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General Assembly Raised Bill No. 1038
January Session, 2023
LCO No. 3768
Referred to Committee on INSURANCE AND REAL ESTATE
Introduced by:
(INS)
AN ACT CONCERNING CAPTIVE INSURANCE COMPANIES.
Be it enacted by the Senate and House of Representatives in General
Assembly convened:
Section 1. Subsection (a) of section 38a-91bb of the general statutes is 1
repealed and the following is substituted in lieu thereof (Effective October 2
1, 2023): 3
(a) Any captive insurance company, when permitted by its articles of 4
association, charter or other organizational document, may apply to the 5
commissioner for a license to do the business of insurance against any 6
kind of loss, damage or liability properly a subject of insurance, if such 7
insurance is not prohibited by law or disapproved by the commissioner 8
as being contrary to public policy, including life insurance, annuities, 9
health insurance, as defined in section 38a-469, and commercial risk 10
insurance, as defined in section 38a-663, and may accept or transfer risk 11
by means of a parametric contract, provided: 12
(1) No pure captive insurance company may insure any risks other 13
than those of its parent and affiliated companies or controlled 14
unaffiliated business; 15 Bill No. 1038
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(2) No association captive insurance company may insure any risks 16
other than those of its association, the member organizations of its 17
association, and the member organizations' affiliated companies; 18
(3) No industrial insured captive insurance company may insure any 19
risks other than those of (A) the industrial insureds that comprise the 20
industrial insured group, (B) the industrial insureds' affiliated 21
companies, or (C) the industrial insureds' controlled unaffiliated 22
businesses; 23
(4) No risk retention group may insure any risks other than those of 24
its members and owners; 25
(5) No captive insurance company may provide personal risk 26
insurance, as defined in section 38a-663, for private passenger motor 27
vehicle or homeowners insurance coverage or any component thereof; 28
(6) No captive insurance company may accept or cede reinsurance 29
except as provided in section 38a-91kk; 30
(7) Any captive insurance company may provide excess workers' 31
compensation insurance to its parent and affiliated companies, unless 32
prohibited by the laws of the state having jurisdiction over the 33
transaction or by federal law. Any captive insurance company may 34
reinsure a workers' compensation qualified self-insured plan of its 35
parent and affiliated companies, unless prohibited by federal law; 36
(8) Any captive insurance company that provides life insurance, 37
annuities or health insurance shall comply with all applicable state and 38
federal laws; 39
(9) Any captive insurance company that transfers risk by means of a 40
parametric contract shall comply with all applicable state and federal 41
laws and regulations. As used in this section, "parametric contract" 42
means any agreement to make a payment upon the occurrence of one or 43
more specified triggering events without proof of loss or obligation to 44
indemnify. 45 Bill No. 1038
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Sec. 2. Subsection (a) of section 38a-91rr of the general statutes is 46
repealed and the following is substituted in lieu thereof (Effective October 47
1, 2023): 48
(a) Each sponsored captive insurance company may establish and 49
maintain one or more protected cells, subject to the following 50
conditions: 51
(1) The stockholders of a sponsored captive insurance company shall 52
be limited to its participants and sponsors, except that a sponsored 53
captive insurance company may issue nonvoting securities to other 54
persons on terms approved by the commissioner; 55
(2) Each sponsored captive insurance company shall account 56
separately on the books and records of such company for each protected 57
cell to reflect the financial condition and results of operations of such 58
protected cell, net income or loss, dividends or other distributions to 59
participants and such other factors as may be provided in the participant 60
contract or required by the commissioner; 61
(3) No liabilities arising out of any other insurance business the 62
sponsored captive insurance company may conduct shall be chargeable 63
against the assets of a protected cell; 64
(4) No sponsored captive insurance company shall make any sale, 65
exchange or other transfer of assets, dividend or distribution between 66
or among any of its protected cells without the consent of such protected 67
cells; 68
(5) No protected cell shall make any sale, exchange or other transfer 69
of assets, dividend or distribution to a sponsor or participant without 70
the commissioner's approval. The commissioner shall not approve such 71
sale, exchange or other transfer if it would result in insolvency or 72
impairment with respect to a protected cell; 73
(6) (A) Except as otherwise specified, each sponsored captive 74
insurance company shall attribute assets and liabilities to the protected 75 Bill No. 1038
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cells and the general account in accordance with the plan of operation 76
approved by the commissioner, and shall not attribute any other assets 77
or liabilities between its general account and any protected cell or 78
between any protected cells. For purposes of this subdivision, "general 79
account" means all assets and liabilities of a sponsored captive insurance 80
company that are not attributable to a protected cell. 81
(B) Each sponsored captive insurance company shall attribute all 82
insurance obligations, assets and liabilities relating to a reinsurance 83
contract entered into with respect to a protected cell to such protected 84
cell. The performance under such reinsurance contract and any tax 85
benefits, losses, refunds or credits allocated pursuant to a tax allocation 86
agreement to which the sponsored captive insurance company is a 87
party, including any payments made by or due to be made to the 88
sponsored captive insurance company pursuant to the terms of such 89
agreement, shall reflect such obligations, assets and liabilities relating to 90
such reinsurance contract; 91
(7) Each sponsored captive insurance company shall file annually 92
with the commissioner such financial reports as the commissioner shall 93
require, including, but not limited to, accounting statements detailing 94
the financial experience of each protected cell; 95
(8) Each sponsored captive insurance company shall notify the 96
commissioner in writing not later than ten business days after any 97
protected cell becomes insolvent or otherwise unable to meet its claim 98
or expense obligations; 99
(9) No participant contract shall take effect without the 100
commissioner's prior written approval. The addition of each new 101
protected cell or the withdrawal of any participant or termination of any 102
existing protected cell shall constitute a change in the sponsored captive 103
insurance company's plan of operation and shall require the 104
commissioner's prior written approval; 105
(10) If required by the commissioner, the business written by a 106 Bill No. 1038
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sponsored captive insurance company with respect to each protected 107
cell shall be (A) fronted by an insurance company licensed under the 108
laws of any state, (B) reinsured by a reinsurer authorized or approved 109
by this state, or (C) secured by a trust fund in the United States for the 110
benefit of policyholders and claimants or funded by an irrevocable letter 111
of credit or other arrangement that is acceptable to the commissioner. 112
The commissioner may require the sponsored captive insurance 113
company to increase the funding of any security arrangement 114
established under this subdivision. If the form of security is a letter of 115
credit, the letter of credit shall be issued or confirmed by a bank 116
approved by the commissioner. A trust maintained pursuant to this 117
subdivision shall be established in a form and upon such terms 118
approved by the commissioner; and 119
(11) A protected cell of a sponsored captive insurance company may, 120
with the commissioner's prior written approval, establish one or more 121
separate accounts and may allocate assets to such accounts to provide 122
for the insurance risks of one or more participants, or controlled 123
unaffiliated business of such participants, subject to the following: 124
(A) The income, gains and losses, realized or unrealized, from assets 125
allocated to a separate account shall be credited to or charged against 126
the account, without regard to other income, gains or losses of the 127
protected cell; 128
(B) Amounts allocated to a separate account pursuant to this 129
subdivision are owned by the protected cell and such protected cell shall 130
not be, nor hold itself out to be, a trustee with respect to such amounts; 131
(C) Unless otherwise approved by the commissioner, assets allocated 132
to a protected cell shall be valued in accordance with the rules otherwise 133
applicable to the protected cell's assets; 134
(D) If, and to the extent provided under the applicable contracts, such 135
portion of the assets of any such protected cell equal to the reserves and 136
other contract liabilities with respect to such account shall not be 137 Bill No. 1038
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chargeable with liabilities arising out of any other business the protected 138
cell may conduct; 139
(E) No sale, exchange or other transfer of assets may be made by any 140
protected cell between any of such protected cell's separate accounts or 141
between any other investment account and one or more of such 142
protected cell's separate accounts unless, in the case of a transfer into a 143
separate account, such transfer is made solely to establish the account 144
or to support the operation of the contracts with respect to the separate 145
account to which the transfer is made, and unless such transfer, whether 146
into or from a separate account, is made (i) by a transfer of cash, or (ii) 147
by a transfer of securities that has a readily determinable market value, 148
provided such transfer of securities is approved by the commissioner. 149
The commissioner may approve other transfers among such accounts if 150
the commissioner determines such transfers would be equitable; and 151
(F) To the extent any protected cell deems it necessary for compliance 152
with any applicable federal or state laws, such protected cell, with 153
respect to any separate account, including, but not limited to, any 154
separate account that is a management investment company or a unit 155
investment trust, may provide for persons having an interest therein 156
appropriate voting and other rights and special procedures for the 157
conduct of the business of such account, including, but not limited to, 158
special rights and procedures relating to investment policy, investment 159
advisory services, selection of independent public accountants and the 160
selection of a committee to manage the business of such account. Such 161
committee members are not required to be affiliated with such protected 162
cell. 163
Sec. 3. Section 38a-91uu of the general statutes is amended by adding 164
subsection (d) as follows (Effective October 1, 2023): 165
(NEW) (d) A dormant captive insurance company shall not be subject 166
to or liable for the payment of any tax under section 38a-91nn. 167 Bill No. 1038
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This act shall take effect as follows and shall amend the following
sections:
Section 1 October 1, 2023 38a-91bb(a)
Sec. 2 October 1, 2023 38a-91rr(a)
Sec. 3 October 1, 2023 38a-91uu(d)
INS Joint Favorable