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OLR Bill Analysis
sHB 6433
AN ACT CONCERNING CAPTIVE INSURANCE.
SUMMARY
This bill makes various changes in laws related to captive insurers
(see BACKGROUND) by generally allowing:
1. a captive insurance company domiciled in the state, with the
insurance commissioner’s prior written approval, to convert into
a protected cell;
2. a sponsored captive insurance company, with prior consent of
certain relevant entities and the commissioner’s approval, to sell,
transfer, assign, or otherwise convey a protected cell to a new or
existing sponsored captive insurance company or one licensed as
a special purpose financial insurance company; and
3. the insurance commissioner to separate any insolvent protected
cell from the sponsored captive insurance company, and the
insolvent protected cell to convert into a new protected cell or a
captive insurance company.
It also subjects captive insurance companies to the general penalty
under existing law if they violate any provision of the insurance title for
which no other penalty is provided. By law, this general penalty is a fine
up to $15,000.
EFFECTIVE DATE: October 1, 2025
CONVERSION TO PROTECTED CELL
Eligibility
The bill allows any captive insurance company domiciled in the state
to convert into a protected cell if it (1) is organized as an agency captive
insurance company, association captive insurance company, industrial 2025HB-06433-R000063-BA.DOCX
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insured captive insurance company, pure captive insurance company,
risk retention group, or special purpose financial insurance company
and (2) has the commissioner’s prior written approval.
Laws That Govern the Conversion
The captive insurance company must perform the conversion under
the laws applicable to business corporations, limited liability
companies, or any other type of legal entity allowed under state law, as
applicable.
Effect of the Conversion
Under the bill, the conversion is subject to the captive insurance-
related statutes and the captive insurance company’s plan of operation
approved by the commissioner, but it does not affect the converted
captive insurance company’s assets, rights, benefits, obligations, or
liabilities.
The bill deems the captive insurance company’s conversion into a
protected cell to be a continuation of the company’s existence with all
its assets, rights, benefits, obligations, and liabilities as a protected cell.
The conversion occurs without transferring, assigning, impairing, or
creating a reversionary interest in the captive insurance company’s
assets, rights, benefits, obligations, or liabilities.
The bill specifies that a captive insurance company’s conversion does
not limit any of the rights or protections that the company had under
certain laws relating to its licensure as a captive insurance company
before the conversion.
CONVEYANCE OF PROTEC TED CELL
Eligibility
The bill allows any sponsored captive insurance company, including
those licensed as a special purpose financial insurance company, to sell,
transfer, assign or otherwise convey a protected cell, together with all of
the protected cell’s assets, rights, benefits, obligations, and liabilities, to
a new or existing sponsored captive insurance company or one licensed
as a special purpose financial insurance company. The company must 2025HB-06433-R000063-BA.DOCX
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do so according to any plan of operation approved by the commissioner.
Prerequisites
Under the bill, to convey the protected cell as described above, the (1)
company must get (a) the affected incorporated protected cell’s consent
or (b) prior consent from each participant of the affected protected cell
or as otherwise allowed under a participation agreement, (2) sponsor
must file an application, and (3) commissioner must approve in writing.
Effect of the Sale, Transfer, Assignment, or Conveyance
The bill deems any sale, transfer, assignment, or conveyance of a
protected cell (as described above) as a continuation of the protected
cell’s existence, with all its assets, rights, benefits, obligations, and
liabilities, as a protected cell of the transferee sponsored captive
insurance company.
Under the bill, the sale, transfer, assignment, or conveyance of a
protected cell does not limit any rights or protections that the
transferred protected cell and the transferor sponsored captive
insurance company or sponsored captive insurance company licensed
as a special purpose financial insurance company had under applicable
insurance laws immediately before the sale, transfer, assignment, or
conveyance date.
SEPARATION OF INSOLVENT PROTECTED CELL
The bill allows the (1) insurance commissioner to separate any
insolvent protected cell from the sponsored captive insurance company
and (2) insolvent protected cell to convert into a captive insurance
company or a new protected cell of another sponsored captive insurance
company.
The bill deems the conversion of the insolvent protected cell as a
continuation of its existence as a new protected cell or captive insurance
company, as applicable. Under the bill, the conversion occurs without
transferring, assigning, impairing, or creating a reversionary interest in
the protected cell’s assets, rights, benefits, obligations, or liabilities.
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BACKGROUND
Captive Insurers
Generally, a captive insurer is an insurance company formed to
insure or reinsure the risks of its owners, parent company, or affiliated
company. Existing law allows several different types of captive insurers
to be licensed and operate in the state. One type, a sponsored captive
insurer, is an insurance company that (1) has the minimum paid-in
capital and surplus provided by one or more sponsors, (2) insures its
participants through separate participant contracts, and (3) funds its
liability to each participant through protected cells and separates each
cell’s assets from that of other cells and the captive insurer as a whole.
COMMITTEE ACTION
Insurance and Real Estate Committee
Joint Favorable Substitute
Yea 13 Nay 0 (02/20/2025)