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General Assembly Raised Bill No. 321
February Session, 2024
LCO No. 2033
Referred to Committee on INSURANCE AND REAL ESTATE
Introduced by:
(INS)
AN ACT CONCERNING CAPTIVE INSURANCE AND THE
CONVERSION OF PROTECTED CELLS.
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 Section 38a-91aa of the general statutes is repealed and the 1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 October 1, 2024): 2
As used in this section, sections 38a-91bb to 38a-91uu, inclusive, [and] 3
sections 38a-91ww, [and] 38a-91xx and section 2 of this act: 4
(1) "Affiliated company" means any company in the same corporate 5
system as a parent, an industrial insured or a member organization by 6
virtue of common ownership, control, operation or management. 7
(2) "Agency captive insurance company" means a captive insurance 8
company that: 9
(A) Is owned or directly or indirectly controlled by one or more 10
insurance agents or insurance producers licensed in accordance with 11
sections 38a-702a to 38a-702r, inclusive; 12
(B) Only insures against risks covered by insurance policies sold, 13 Raised Bill No. 321
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solicited or negotiated through the insurance agents or insurance 14
producers that own or control such captive insurance company; and 15
(C) Does not insure against risks covered by any health insurance 16
policy or plan. 17
(3) "Alien captive insurance company" means any insurance 18
company formed to write insurance business for its parent and affiliated 19
companies and licensed pursuant to the laws of an alien jurisdiction that 20
imposes statutory or regulatory standards on companies transacting the 21
business of insurance in such jurisdiction that the commissioner deems 22
to be acceptable. 23
(4) "Association" means any legal association of individuals, 24
corporations, limited liability companies, partnerships, associations or 25
other entities, where the association itself or some or all of the member 26
organizations: 27
(A) Directly or indirectly own, control or hold with power to vote all 28
of the outstanding voting securities or other voting interests of an 29
association captive insurance company incorporated as a stock insurer; 30
(B) Have complete voting control over an association captive 31
insurance company incorporated as a mutual corporation or formed as 32
a limited liability company; or 33
(C) Constitute all of the subscribers of an association captive 34
insurance company formed as a reciprocal insurer. 35
(5) "Association captive insurance company" means any company 36
that insures risks of the member organizations of an association, and 37
includes a company that also insures risks of such member 38
organizations' affiliated companies or of the association. 39
(6) "Branch business" means any insurance business transacted in this 40
state by a branch captive insurance company. 41
(7) "Branch captive insurance company" means any alien captive 42 Raised Bill No. 321
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insurance company or foreign captive insurance company licensed by 43
the commissioner to transact the business of insurance in this state 44
through a business unit with a principal place of business in this state. 45
(8) "Branch operations" means any business operations in this state of 46
a branch captive insurance company. 47
(9) "Captive insurance company" means any (A) pure captive 48
insurance company, agency captive insurance company, association 49
captive insurance company, industrial insured captive insurance 50
company, risk retention group, sponsored captive insurance company 51
or special purpose financial captive insurance company that is 52
domiciled in this state and formed or licensed under the provisions of 53
this section and sections 38a-91bb to 38a-91tt, inclusive, or (B) branch 54
captive insurance company. 55
(10) "Ceding insurer" means an insurance company, approved by the 56
commissioner and licensed or otherwise authorized to transact the 57
business of insurance or reinsurance in its state or country of domicile, 58
that cedes risk to a special purpose financial captive insurance company 59
pursuant to a reinsurance contract. 60
(11) "Commissioner" means the Insurance Commissioner. 61
(12) "Controlled unaffiliated business" means any person: 62
(A) Who, (i) in the case of a pure captive insurance company, is not 63
in the corporate system of a parent and the parent's affiliated companies, 64
(ii) in the case of an industrial insured captive insurance company, is not 65
in the corporate system of an industrial insured and the industrial 66
insured's affiliated companies, or (iii) in the case of a sponsored captive 67
insurance company, is not in the corporate system of a participant and 68
the participant'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
affiliated companies, (ii) in the case of an industrial insured captive 72 Raised Bill No. 321
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insurance company, has an existing contractual relationship with an 73
industrial insured or one of the industrial insured's affiliated companies, 74
or (iii) in the case of a sponsored captive insurance company, has an 75
existing contractual relationship with a participant or one of the 76
participant's affiliated companies; and 77
(C) Whose risks are managed by a pure captive insurance company, 78
an industrial insured captive insurance company or a sponsored captive 79
insurance company, as applicable, in accordance with section 38a-91qq. 80
(13) "Excess workers' compensation insurance" means, in the case of 81
an employer that has insured or self-insured its workers' compensation 82
risks in accordance with applicable state or federal law, insurance in 83
excess of a specified per-incident or aggregate limit established by the 84
commissioner. 85
(14) "Foreign captive insurance company" means any insurance 86
company formed to write insurance business for its parent and affiliated 87
companies and licensed pursuant to the laws of a foreign jurisdiction 88
that imposes statutory or regulatory standards on companies 89
transacting the business of insurance in such jurisdiction that the 90
commissioner deems to be acceptable. 91
(15) "Incorporated protected cell" means a protected cell that is 92
established as a corporation or a limited liability company, separate 93
from the sponsored captive insurance company with which it has 94
entered into a participant contract. 95
(16) "Industrial insured" means an insured: 96
(A) Who procures the insurance of any risk or risks by use of the 97
services of a full-time employee acting as an insurance manager or 98
buyer; 99
(B) Whose aggregate annual premiums for insurance on all risks total 100
at least twenty-five thousand dollars; and 101
(C) Who has at least twenty-five full-time employees. 102 Raised Bill No. 321
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(17) "Industrial insured captive insurance company" means any 103
company that insures risks of the industrial insureds that comprise an 104
industrial insured group, and includes a company that also insures risks 105
of such industrial insureds' affiliated companies. 106
(18) "Industrial insured group" means any group of industrial 107
insureds that collectively: 108
(A) Directly or indirectly own, control or hold with power to vote all 109
of the outstanding voting securities or other voting interests of an 110
industrial insured captive insurance company incorporated as a stock 111
insurer; 112
(B) Have complete voting control over an industrial insured captive 113
insurance company incorporated as a mutual corporation or formed as 114
a limited liability company; or 115
(C) Constitute all of the subscribers of an industrial insured captive 116
insurance company formed as a reciprocal insurer. 117
(19) "Insurance securitization" or "securitization" means a transaction 118
or a group of related transactions, which may include capital market 119
offerings, that are effected through related risk transfer instruments and 120
facilitating administrative agreements, in which all or part of the result 121
of such transaction is used to fund a special purpose financial captive 122
insurance company's obligations under a reinsurance contract with a 123
ceding insurer and by which: 124
(A) A special purpose financial captive insurance company directly 125
or indirectly obtains proceeds through the issuance of securities by such 126
company or any other person; or 127
(B) A person provides, for the benefit of a special purpose financial 128
captive insurance company, one or more letters of credit or other assets 129
that the commissioner has authorized such company to treat as 130
admitted assets for purposes of its annual report. "Insurance 131
securitization" or "securitization" does not include the issuance of a 132 Raised Bill No. 321
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letter of credit for the benefit of the commissioner to satisfy all or part of 133
a special purpose financial captive insurance company's capital and 134
surplus requirements under section 38a-91dd. 135
(20) "Member organization" means any individual, corporation, 136
limited liability company, partnership, association or other entity that 137
belongs to an association. 138
(21) "Mutual corporation" means a corporation organized without 139
stockholders and includes a nonprofit corporation with members. 140
(22) "Parent" means any individual, corporation, limited liability 141
company, partnership or other entity that directly or indirectly owns, 142
controls or holds with power to vote more than fifty per cent of the 143
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
(23) "Participant" means any association, corporation, limited liability 149
company, partnership, trust or other entity, and any affiliated company 150
or controlled unaffiliated business thereof, that is insured by a 151
sponsored captive insurance company pursuant to a participant 152
contract. 153
(24) "Participant contract" means a contract entered into by a 154
sponsored captive insurance company and a participant by which the 155
sponsored captive insurance company insures the risks of the 156
participant and limits the losses of each such participant to its pro rata 157
share of the assets of one or more protected cells identified in such 158
participant contract. 159
(25) "Protected cell" means a separate account established by a 160
sponsored captive insurance company, in which assets are maintained 161
for one or more participants in accordance with the terms of one or more 162 Raised Bill No. 321
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participant contracts to fund the liability of the sponsored captive 163
insurance company assumed on behalf of such participants as set forth 164
in such participant contracts. 165
(26) "Pure captive insurance company" means any company that 166
insures risks of its parent and affiliated companies or controlled 167
unaffiliated business. 168
(27) "Reinsurance contract" means a contract entered into by a special 169
purpose financial captive insurance company and a ceding insurer by 170
which the special purpose financial captive insurance company agrees 171
to provide reinsurance to the ceding insurer for risks associated with the 172
ceding insurer's insurance or reinsurance business. 173
(28) "Risk retention group" means a captive insurance company 174
organized under the laws of this state pursuant to the federal Liability 175
Risk Retention Act of 1986, 15 USC 3901 et seq., as amended from time 176
to time, as a stock insurer or mutual corporation, a reciprocal or other 177
limited liability entity. 178
(29) "Security" has the same meaning as provided in section 36b-3 and 179
includes any form of debt obligation, equity, surplus certificate, surplus 180
note, funding agreement, derivative or other financial instrument that 181
the commissioner designates as a security for purposes of this section 182
and sections 38a-91bb to 38a-91tt, inclusive. 183
(30) "Special purpose financial captive insurance company" means a 184
company that is licensed by the commissioner in accordance with 185
section 38a-91bb. 186
(31) "Special purpose financial captive insurance company security" 187
means a security issued by (A) a special purpose financial captive 188
insurance company, or (B) a third party, the proceeds of which are 189
obtained directly or indirectly by a special purpose financial captive 190
insurance company. 191
(32) "Sponsor" means any association, corporation, limited liability 192 Raised Bill No. 321
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company, partnership, trust or other entity that is approved by the 193
commissioner to organize and operate a sponsored captive insurance 194
company and to provide all or part of the required unimpaired paid-in 195
capital and surplus. 196
(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
(34) "Surplus note" means an unsecured subordinated debt obligation 207
possessing characteristics consistent with the National Association of 208
Insurance Commissioners Statement of Statutory Accounting Principles 209
No. 41, as amended from time to time, and as modified or supplemented 210
by the commissioner. 211
Sec. 2. (NEW) (Effective October 1, 2024) (a) (1) Any sponsored captive 212
insurance company, including a sponsored captive insurance company 213
licensed as a special purpose financial captive insurance company, may, 214
upon application of such sponsored captive insurance company and 215
with the commissioner's prior written approval, convert one or more 216
protected cells or incorporated protected cells into a: 217
(A) Single protected cell or incorporated protected cell; 218
(B) New sponsored captive insurance company; 219
(C) New sponsored captive insurance company licensed as a special 220
purpose financial captive insurance company; 221 Raised Bill No. 321
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(D) New special purpose financial captive insurance company; 222
(E) New pure captive insurance company; 223
(F) New risk retention group; 224
(G) New agency captive insurance company; 225
(H) New industrial insured captive insurance company; or 226
(I) New association captive insurance company. 227
(2) Any such conversion of a protected cell or incorporated protected 228
cell, in accordance with subdivision (1) of this subsection, shall be 229
subject to the provisions of sections 38a-91aa to 38a-91xx, inclusive, of 230
the general statutes, as amended by this act, as applicable, and such 231
sponsored captive insurance company's plan of operation approved by 232
the commissioner, without affecting such converted protected cell's or 233
incorporated protected cell's assets, rights, benefits, obligations and 234
liabilities. 235
(b) Any conversion of a protected cell or incorporated protected cell 236
shall be deemed to be a continuation of such protected cell's or 237
incorporated protected cell's existence together with all of such 238
protected cell's or incorporated protected cell's assets, rights, benefits, 239
obligations and liabilities, as (1) a new protected cell or incorporated 240
protected cell, (2) a sponsored captive insurance company, (3) a 241
sponsored captive insurance company licensed as a special purpose 242
financial captive insurance company, (4) a pure captive insurance 243
company, (5) a risk retention group, (6) an industrial insured captive 244
insurance company, or (7) an association captive insurance company, as 245
applicable. Any such conversion of a protected cell or incorporated 246
protected cell shall be deemed to occur without any transfer or 247
assignment of such cell's assets, rights, benefits, obligations or liabilities, 248
and without the creation of any reversionary interest in, or impairment 249
of, any such assets, rights, benefits, obligations or liabilities. 250
(c) Any conversion of a protected cell or incorporated protected cell 251 Raised Bill No. 321
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shall not be construed to limit any rights or protections applicable to 252
such converted protected cell or incorporated protected cell or 253
applicable to such sponsored captive insurance company or sponsored 254
captive insurance company licensed as a special purpose financial 255
captive insurance company, as applicable, that existed immediately 256
prior to the date of such conversion. 257
(d) Any protected cell or incorporated protected cell that converts 258
into an incorporated protected cell, a new captive insurance company 259
or risk retention group, in accordance with the provisions of this section, 260
shall perform such conversion in accordance with chapter 601 or 613 of 261
the general statutes, as applicable, or in accordance with any such 262
provisions of the general statutes applicable to the formation of any 263
other type of legal entity permissible under the laws of this state, as 264
applicable. 265
This act shall take effect as follows and shall amend the following
sections:
Section 1 October 1, 2024 38a-91aa
Sec. 2 October 1, 2024 New section
Statement of Purpose:
To allow sponsored captive insurance companies to convert one or more
protected cells or incorporated protected cells into a new protected cell,
incorporated protected cell, captive insurance company or risk retention
group without impacting such cell's assets, rights, benefits, obligations
and liabilities.
[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.]