CT
Connecticut Senate Bill SB01038

Connecticut 2023 Regular Session

Connecticut Senate Bill SB01038 Compare Versions

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4-Senate Bill No. 1038
7+General Assembly Raised Bill No. 1038
8+January Session, 2023
9+LCO No. 3768
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6-Public Act No. 23-15
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12+Referred to Committee on INSURANCE AND REAL ESTATE
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14+
15+Introduced by:
16+(INS)
17+
718
819
920 AN ACT CONCERNING CAPTIVE INSURANCE COMPANIES.
1021 Be it enacted by the Senate and House of Representatives in General
1122 Assembly convened:
1223
13-Section 1. Subsection (a) of section 38a-91bb of the general statutes is
14-repealed and the following is substituted in lieu thereof (Effective October
15-1, 2023):
16-(a) Any captive insurance company, when permitted by its articles of
17-association, charter or other organizational document, may apply to the
18-commissioner for a license to do the business of insurance against any
19-kind of loss, damage or liability properly a subject of insurance, if such
20-insurance is not prohibited by law or disapproved by the commissioner
21-as being contrary to public policy, including life insurance, annuities,
22-health insurance, as defined in section 38a-469, and commercial risk
23-insurance, as defined in section 38a-663, and may accept or transfer risk
24-by means of a parametric contract, provided:
25-(1) No pure captive insurance company may insure any risks other
26-than those of its parent and affiliated companies or controlled
27-unaffiliated business;
28-(2) No association captive insurance company may insure any risks
29-other than those of its association, the member organizations of its Senate Bill No. 1038
24+Section 1. Subsection (a) of section 38a-91bb of the general statutes is 1
25+repealed and the following is substituted in lieu thereof (Effective October 2
26+1, 2023): 3
27+(a) Any captive insurance company, when permitted by its articles of 4
28+association, charter or other organizational document, may apply to the 5
29+commissioner for a license to do the business of insurance against any 6
30+kind of loss, damage or liability properly a subject of insurance, if such 7
31+insurance is not prohibited by law or disapproved by the commissioner 8
32+as being contrary to public policy, including life insurance, annuities, 9
33+health insurance, as defined in section 38a-469, and commercial risk 10
34+insurance, as defined in section 38a-663, and may accept or transfer risk 11
35+by means of a parametric contract, provided: 12
36+(1) No pure captive insurance company may insure any risks other 13
37+than those of its parent and affiliated companies or controlled 14
38+unaffiliated business; 15 Bill No. 1038
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31-Public Act No. 23-15 2 of 7
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33-association, and the member organizations' affiliated companies;
34-(3) No industrial insured captive insurance company may insure any
35-risks other than those of (A) the industrial insureds that comprise the
36-industrial insured group, (B) the industrial insureds' affiliated
37-companies, or (C) the industrial insureds' controlled unaffiliated
38-businesses;
39-(4) No risk retention group may insure any risks other than those of
40-its members and owners;
41-(5) No captive insurance company may provide personal risk
42-insurance, as defined in section 38a-663, for private passenger motor
43-vehicle or homeowners insurance coverage or any component thereof;
44-(6) No captive insurance company may accept or cede reinsurance
45-except as provided in section 38a-91kk;
46-(7) Any captive insurance company may provide excess workers'
47-compensation insurance to its parent and affiliated companies, unless
48-prohibited by the laws of the state having jurisdiction over the
49-transaction or by federal law. Any captive insurance company may
50-reinsure a workers' compensation qualified self-insured plan of its
51-parent and affiliated companies, unless prohibited by federal law;
52-(8) Any captive insurance company that provides life insurance,
53-annuities or health insurance shall comply with all applicable state and
54-federal laws;
55-(9) Any captive insurance company that transfers risk by means of a
56-parametric contract shall comply with all applicable state and federal
57-laws and regulations. As used in this section, "parametric contract"
58-means any agreement to make a payment upon the occurrence of one or
59-more specified triggering events without proof of loss or obligation to
60-indemnify. Senate Bill No. 1038
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45+(2) No association captive insurance company may insure any risks 16
46+other than those of its association, the member organizations of its 17
47+association, and the member organizations' affiliated companies; 18
48+(3) No industrial insured captive insurance company may insure any 19
49+risks other than those of (A) the industrial insureds that comprise the 20
50+industrial insured group, (B) the industrial insureds' affiliated 21
51+companies, or (C) the industrial insureds' controlled unaffiliated 22
52+businesses; 23
53+(4) No risk retention group may insure any risks other than those of 24
54+its members and owners; 25
55+(5) No captive insurance company may provide personal risk 26
56+insurance, as defined in section 38a-663, for private passenger motor 27
57+vehicle or homeowners insurance coverage or any component thereof; 28
58+(6) No captive insurance company may accept or cede reinsurance 29
59+except as provided in section 38a-91kk; 30
60+(7) Any captive insurance company may provide excess workers' 31
61+compensation insurance to its parent and affiliated companies, unless 32
62+prohibited by the laws of the state having jurisdiction over the 33
63+transaction or by federal law. Any captive insurance company may 34
64+reinsure a workers' compensation qualified self-insured plan of its 35
65+parent and affiliated companies, unless prohibited by federal law; 36
66+(8) Any captive insurance company that provides life insurance, 37
67+annuities or health insurance shall comply with all applicable state and 38
68+federal laws; 39
69+(9) Any captive insurance company that transfers risk by means of a 40
70+parametric contract shall comply with all applicable state and federal 41
71+laws and regulations. As used in this section, "parametric contract" 42
72+means any agreement to make a payment upon the occurrence of one or 43
73+more specified triggering events without proof of loss or obligation to 44
74+indemnify. 45 Bill No. 1038
6375
64-Sec. 2. Subsection (a) of section 38a-91rr of the general statutes is
65-repealed and the following is substituted in lieu thereof (Effective October
66-1, 2023):
67-(a) Each sponsored captive insurance company may establish and
68-maintain one or more protected cells, subject to the following
69-conditions:
70-(1) The stockholders of a sponsored captive insurance company shall
71-be limited to its participants and sponsors, except that a sponsored
72-captive insurance company may issue nonvoting securities to other
73-persons on terms approved by the commissioner;
74-(2) Each sponsored captive insurance company shall account
75-separately on the books and records of such company for each protected
76-cell to reflect the financial condition and results of operations of such
77-protected cell, net income or loss, dividends or other distributions to
78-participants and such other factors as may be provided in the participant
79-contract or required by the commissioner;
80-(3) No liabilities arising out of any other insurance business the
81-sponsored captive insurance company may conduct shall be chargeable
82-against the assets of a protected cell;
83-(4) No sponsored captive insurance company shall make any sale,
84-exchange or other transfer of assets, dividend or distribution between
85-or among any of its protected cells without the consent of such protected
86-cells;
87-(5) No protected cell shall make any sale, exchange or other transfer
88-of assets, dividend or distribution to a sponsor or participant without
89-the commissioner's approval. The commissioner shall not approve such
90-sale, exchange or other transfer if it would result in insolvency or
91-impairment with respect to a protected cell; Senate Bill No. 1038
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95-(6) (A) Except as otherwise specified, each sponsored captive
96-insurance company shall attribute assets and liabilities to the protected
97-cells and the general account in accordance with the plan of operation
98-approved by the commissioner, and shall not attribute any other assets
99-or liabilities between its general account and any protected cell or
100-between any protected cells. For purposes of this subdivision, "general
101-account" means all assets and liabilities of a sponsored captive insurance
102-company that are not attributable to a protected cell.
103-(B) Each sponsored captive insurance company shall attribute all
104-insurance obligations, assets and liabilities relating to a reinsurance
105-contract entered into with respect to a protected cell to such protected
106-cell. The performance under such reinsurance contract and any tax
107-benefits, losses, refunds or credits allocated pursuant to a tax allocation
108-agreement to which the sponsored captive insurance company is a
109-party, including any payments made by or due to be made to the
110-sponsored captive insurance company pursuant to the terms of such
111-agreement, shall reflect such obligations, assets and liabilities relating to
112-such reinsurance contract;
113-(7) Each sponsored captive insurance company shall file annually
114-with the commissioner such financial reports as the commissioner shall
115-require, including, but not limited to, accounting statements detailing
116-the financial experience of each protected cell;
117-(8) Each sponsored captive insurance company shall notify the
118-commissioner in writing not later than ten business days after any
119-protected cell becomes insolvent or otherwise unable to meet its claim
120-or expense obligations;
121-(9) No participant contract shall take effect without the
122-commissioner's prior written approval. The addition of each new
123-protected cell or the withdrawal of any participant or termination of any
124-existing protected cell shall constitute a change in the sponsored captive Senate Bill No. 1038
81+Sec. 2. Subsection (a) of section 38a-91rr of the general statutes is 46
82+repealed and the following is substituted in lieu thereof (Effective October 47
83+1, 2023): 48
84+(a) Each sponsored captive insurance company may establish and 49
85+maintain one or more protected cells, subject to the following 50
86+conditions: 51
87+(1) The stockholders of a sponsored captive insurance company shall 52
88+be limited to its participants and sponsors, except that a sponsored 53
89+captive insurance company may issue nonvoting securities to other 54
90+persons on terms approved by the commissioner; 55
91+(2) Each sponsored captive insurance company shall account 56
92+separately on the books and records of such company for each protected 57
93+cell to reflect the financial condition and results of operations of such 58
94+protected cell, net income or loss, dividends or other distributions to 59
95+participants and such other factors as may be provided in the participant 60
96+contract or required by the commissioner; 61
97+(3) No liabilities arising out of any other insurance business the 62
98+sponsored captive insurance company may conduct shall be chargeable 63
99+against the assets of a protected cell; 64
100+(4) No sponsored captive insurance company shall make any sale, 65
101+exchange or other transfer of assets, dividend or distribution between 66
102+or among any of its protected cells without the consent of such protected 67
103+cells; 68
104+(5) No protected cell shall make any sale, exchange or other transfer 69
105+of assets, dividend or distribution to a sponsor or participant without 70
106+the commissioner's approval. The commissioner shall not approve such 71
107+sale, exchange or other transfer if it would result in insolvency or 72
108+impairment with respect to a protected cell; 73
109+(6) (A) Except as otherwise specified, each sponsored captive 74
110+insurance company shall attribute assets and liabilities to the protected 75 Bill No. 1038
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128-insurance company's plan of operation and shall require the
129-commissioner's prior written approval;
130-(10) If required by the commissioner, the business written by a
131-sponsored captive insurance company with respect to each protected
132-cell shall be (A) fronted by an insurance company licensed under the
133-laws of any state, (B) reinsured by a reinsurer authorized or approved
134-by this state, or (C) secured by a trust fund in the United States for the
135-benefit of policyholders and claimants or funded by an irrevocable letter
136-of credit or other arrangement that is acceptable to the commissioner.
137-The commissioner may require the sponsored captive insurance
138-company to increase the funding of any security arrangement
139-established under this subdivision. If the form of security is a letter of
140-credit, the letter of credit shall be issued or confirmed by a bank
141-approved by the commissioner. A trust maintained pursuant to this
142-subdivision shall be established in a form and upon such terms
143-approved by the commissioner; and
144-(11) A protected cell of a sponsored captive insurance company may,
145-with the commissioner's prior written approval, establish one or more
146-separate accounts and may allocate assets to such accounts to provide
147-for the insurance risks of one or more participants, or controlled
148-unaffiliated business of such participants, subject to the following:
149-(A) The income, gains and losses, realized or unrealized, from assets
150-allocated to a separate account shall be credited to or charged against
151-the account, without regard to other income, gains or losses of the
152-protected cell;
153-(B) Amounts allocated to a separate account pursuant to this
154-subdivision are owned by the protected cell and such protected cell shall
155-not be, nor hold itself out to be, a trustee with respect to such amounts;
156-(C) Unless otherwise approved by the commissioner, assets allocated Senate Bill No. 1038
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117+cells and the general account in accordance with the plan of operation 76
118+approved by the commissioner, and shall not attribute any other assets 77
119+or liabilities between its general account and any protected cell or 78
120+between any protected cells. For purposes of this subdivision, "general 79
121+account" means all assets and liabilities of a sponsored captive insurance 80
122+company that are not attributable to a protected cell. 81
123+(B) Each sponsored captive insurance company shall attribute all 82
124+insurance obligations, assets and liabilities relating to a reinsurance 83
125+contract entered into with respect to a protected cell to such protected 84
126+cell. The performance under such reinsurance contract and any tax 85
127+benefits, losses, refunds or credits allocated pursuant to a tax allocation 86
128+agreement to which the sponsored captive insurance company is a 87
129+party, including any payments made by or due to be made to the 88
130+sponsored captive insurance company pursuant to the terms of such 89
131+agreement, shall reflect such obligations, assets and liabilities relating to 90
132+such reinsurance contract; 91
133+(7) Each sponsored captive insurance company shall file annually 92
134+with the commissioner such financial reports as the commissioner shall 93
135+require, including, but not limited to, accounting statements detailing 94
136+the financial experience of each protected cell; 95
137+(8) Each sponsored captive insurance company shall notify the 96
138+commissioner in writing not later than ten business days after any 97
139+protected cell becomes insolvent or otherwise unable to meet its claim 98
140+or expense obligations; 99
141+(9) No participant contract shall take effect without the 100
142+commissioner's prior written approval. The addition of each new 101
143+protected cell or the withdrawal of any participant or termination of any 102
144+existing protected cell shall constitute a change in the sponsored captive 103
145+insurance company's plan of operation and shall require the 104
146+commissioner's prior written approval; 105
147+(10) If required by the commissioner, the business written by a 106 Bill No. 1038
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160-to a separate account shall be valued in accordance with the laws and
161-regulations of this state otherwise applicable to the protected cell's
162-assets;
163-(D) To the extent provided under the applicable contracts, such
164-portion of the assets of any such protected cell equal to the reserves and
165-other contract liabilities with respect to such account shall not be
166-chargeable with liabilities arising out of any other business the protected
167-cell may conduct;
168-(E) No sale, exchange or other transfer of assets may be made by any
169-protected cell between any of such protected cell's separate accounts or
170-between any other investment account and one or more of such
171-protected cell's separate accounts unless, in the case of a transfer into a
172-separate account, such transfer is made solely to establish the account
173-or to support the operation of the contracts with respect to the separate
174-account to which the transfer is made, and unless such transfer, whether
175-into or from a separate account, is made (i) by a transfer of cash, or (ii)
176-by a transfer of securities that has a readily determinable market value,
177-provided such transfer of securities is approved by the commissioner.
178-The commissioner may approve other transfers among such accounts if
179-the commissioner determines such transfers would be equitable; and
180-(F) To the extent any protected cell deems it necessary for compliance
181-with any applicable federal or state laws, such protected cell, with
182-respect to any separate account, including, but not limited to, any
183-separate account that is a management investment company or a unit
184-investment trust, may provide for persons having an interest therein
185-appropriate voting and other rights and special procedures for the
186-conduct of the business of such account, including, but not limited to,
187-special rights and procedures relating to investment policy, investment
188-advisory services, selection of independent public accountants and the
189-selection of a committee to manage the business of such account. Such
190-committee members are not required to be affiliated with such protected Senate Bill No. 1038
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194-cell.
195-Sec. 3. Section 38a-91uu of the general statutes is amended by adding
196-subsection (d) as follows (Effective October 1, 2023):
197-(NEW) (d) A dormant captive insurance company shall not be subject
198-to or liable for the payment of any tax under section 38a-91nn.
154+sponsored captive insurance company with respect to each protected 107
155+cell shall be (A) fronted by an insurance company licensed under the 108
156+laws of any state, (B) reinsured by a reinsurer authorized or approved 109
157+by this state, or (C) secured by a trust fund in the United States for the 110
158+benefit of policyholders and claimants or funded by an irrevocable letter 111
159+of credit or other arrangement that is acceptable to the commissioner. 112
160+The commissioner may require the sponsored captive insurance 113
161+company to increase the funding of any security arrangement 114
162+established under this subdivision. If the form of security is a letter of 115
163+credit, the letter of credit shall be issued or confirmed by a bank 116
164+approved by the commissioner. A trust maintained pursuant to this 117
165+subdivision shall be established in a form and upon such terms 118
166+approved by the commissioner; and 119
167+(11) A protected cell of a sponsored captive insurance company may, 120
168+with the commissioner's prior written approval, establish one or more 121
169+separate accounts and may allocate assets to such accounts to provide 122
170+for the insurance risks of one or more participants, or controlled 123
171+unaffiliated business of such participants, subject to the following: 124
172+(A) The income, gains and losses, realized or unrealized, from assets 125
173+allocated to a separate account shall be credited to or charged against 126
174+the account, without regard to other income, gains or losses of the 127
175+protected cell; 128
176+(B) Amounts allocated to a separate account pursuant to this 129
177+subdivision are owned by the protected cell and such protected cell shall 130
178+not be, nor hold itself out to be, a trustee with respect to such amounts; 131
179+(C) Unless otherwise approved by the commissioner, assets allocated 132
180+to a protected cell shall be valued in accordance with the rules otherwise 133
181+applicable to the protected cell's assets; 134
182+(D) If, and to the extent provided under the applicable contracts, such 135
183+portion of the assets of any such protected cell equal to the reserves and 136
184+other contract liabilities with respect to such account shall not be 137 Bill No. 1038
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191+chargeable with liabilities arising out of any other business the protected 138
192+cell may conduct; 139
193+(E) No sale, exchange or other transfer of assets may be made by any 140
194+protected cell between any of such protected cell's separate accounts or 141
195+between any other investment account and one or more of such 142
196+protected cell's separate accounts unless, in the case of a transfer into a 143
197+separate account, such transfer is made solely to establish the account 144
198+or to support the operation of the contracts with respect to the separate 145
199+account to which the transfer is made, and unless such transfer, whether 146
200+into or from a separate account, is made (i) by a transfer of cash, or (ii) 147
201+by a transfer of securities that has a readily determinable market value, 148
202+provided such transfer of securities is approved by the commissioner. 149
203+The commissioner may approve other transfers among such accounts if 150
204+the commissioner determines such transfers would be equitable; and 151
205+(F) To the extent any protected cell deems it necessary for compliance 152
206+with any applicable federal or state laws, such protected cell, with 153
207+respect to any separate account, including, but not limited to, any 154
208+separate account that is a management investment company or a unit 155
209+investment trust, may provide for persons having an interest therein 156
210+appropriate voting and other rights and special procedures for the 157
211+conduct of the business of such account, including, but not limited to, 158
212+special rights and procedures relating to investment policy, investment 159
213+advisory services, selection of independent public accountants and the 160
214+selection of a committee to manage the business of such account. Such 161
215+committee members are not required to be affiliated with such protected 162
216+cell. 163
217+Sec. 3. Section 38a-91uu of the general statutes is amended by adding 164
218+subsection (d) as follows (Effective October 1, 2023): 165
219+(NEW) (d) A dormant captive insurance company shall not be subject 166
220+to or liable for the payment of any tax under section 38a-91nn. 167 Bill No. 1038
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227+This act shall take effect as follows and shall amend the following
228+sections:
229+
230+Section 1 October 1, 2023 38a-91bb(a)
231+Sec. 2 October 1, 2023 38a-91rr(a)
232+Sec. 3 October 1, 2023 38a-91uu(d)
233+
234+INS Joint Favorable
235+FIN Joint Favorable
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