Senate Bill No. 1038
Public Act No. 23-15
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
repealed and the following is substituted in lieu thereof (Effective October
1, 2023):
(a) Any captive insurance company, when permitted by its articles of
association, charter or other organizational document, may apply to the
commissioner for a license to do the business of insurance against any
kind of loss, damage or liability properly a subject of insurance, if such
insurance is not prohibited by law or disapproved by the commissioner
as being contrary to public policy, including life insurance, annuities,
health insurance, as defined in section 38a-469, and commercial risk
insurance, as defined in section 38a-663, and may accept or transfer risk
by means of a parametric contract, provided:
(1) No pure captive insurance company may insure any risks other
than those of its parent and affiliated companies or controlled
unaffiliated business;
(2) No association captive insurance company may insure any risks
other than those of its association, the member organizations of its Senate Bill No. 1038
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association, and the member organizations' affiliated companies;
(3) No industrial insured captive insurance company may insure any
risks other than those of (A) the industrial insureds that comprise the
industrial insured group, (B) the industrial insureds' affiliated
companies, or (C) the industrial insureds' controlled unaffiliated
businesses;
(4) No risk retention group may insure any risks other than those of
its members and owners;
(5) No captive insurance company may provide personal risk
insurance, as defined in section 38a-663, for private passenger motor
vehicle or homeowners insurance coverage or any component thereof;
(6) No captive insurance company may accept or cede reinsurance
except as provided in section 38a-91kk;
(7) Any captive insurance company may provide excess workers'
compensation insurance to its parent and affiliated companies, unless
prohibited by the laws of the state having jurisdiction over the
transaction or by federal law. Any captive insurance company may
reinsure a workers' compensation qualified self-insured plan of its
parent and affiliated companies, unless prohibited by federal law;
(8) Any captive insurance company that provides life insurance,
annuities or health insurance shall comply with all applicable state and
federal laws;
(9) Any captive insurance company that transfers risk by means of a
parametric contract shall comply with all applicable state and federal
laws and regulations. As used in this section, "parametric contract"
means any agreement to make a payment upon the occurrence of one or
more specified triggering events without proof of loss or obligation to
indemnify. Senate Bill No. 1038
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Sec. 2. Subsection (a) of section 38a-91rr of the general statutes is
repealed and the following is substituted in lieu thereof (Effective October
1, 2023):
(a) Each sponsored captive insurance company may establish and
maintain one or more protected cells, subject to the following
conditions:
(1) The stockholders of a sponsored captive insurance company shall
be limited to its participants and sponsors, except that a sponsored
captive insurance company may issue nonvoting securities to other
persons on terms approved by the commissioner;
(2) Each sponsored captive insurance company shall account
separately on the books and records of such company for each protected
cell to reflect the financial condition and results of operations of such
protected cell, net income or loss, dividends or other distributions to
participants and such other factors as may be provided in the participant
contract or required by the commissioner;
(3) No liabilities arising out of any other insurance business the
sponsored captive insurance company may conduct shall be chargeable
against the assets of a protected cell;
(4) No sponsored captive insurance company shall make any sale,
exchange or other transfer of assets, dividend or distribution between
or among any of its protected cells without the consent of such protected
cells;
(5) No protected cell shall make any sale, exchange or other transfer
of assets, dividend or distribution to a sponsor or participant without
the commissioner's approval. The commissioner shall not approve such
sale, exchange or other transfer if it would result in insolvency or
impairment with respect to a protected cell; Senate Bill No. 1038
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(6) (A) Except as otherwise specified, each sponsored captive
insurance company shall attribute assets and liabilities to the protected
cells and the general account in accordance with the plan of operation
approved by the commissioner, and shall not attribute any other assets
or liabilities between its general account and any protected cell or
between any protected cells. For purposes of this subdivision, "general
account" means all assets and liabilities of a sponsored captive insurance
company that are not attributable to a protected cell.
(B) Each sponsored captive insurance company shall attribute all
insurance obligations, assets and liabilities relating to a reinsurance
contract entered into with respect to a protected cell to such protected
cell. The performance under such reinsurance contract and any tax
benefits, losses, refunds or credits allocated pursuant to a tax allocation
agreement to which the sponsored captive insurance company is a
party, including any payments made by or due to be made to the
sponsored captive insurance company pursuant to the terms of such
agreement, shall reflect such obligations, assets and liabilities relating to
such reinsurance contract;
(7) Each sponsored captive insurance company shall file annually
with the commissioner such financial reports as the commissioner shall
require, including, but not limited to, accounting statements detailing
the financial experience of each protected cell;
(8) Each sponsored captive insurance company shall notify the
commissioner in writing not later than ten business days after any
protected cell becomes insolvent or otherwise unable to meet its claim
or expense obligations;
(9) No participant contract shall take effect without the
commissioner's prior written approval. The addition of each new
protected cell or the withdrawal of any participant or termination of any
existing protected cell shall constitute a change in the sponsored captive Senate Bill No. 1038
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insurance company's plan of operation and shall require the
commissioner's prior written approval;
(10) If required by the commissioner, the business written by a
sponsored captive insurance company with respect to each protected
cell shall be (A) fronted by an insurance company licensed under the
laws of any state, (B) reinsured by a reinsurer authorized or approved
by this state, or (C) secured by a trust fund in the United States for the
benefit of policyholders and claimants or funded by an irrevocable letter
of credit or other arrangement that is acceptable to the commissioner.
The commissioner may require the sponsored captive insurance
company to increase the funding of any security arrangement
established under this subdivision. If the form of security is a letter of
credit, the letter of credit shall be issued or confirmed by a bank
approved by the commissioner. A trust maintained pursuant to this
subdivision shall be established in a form and upon such terms
approved by the commissioner; and
(11) A protected cell of a sponsored captive insurance company may,
with the commissioner's prior written approval, establish one or more
separate accounts and may allocate assets to such accounts to provide
for the insurance risks of one or more participants, or controlled
unaffiliated business of such participants, subject to the following:
(A) The income, gains and losses, realized or unrealized, from assets
allocated to a separate account shall be credited to or charged against
the account, without regard to other income, gains or losses of the
protected cell;
(B) Amounts allocated to a separate account pursuant to this
subdivision are owned by the protected cell and such protected cell shall
not be, nor hold itself out to be, a trustee with respect to such amounts;
(C) Unless otherwise approved by the commissioner, assets allocated Senate Bill No. 1038
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to a separate account shall be valued in accordance with the laws and
regulations of this state otherwise applicable to the protected cell's
assets;
(D) To the extent provided under the applicable contracts, such
portion of the assets of any such protected cell equal to the reserves and
other contract liabilities with respect to such account shall not be
chargeable with liabilities arising out of any other business the protected
cell may conduct;
(E) No sale, exchange or other transfer of assets may be made by any
protected cell between any of such protected cell's separate accounts or
between any other investment account and one or more of such
protected cell's separate accounts unless, in the case of a transfer into a
separate account, such transfer is made solely to establish the account
or to support the operation of the contracts with respect to the separate
account to which the transfer is made, and unless such transfer, whether
into or from a separate account, is made (i) by a transfer of cash, or (ii)
by a transfer of securities that has a readily determinable market value,
provided such transfer of securities is approved by the commissioner.
The commissioner may approve other transfers among such accounts if
the commissioner determines such transfers would be equitable; and
(F) To the extent any protected cell deems it necessary for compliance
with any applicable federal or state laws, such protected cell, with
respect to any separate account, including, but not limited to, any
separate account that is a management investment company or a unit
investment trust, may provide for persons having an interest therein
appropriate voting and other rights and special procedures for the
conduct of the business of such account, including, but not limited to,
special rights and procedures relating to investment policy, investment
advisory services, selection of independent public accountants and the
selection of a committee to manage the business of such account. Such
committee members are not required to be affiliated with such protected Senate Bill No. 1038
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cell.
Sec. 3. Section 38a-91uu of the general statutes is amended by adding
subsection (d) as follows (Effective October 1, 2023):
(NEW) (d) A dormant captive insurance company shall not be subject
to or liable for the payment of any tax under section 38a-91nn.