurance business 607
transacted.] 608
[(c)] (b) Notwithstanding any other provision of this section, the 609
commissioner shall have the discretion to allow a captive insurance 610
company, other than a captive insurance company organized as a risk 611
retention group, to maintain less than the required unimpaired paid-in 612 Raised Bill No. 339
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capital and surplus set forth in subsection (a) of this section. The 613
commissioner shall consider the type, volume and nature of the 614
insurance or reinsurance business transacted by such a captive 615
insurance company in establishing the amount of unimpaired paid-in 616
capital and surplus the company is required to maintain. 617
[(d)] (c) Except as specified in subdivision (2) of subsection (a) of this 618
section, capital and surplus may be in the form of cash or an irrevocable 619
letter of credit issued by a bank approved by the commissioner. 620
(d) The commissioner may adopt regulations, in accordance with 621
chapter 54, to establish additional capital and surplus requirements 622
based upon the type, volume and nature of insurance business 623
transacted. 624
Sec. 5. Subsection (h) of section 38a-91ff of the general statutes is 625
repealed and the following is substituted in lieu thereof (Effective July 1, 626
2020): 627
(h) In the case of a captive insurance company licensed as a branch 628
captive insurance company, the alien captive insurance company or 629
foreign captive insurance company shall petition the commissioner to 630
issue a certificate setting forth the commissioner's finding that, after 631
considering the character, reputation, financial responsibility, insurance 632
experience, and business qualifications of the officers and directors of 633
the alien captive insurance company or foreign captive insurance 634
company, the licensing and maintenance of the branch operations will 635
promote the general good of the state. The alien captive insurance 636
company or foreign captive insurance company may register to do 637
business in this state after the commissioner's certificate is issued. 638
Sec. 6. Subdivision (1) of subsection (b) of section 38a-91gg of the 639
general statutes is repealed and the following is substituted in lieu 640
thereof (Effective July 1, 2020): 641
(b) (1) (A) [Prior] Except as provided in subparagraph (B) of this 642
subdivision, prior to March first of each year and, in the case of pure 643 Raised Bill No. 339
LCO No. 1825 23 of 28
captive insurance companies and industrial insured captive insurance 644
companies, prior to March fifteenth of each year, each captive insurance 645
company [other than a branch captive insurance company] shall 646
[submit] file with [to] the [Insurance Commissioner] commissioner a 647
report of [its] the captive insurance company's financial condition 648
verified by oath of two [of its] executive officers of the captive insurance 649
company. The commissioner shall establish the form and content of the 650
annual report to be filed by special purpose captive insurance 651
companies. 652
(B) [In the case of branch captive insurance companies, prior to March 653
first of each year, each such company] Each branch captive insurance 654
company shall [submit to] file with the commissioner a copy of all 655
reports and statements required to be filed under the laws of the 656
jurisdiction in which the alien captive insurance company or foreign 657
captive insurance company is formed. Such reports and statements shall 658
be verified by oath of two [of its] executive officers of the branch captive 659
insurance company and filed with the commissioner on the same day 660
that such reports and statements must be filed in the domiciliary 661
jurisdiction of the alien captive insurance company or foreign captive 662
insurance company. If the commissioner is satisfied that the annual 663
report filed by the alien captive insurance company or foreign captive 664
insurance company in [its] the domiciliary jurisdiction of the alien 665
captive insurance company or foreign captive insurance company 666
provides adequate information concerning the financial condition of 667
[the alien captive insurance company] the branch captive insurance 668
company, the commissioner may waive the requirement for completion 669
of the [captive] annual [statement for business written in the alien 670
jurisdiction.] report required under subparagraph (A) of this 671
subdivision. If the commissioner is not satisfied with such reports and 672
statements, or if the branch captive insurance company is not required 673
to file such reports and statements in the domiciliary jurisdiction of the 674
alien captive insurance company or foreign captive insurance company, 675
the branch captive insurance company shall file a report, at a time and 676
in a form and manner prescribed by the commissioner, that provides the 677 Raised Bill No. 339
LCO No. 1825 24 of 28
commissioner with adequate information concerning the financial 678
condition of the branch captive insurance company. 679
Sec. 7. Subsection (a) of section 38a-91hh of the general statutes is 680
repealed and the following is substituted in lieu thereof (Effective July 1, 681
2020): 682
(a) (1) [At least once every three years, and additionally whenever] 683
Except as provided in subdivision (3) of this subsection, the [Insurance 684
Commissioner] commissioner or the commissioner's designee shall, 685
whenever the commissioner determines it to be prudent, [the 686
commissioner or the commissioner's designee shall visit each captive 687
insurance company and thoroughly] but not less frequently than once 688
every five years, inspect and examine [its] each captive insurance 689
company's affairs to ascertain [its] the captive insurance company's 690
financial condition, [its] the captive insurance company's ability to fulfill 691
its obligations and whether [it] the captive insurance company has 692
complied with the provisions of sections 38a-91aa to 38a-91tt, inclusive, 693
as amended by this act, and any other applicable provisions of this title. 694
[The commissioner may extend the three-year period to five years, 695
provided a captive insurance company is subject to a comprehensive 696
annual audit during such period by independent auditors approved by 697
the commissioner and of a scope satisfactory to the commissioner.] 698
(2) The examination of a branch captive insurance company pursuant 699
to this section shall be of branch business and branch operations only, 700
as long as the branch captive insurance company provides annually to 701
the commissioner a certificate of compliance or its equivalent, issued by 702
or filed with the licensing authority of the jurisdiction in which the 703
branch captive insurance company is formed, and demonstrates to the 704
commissioner's satisfaction that it is operating in sound financial 705
condition in accordance with all applicable laws and regulations of such 706
jurisdiction. 707
(3) The commissioner may waive the requirement that the 708
commissioner or the commissioner's designee inspect and examine a 709 Raised Bill No. 339
LCO No. 1825 25 of 28
captive insurance company's affairs pursuant to this subsection if the 710
captive insurance company is a pure captive insurance company. 711
Sec. 8. Subsection (a) of section 38a-91ii of the general statutes is 712
repealed and the following is substituted in lieu thereof (Effective July 1, 713
2020): 714
(a) (1) The commissioner may, at any time, for cause, suspend, revoke 715
or refuse to renew any license of a captive insurance company, or in lieu 716
of or in addition to suspension or revocation of such license, the 717
commissioner, after reasonable notice to and hearing of any holder of 718
such license, may impose a fine not to exceed ten thousand dollars. Such 719
hearings may be held by the commissioner or any person designated by 720
the commissioner. For purposes of this subsection, cause for such 721
administrative action shall include, but not be limited to, the following 722
reasons: (A) Insolvency or impairment of capital or surplus; (B) failure 723
to meet the requirements of section 38a-91dd, as amended by this act; 724
(C) refusal or failure to [submit] file an annual report, as required by 725
section 38a-91gg, as amended by this act, or any other report or 726
statement required by law or by lawful order of the commissioner; (D) 727
failure to comply with the provisions of its own charter, bylaws or other 728
organizational document; (E) failure to submit to or pay the cost of 729
examination or any legal obligation relative thereto; (F) use of methods 730
that, although not otherwise specifically prohibited by law, nevertheless 731
render its operation detrimental or its condition unsound with respect 732
to the public or to its policyholders; or (G) failure otherwise to comply 733
with the laws of this state. 734
(2) Any captive insurance company aggrieved by the action of the 735
commissioner in suspending, revoking or refusing to renew a license or 736
in imposing a fine may appeal therefrom, in accordance with the 737
provisions of section 4-183, except venue for such appeal shall be in the 738
judicial district of New Britain. Appeals under this section shall be 739
privileged in respect to the order of trial assignment. 740
Sec. 9. Subparagraph (A) of subdivision (2) of subsection (g) of section 741 Raised Bill No. 339
LCO No. 1825 26 of 28
38a-91ss of the general statutes is repealed and the following is 742
substituted in lieu thereof (Effective July 1, 2020): 743
(A) Proceeds from a special purpose financial captive insurance 744
company securitization or letters of credit or other assets described in 745
subdivision [(18)] (19) of section 38a-91aa, as amended by this act; 746
Sec. 10. Section 38a-91uu of the general statutes is repealed and the 747
following is substituted in lieu thereof (Effective July 1, 2020): 748
(a) For the purposes of this section, [unless the context otherwise 749
requires: 750
(1) "Dormant captive insurance company" means a pure captive 751
insurance company, a sponsored captive insurance company or an 752
industrial insured captive insurance company, each as defined in 753
section 38a-91aa, that has: 754
(A) Ceased transacting insurance business; and 755
(B) No liabilities associated with any insurance business that 756
occurred, or insurance policy that was issued, prior to, on or after the 757
filing of its application for a certificate of dormancy under subsection 758
(b) of this section; and 759
(2) "Insurance business"] "insurance business" means the business of 760
insurance, as defined in section 38a-905. 761
(b) (1) [A dormant captive insurance company that is domiciled in 762
this state may apply to the Insurance Commissioner for] The 763
commissioner may issue to a pure captive insurance company, 764
sponsored captive insurance company or industrial insured captive 765
insurance company a certificate of dormancy if such company: 766
(A) Files with the commissioner, in a form and manner prescribed by 767
the commissioner, an application for such certificate; 768
(B) Has ceased transacting insurance business; and 769 Raised Bill No. 339
LCO No. 1825 27 of 28
(C) Has no liabilities associated with any insurance business that 770
occurred, or insurance policy that was issued, prior to, on or after the 771
date that such company files an application with the commissioner 772
pursuant to subparagraph (A) of this subdivision. 773
(2) [The] Each certificate of dormancy issued by the commissioner 774
pursuant to subdivision (1) of this subsection shall be subject to renewal 775
once every two years [,] and shall be forfeited if the [dormant captive 776
insurance company] pure captive insurance company, sponsored 777
captive insurance company or industrial insured captive insurance 778
company that receives such certificate commences transacting insurance 779
business or fails to timely renew such certificate. 780
(c) [A dormant captive insurance company] Each pure captive 781
insurance company, sponsored captive insurance company or industrial 782
insured captive insurance company that [has been issued] receives or 783
renews a certificate of dormancy under subsection (b) of this section 784
shall: 785
(1) Possess and maintain unimpaired, paid-in capital and surplus of 786
not less than twenty-five thousand dollars; 787
(2) Not later than March [15, 2018] fifteenth, annually, submit to the 788
commissioner a report on the financial condition of such company, 789
verified by oath of two executive officers of such company, in such form 790
as the commissioner prescribes; and 791
(3) Pay the license renewal fee specified in section 38a-11 for a captive 792
insurance company. 793
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
Sec. 3 July 1, 2020 38a-91bb
Sec. 4 July 1, 2020 38a-91dd
Sec. 5 July 1, 2020 38a-91ff(h) Raised Bill No. 339
LCO No. 1825 28 of 28
Sec. 6 July 1, 2020 38a-91gg(b)(1)
Sec. 7 July 1, 2020 38a-91hh(a)
Sec. 8 July 1, 2020 38a-91ii(a)
Sec. 9 July 1, 2020 38a-91ss(g)(2)(A)
Sec. 10 July 1, 2020 38a-91uu
Statement of Purpose:
To: (1) Amend certain captive insurance company definitions; (2)
provide tax amnesty to an insured that establishes a branch captive
insurance company in, or transfers domicile of its alien captive
insurance company or foreign captive insurance company to, this state;
(3) modify licensing requirements; (4) authorize the Insurance
Commissioner to license foreign captive insurance companies, and issue
unlicensed captive insurance companies a conditional certificate of
authority; (5) reduce capitalization requirements for pure captive and
branch captive insurance companies; (6) authorize the commissioner to
exempt foreign branch captive insurance companies from minimum
capitalization requirements; (7) authorize foreign captive insurance
companies to register to do business in this state; and (8) authorize the
commissioner to waive the requirement that (A) alien captive insurance
companies and foreign captive insurance companies file an annual
report concerning their financial condition; and (B) the commissioner
periodically examine the financial condition of pure captive insurance
companies.
[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.]