CT
Connecticut Senate Bill SB00321

Connecticut 2024 Regular Session

Connecticut Senate Bill SB00321 Compare Versions

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55 General Assembly Raised Bill No. 321
66 February Session, 2024
77 LCO No. 2033
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1010 Referred to Committee on INSURANCE AND REAL ESTATE
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1313 Introduced by:
1414 (INS)
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1919 AN ACT CONCERNING CAPTIVE INSURANCE AND THE
2020 CONVERSION OF PROTECTED CELLS.
2121 Be it enacted by the Senate and House of Representatives in General
2222 Assembly convened:
2323
2424 Section 1. Section 38a-91aa of the general statutes is repealed and the 1
2525 following is substituted in lieu thereof (Effective October 1, 2024): 2
2626 As used in this section, sections 38a-91bb to 38a-91uu, inclusive, [and] 3
2727 sections 38a-91ww, [and] 38a-91xx and section 2 of this act: 4
2828 (1) "Affiliated company" means any company in the same corporate 5
2929 system as a parent, an industrial insured or a member organization by 6
3030 virtue of common ownership, control, operation or management. 7
3131 (2) "Agency captive insurance company" means a captive insurance 8
3232 company that: 9
3333 (A) Is owned or directly or indirectly controlled by one or more 10
3434 insurance agents or insurance producers licensed in accordance with 11
3535 sections 38a-702a to 38a-702r, inclusive; 12
3636 (B) Only insures against risks covered by insurance policies sold, 13 Raised Bill No. 321
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4242 solicited or negotiated through the insurance agents or insurance 14
4343 producers that own or control such captive insurance company; and 15
4444 (C) Does not insure against risks covered by any health insurance 16
4545 policy or plan. 17
4646 (3) "Alien captive insurance company" means any insurance 18
4747 company formed to write insurance business for its parent and affiliated 19
4848 companies and licensed pursuant to the laws of an alien jurisdiction that 20
4949 imposes statutory or regulatory standards on companies transacting the 21
5050 business of insurance in such jurisdiction that the commissioner deems 22
5151 to be acceptable. 23
5252 (4) "Association" means any legal association of individuals, 24
5353 corporations, limited liability companies, partnerships, associations or 25
5454 other entities, where the association itself or some or all of the member 26
5555 organizations: 27
5656 (A) Directly or indirectly own, control or hold with power to vote all 28
5757 of the outstanding voting securities or other voting interests of an 29
5858 association captive insurance company incorporated as a stock insurer; 30
5959 (B) Have complete voting control over an association captive 31
6060 insurance company incorporated as a mutual corporation or formed as 32
6161 a limited liability company; or 33
6262 (C) Constitute all of the subscribers of an association captive 34
6363 insurance company formed as a reciprocal insurer. 35
6464 (5) "Association captive insurance company" means any company 36
6565 that insures risks of the member organizations of an association, and 37
6666 includes a company that also insures risks of such member 38
6767 organizations' affiliated companies or of the association. 39
6868 (6) "Branch business" means any insurance business transacted in this 40
6969 state by a branch captive insurance company. 41
7070 (7) "Branch captive insurance company" means any alien captive 42 Raised Bill No. 321
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7676 insurance company or foreign captive insurance company licensed by 43
7777 the commissioner to transact the business of insurance in this state 44
7878 through a business unit with a principal place of business in this state. 45
7979 (8) "Branch operations" means any business operations in this state of 46
8080 a branch captive insurance company. 47
8181 (9) "Captive insurance company" means any (A) pure captive 48
8282 insurance company, agency captive insurance company, association 49
8383 captive insurance company, industrial insured captive insurance 50
8484 company, risk retention group, sponsored captive insurance company 51
8585 or special purpose financial captive insurance company that is 52
8686 domiciled in this state and formed or licensed under the provisions of 53
8787 this section and sections 38a-91bb to 38a-91tt, inclusive, or (B) branch 54
8888 captive insurance company. 55
8989 (10) "Ceding insurer" means an insurance company, approved by the 56
9090 commissioner and licensed or otherwise authorized to transact the 57
9191 business of insurance or reinsurance in its state or country of domicile, 58
9292 that cedes risk to a special purpose financial captive insurance company 59
9393 pursuant to a reinsurance contract. 60
9494 (11) "Commissioner" means the Insurance Commissioner. 61
9595 (12) "Controlled unaffiliated business" means any person: 62
9696 (A) Who, (i) in the case of a pure captive insurance company, is not 63
9797 in the corporate system of a parent and the parent's affiliated companies, 64
9898 (ii) in the case of an industrial insured captive insurance company, is not 65
9999 in the corporate system of an industrial insured and the industrial 66
100100 insured's affiliated companies, or (iii) in the case of a sponsored captive 67
101101 insurance company, is not in the corporate system of a participant and 68
102102 the participant's affiliated companies; 69
103103 (B) Who, (i) in the case of a pure captive insurance company, has an 70
104104 existing contractual relationship with a parent or one of the parent's 71
105105 affiliated companies, (ii) in the case of an industrial insured captive 72 Raised Bill No. 321
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111111 insurance company, has an existing contractual relationship with an 73
112112 industrial insured or one of the industrial insured's affiliated companies, 74
113113 or (iii) in the case of a sponsored captive insurance company, has an 75
114114 existing contractual relationship with a participant or one of the 76
115115 participant's affiliated companies; and 77
116116 (C) Whose risks are managed by a pure captive insurance company, 78
117117 an industrial insured captive insurance company or a sponsored captive 79
118118 insurance company, as applicable, in accordance with section 38a-91qq. 80
119119 (13) "Excess workers' compensation insurance" means, in the case of 81
120120 an employer that has insured or self-insured its workers' compensation 82
121121 risks in accordance with applicable state or federal law, insurance in 83
122122 excess of a specified per-incident or aggregate limit established by the 84
123123 commissioner. 85
124124 (14) "Foreign captive insurance company" means any insurance 86
125125 company formed to write insurance business for its parent and affiliated 87
126126 companies and licensed pursuant to the laws of a foreign jurisdiction 88
127127 that imposes statutory or regulatory standards on companies 89
128128 transacting the business of insurance in such jurisdiction that the 90
129129 commissioner deems to be acceptable. 91
130130 (15) "Incorporated protected cell" means a protected cell that is 92
131131 established as a corporation or a limited liability company, separate 93
132132 from the sponsored captive insurance company with which it has 94
133133 entered into a participant contract. 95
134134 (16) "Industrial insured" means an insured: 96
135135 (A) Who procures the insurance of any risk or risks by use of the 97
136136 services of a full-time employee acting as an insurance manager or 98
137137 buyer; 99
138138 (B) Whose aggregate annual premiums for insurance on all risks total 100
139139 at least twenty-five thousand dollars; and 101
140140 (C) Who has at least twenty-five full-time employees. 102 Raised Bill No. 321
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146146 (17) "Industrial insured captive insurance company" means any 103
147147 company that insures risks of the industrial insureds that comprise an 104
148148 industrial insured group, and includes a company that also insures risks 105
149149 of such industrial insureds' affiliated companies. 106
150150 (18) "Industrial insured group" means any group of industrial 107
151151 insureds that collectively: 108
152152 (A) Directly or indirectly own, control or hold with power to vote all 109
153153 of the outstanding voting securities or other voting interests of an 110
154154 industrial insured captive insurance company incorporated as a stock 111
155155 insurer; 112
156156 (B) Have complete voting control over an industrial insured captive 113
157157 insurance company incorporated as a mutual corporation or formed as 114
158158 a limited liability company; or 115
159159 (C) Constitute all of the subscribers of an industrial insured captive 116
160160 insurance company formed as a reciprocal insurer. 117
161161 (19) "Insurance securitization" or "securitization" means a transaction 118
162162 or a group of related transactions, which may include capital market 119
163163 offerings, that are effected through related risk transfer instruments and 120
164164 facilitating administrative agreements, in which all or part of the result 121
165165 of such transaction is used to fund a special purpose financial captive 122
166166 insurance company's obligations under a reinsurance contract with a 123
167167 ceding insurer and by which: 124
168168 (A) A special purpose financial captive insurance company directly 125
169169 or indirectly obtains proceeds through the issuance of securities by such 126
170170 company or any other person; or 127
171171 (B) A person provides, for the benefit of a special purpose financial 128
172172 captive insurance company, one or more letters of credit or other assets 129
173173 that the commissioner has authorized such company to treat as 130
174174 admitted assets for purposes of its annual report. "Insurance 131
175175 securitization" or "securitization" does not include the issuance of a 132 Raised Bill No. 321
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181181 letter of credit for the benefit of the commissioner to satisfy all or part of 133
182182 a special purpose financial captive insurance company's capital and 134
183183 surplus requirements under section 38a-91dd. 135
184184 (20) "Member organization" means any individual, corporation, 136
185185 limited liability company, partnership, association or other entity that 137
186186 belongs to an association. 138
187187 (21) "Mutual corporation" means a corporation organized without 139
188188 stockholders and includes a nonprofit corporation with members. 140
189189 (22) "Parent" means any individual, corporation, limited liability 141
190190 company, partnership or other entity that directly or indirectly owns, 142
191191 controls or holds with power to vote more than fifty per cent of the 143
192192 outstanding voting: 144
193193 (A) Securities of a pure captive insurance company organized as a 145
194194 stock insurer; or 146
195195 (B) Membership interests of a pure captive insurance company 147
196196 organized as a nonprofit corporation or as a limited liability company. 148
197197 (23) "Participant" means any association, corporation, limited liability 149
198198 company, partnership, trust or other entity, and any affiliated company 150
199199 or controlled unaffiliated business thereof, that is insured by a 151
200200 sponsored captive insurance company pursuant to a participant 152
201201 contract. 153
202202 (24) "Participant contract" means a contract entered into by a 154
203203 sponsored captive insurance company and a participant by which the 155
204204 sponsored captive insurance company insures the risks of the 156
205205 participant and limits the losses of each such participant to its pro rata 157
206206 share of the assets of one or more protected cells identified in such 158
207207 participant contract. 159
208208 (25) "Protected cell" means a separate account established by a 160
209209 sponsored captive insurance company, in which assets are maintained 161
210210 for one or more participants in accordance with the terms of one or more 162 Raised Bill No. 321
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216216 participant contracts to fund the liability of the sponsored captive 163
217217 insurance company assumed on behalf of such participants as set forth 164
218218 in such participant contracts. 165
219219 (26) "Pure captive insurance company" means any company that 166
220220 insures risks of its parent and affiliated companies or controlled 167
221221 unaffiliated business. 168
222222 (27) "Reinsurance contract" means a contract entered into by a special 169
223223 purpose financial captive insurance company and a ceding insurer by 170
224224 which the special purpose financial captive insurance company agrees 171
225225 to provide reinsurance to the ceding insurer for risks associated with the 172
226226 ceding insurer's insurance or reinsurance business. 173
227227 (28) "Risk retention group" means a captive insurance company 174
228228 organized under the laws of this state pursuant to the federal Liability 175
229229 Risk Retention Act of 1986, 15 USC 3901 et seq., as amended from time 176
230230 to time, as a stock insurer or mutual corporation, a reciprocal or other 177
231231 limited liability entity. 178
232232 (29) "Security" has the same meaning as provided in section 36b-3 and 179
233233 includes any form of debt obligation, equity, surplus certificate, surplus 180
234234 note, funding agreement, derivative or other financial instrument that 181
235235 the commissioner designates as a security for purposes of this section 182
236236 and sections 38a-91bb to 38a-91tt, inclusive. 183
237237 (30) "Special purpose financial captive insurance company" means a 184
238238 company that is licensed by the commissioner in accordance with 185
239239 section 38a-91bb. 186
240240 (31) "Special purpose financial captive insurance company security" 187
241241 means a security issued by (A) a special purpose financial captive 188
242242 insurance company, or (B) a third party, the proceeds of which are 189
243243 obtained directly or indirectly by a special purpose financial captive 190
244244 insurance company. 191
245245 (32) "Sponsor" means any association, corporation, limited liability 192 Raised Bill No. 321
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251251 company, partnership, trust or other entity that is approved by the 193
252252 commissioner to organize and operate a sponsored captive insurance 194
253253 company and to provide all or part of the required unimpaired paid-in 195
254254 capital and surplus. 196
255255 (33) "Sponsored captive insurance company" means a captive 197
256256 insurance company: 198
257257 (A) In which the minimum required unimpaired paid-in capital and 199
258258 surplus are provided by one or more sponsors; 200
259259 (B) That insures risks of its participants only through separate 201
260260 participant contracts; and 202
261261 (C) That funds its liability to each participant through one or more 203
262262 protected cells and segregates the assets of each protected cell from the 204
263263 assets of other protected cells and from the assets of the sponsored 205
264264 captive insurance company's general account. 206
265265 (34) "Surplus note" means an unsecured subordinated debt obligation 207
266266 possessing characteristics consistent with the National Association of 208
267267 Insurance Commissioners Statement of Statutory Accounting Principles 209
268268 No. 41, as amended from time to time, and as modified or supplemented 210
269269 by the commissioner. 211
270270 Sec. 2. (NEW) (Effective October 1, 2024) (a) (1) Any sponsored captive 212
271271 insurance company, including a sponsored captive insurance company 213
272272 licensed as a special purpose financial captive insurance company, may, 214
273273 upon application of such sponsored captive insurance company and 215
274274 with the commissioner's prior written approval, convert one or more 216
275275 protected cells or incorporated protected cells into a: 217
276276 (A) Single protected cell or incorporated protected cell; 218
277277 (B) New sponsored captive insurance company; 219
278278 (C) New sponsored captive insurance company licensed as a special 220
279279 purpose financial captive insurance company; 221 Raised Bill No. 321
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285285 (D) New special purpose financial captive insurance company; 222
286286 (E) New pure captive insurance company; 223
287287 (F) New risk retention group; 224
288288 (G) New agency captive insurance company; 225
289289 (H) New industrial insured captive insurance company; or 226
290290 (I) New association captive insurance company. 227
291291 (2) Any such conversion of a protected cell or incorporated protected 228
292292 cell, in accordance with subdivision (1) of this subsection, shall be 229
293293 subject to the provisions of sections 38a-91aa to 38a-91xx, inclusive, of 230
294294 the general statutes, as amended by this act, as applicable, and such 231
295295 sponsored captive insurance company's plan of operation approved by 232
296296 the commissioner, without affecting such converted protected cell's or 233
297297 incorporated protected cell's assets, rights, benefits, obligations and 234
298298 liabilities. 235
299299 (b) Any conversion of a protected cell or incorporated protected cell 236
300300 shall be deemed to be a continuation of such protected cell's or 237
301301 incorporated protected cell's existence together with all of such 238
302302 protected cell's or incorporated protected cell's assets, rights, benefits, 239
303303 obligations and liabilities, as (1) a new protected cell or incorporated 240
304304 protected cell, (2) a sponsored captive insurance company, (3) a 241
305305 sponsored captive insurance company licensed as a special purpose 242
306306 financial captive insurance company, (4) a pure captive insurance 243
307307 company, (5) a risk retention group, (6) an industrial insured captive 244
308308 insurance company, or (7) an association captive insurance company, as 245
309309 applicable. Any such conversion of a protected cell or incorporated 246
310310 protected cell shall be deemed to occur without any transfer or 247
311311 assignment of such cell's assets, rights, benefits, obligations or liabilities, 248
312312 and without the creation of any reversionary interest in, or impairment 249
313313 of, any such assets, rights, benefits, obligations or liabilities. 250
314314 (c) Any conversion of a protected cell or incorporated protected cell 251 Raised Bill No. 321
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320320 shall not be construed to limit any rights or protections applicable to 252
321321 such converted protected cell or incorporated protected cell or 253
322322 applicable to such sponsored captive insurance company or sponsored 254
323323 captive insurance company licensed as a special purpose financial 255
324324 captive insurance company, as applicable, that existed immediately 256
325325 prior to the date of such conversion. 257
326326 (d) Any protected cell or incorporated protected cell that converts 258
327327 into an incorporated protected cell, a new captive insurance company 259
328328 or risk retention group, in accordance with the provisions of this section, 260
329329 shall perform such conversion in accordance with chapter 601 or 613 of 261
330330 the general statutes, as applicable, or in accordance with any such 262
331331 provisions of the general statutes applicable to the formation of any 263
332332 other type of legal entity permissible under the laws of this state, as 264
333333 applicable. 265
334334 This act shall take effect as follows and shall amend the following
335335 sections:
336336
337337 Section 1 October 1, 2024 38a-91aa
338338 Sec. 2 October 1, 2024 New section
339339
340340 Statement of Purpose:
341341 To allow sponsored captive insurance companies to convert one or more
342342 protected cells or incorporated protected cells into a new protected cell,
343343 incorporated protected cell, captive insurance company or risk retention
344344 group without impacting such cell's assets, rights, benefits, obligations
345345 and liabilities.
346346 [Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
347347 that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
348348 underlined.]
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