Connecticut 2025 Regular Session

Connecticut House Bill HB06433 Compare Versions

Version 1 (Old)

Version 2 (New)

Old	New		Differences
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2	2
3		-	LCO 1 of 18
	3	+	LCO No. 2558 1 of 19
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5		-	General Assembly ~~Substitute~~ Bill No. 6433
	5	+	General Assembly Raised Bill No. 6433
6	6		January Session, 2025
	7	+	LCO No. 2558
7	8
	9	+
	10	+	Referred to Committee on INSURANCE AND REAL ESTATE
	11	+
	12	+
	13	+	Introduced by:
	14	+	(INS)
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9	16
10	17
11	18
12	19		AN ACT CONCERNING CAPTIVE INSURANCE.
13	20		Be it enacted by the Senate and House of Representatives in General
14	21		Assembly convened:
15	22
16	23		Section 1. Section 38a-91aa of the general statutes is repealed and the 1
17	24		following is substituted in lieu thereof (Effective October 1, 2025): 2
18	25		As used in this section, sections 38a-91bb to 38a-91uu, inclusive, [and] 3
19	26		sections 38a-91ww to 38-91yy, inclusive, and section 3 of this act: 4
20	27		(1) "Affiliated company" means any company in the same corporate 5
21	28		system as a parent, an industrial insured or a member organization by 6
22	29		virtue of common ownership, control, operation or management. 7
23	30		(2) "Agency captive insurance company" means a captive insurance 8
24	31		company that: 9
25	32		(A) Is owned or directly or indirectly controlled by one or more 10
26	33		insurance agents or insurance producers licensed in accordance with 11
27	34		sections 38a-702a to 38a-702r, inclusive; 12
28	35		(B) Only insures against risks covered by insurance policies sold, 13
	36	+	Raised Bill No. 6433
	37	+
	38	+
	39	+
	40	+	LCO No. 2558 2 of 19
	41	+
29	42		solicited or negotiated through the insurance agents or insurance 14
30	43		producers that own or control such captive insurance company; and 15
31		-	(C) Does not insure against risks covered by any health insurance 16 Substitute Bill No. 6433
32		-
33		-
34		-	LCO 2 of 18
35		-
	44	+	(C) Does not insure against risks covered by any health insurance 16
36	45		policy or plan. 17
37	46		(3) "Alien captive insurance company" means any insurance 18
38	47		company formed to write insurance business for its parent and affiliated 19
39	48		companies and licensed pursuant to the laws of an alien jurisdiction that 20
40	49		imposes statutory or regulatory standards on companies transacting the 21
41	50		business of insurance in such jurisdiction that the commissioner deems 22
42	51		to be acceptable. 23
43	52		(4) "Association" means any legal association of individuals, 24
44	53		corporations, limited liability companies, partnerships, associations or 25
45	54		other entities, where the association itself or some or all of the member 26
46	55		organizations: 27
47	56		(A) Directly or indirectly own, control or hold with power to vote all 28
48	57		of the outstanding voting securities or other voting interests of an 29
49	58		association captive insurance company incorporated as a stock insurer; 30
50	59		(B) Have complete voting control over an association captive 31
51	60		insurance company incorporated as a mutual corporation or formed as 32
52	61		a limited liability company; or 33
53	62		(C) Constitute all of the subscribers of an association captive 34
54	63		insurance company formed as a reciprocal insurer. 35
55	64		(5) "Association captive insurance company" means any company 36
56	65		that insures risks of the member organizations of an association, and 37
57	66		includes a company that also insures risks of such member 38
58	67		organizations' affiliated companies or of the association. 39
59	68		(6) "Branch business" means any insurance business transacted in this 40
60	69		state by a branch captive insurance company. 41
	70	+	Raised Bill No. 6433
	71	+
	72	+
	73	+
	74	+	LCO No. 2558 3 of 19
	75	+
61	76		(7) "Branch captive insurance company" means any alien captive 42
62	77		insurance company or foreign captive insurance company licensed by 43
63	78		the commissioner to transact the business of insurance in this state 44
64		-	through a business unit with a principal place of business in this state. 45 Substitute Bill No. 6433
65		-
66		-
67		-	LCO 3 of 18
68		-
	79	+	through a business unit with a principal place of business in this state. 45
69	80		(8) "Branch operations" means any business operations in this state of 46
70	81		a branch captive insurance company. 47
71	82		(9) "Captive insurance company" means any (A) pure captive 48
72	83		insurance company, agency captive insurance company, association 49
73	84		captive insurance company, industrial insured captive insurance 50
74	85		company, risk retention group, sponsored captive insurance company 51
75	86		or special purpose financial captive insurance company that is 52
76	87		domiciled in this state and formed or licensed under the provisions of 53
77	88		this section and sections 38a-91bb to 38a-91tt, inclusive, or (B) branch 54
78	89		captive insurance company. 55
79	90		(10) "Ceding insurer" means an insurance company, approved by the 56
80	91		commissioner and licensed or otherwise authorized to transact the 57
81	92		business of insurance or reinsurance in its state or country of domicile, 58
82	93		that cedes risk to a special purpose financial captive insurance company 59
83	94		pursuant to a reinsurance contract. 60
84	95		(11) "Commissioner" means the Insurance Commissioner. 61
85	96		(12) "Controlled unaffiliated business" means any person: 62
86	97		(A) Who, (i) in the case of a pure captive insurance company, is not 63
87	98		in the corporate system of a parent and the parent's affiliated companies, 64
88	99		(ii) in the case of an industrial insured captive insurance company, is not 65
89	100		in the corporate system of an industrial insured and the industrial 66
90	101		insured's affiliated companies, or (iii) in the case of a sponsored captive 67
91	102		insurance company, is not in the corporate system of a participant and 68
92	103		the participant's affiliated companies; 69
93	104		(B) Who, (i) in the case of a pure captive insurance company, has an 70
	105	+	Raised Bill No. 6433
	106	+
	107	+
	108	+
	109	+	LCO No. 2558 4 of 19
	110	+
94	111		existing contractual relationship with a parent or one of the parent's 71
95	112		affiliated companies, (ii) in the case of an industrial insured captive 72
96	113		insurance company, has an existing contractual relationship with an 73
97	114		industrial insured or one of the industrial insured's affiliated companies, 74
98	115		or (iii) in the case of a sponsored captive insurance company, has an 75
99		-	existing contractual relationship with a participant or one of the 76 Substitute Bill No. 6433
100		-
101		-
102		-	LCO 4 of 18
103		-
	116	+	existing contractual relationship with a participant or one of the 76
104	117		participant's affiliated companies; and 77
105	118		(C) Whose risks are managed by a pure captive insurance company, 78
106	119		an industrial insured captive insurance company or a sponsored captive 79
107	120		insurance company, as applicable, in accordance with section 38a-91qq. 80
108	121		(13) "Excess workers' compensation insurance" means, in the case of 81
109	122		an employer that has insured or self-insured its workers' compensation 82
110	123		risks in accordance with applicable state or federal law, insurance in 83
111	124		excess of a specified per-incident or aggregate limit established by the 84
112	125		commissioner. 85
113	126		(14) "Foreign captive insurance company" means any insurance 86
114	127		company formed to write insurance business for its parent and affiliated 87
115	128		companies and licensed pursuant to the laws of a foreign jurisdiction 88
116	129		that imposes statutory or regulatory standards on companies 89
117	130		transacting the business of insurance in such jurisdiction that the 90
118	131		commissioner deems to be acceptable. 91
119	132		(15) "Incorporated protected cell" means a protected cell that is 92
120	133		established as a corporation or a limited liability company, separate 93
121	134		from the sponsored captive insurance company with which it has 94
122	135		entered into a participant contract. 95
123	136		(16) "Industrial insured" means an insured: 96
124	137		(A) Who procures the insurance of any risk or risks by use of the 97
125	138		services of a full-time employee acting as an insurance manager or 98
126	139		buyer; 99
	140	+	Raised Bill No. 6433
	141	+
	142	+
	143	+
	144	+	LCO No. 2558 5 of 19
	145	+
127	146		(B) Whose aggregate annual premiums for insurance on all risks total 100
128	147		at least twenty-five thousand dollars; and 101
129	148		(C) Who has at least twenty-five full-time employees. 102
130	149		(17) "Industrial insured captive insurance company" means any 103
131	150		company that insures risks of the industrial insureds that comprise an 104
132		-	industrial insured group, and includes a company that also insures risks 105 Substitute Bill No. 6433
133		-
134		-
135		-	LCO 5 of 18
136		-
	151	+	industrial insured group, and includes a company that also insures risks 105
137	152		of such industrial insureds' affiliated companies. 106
138	153		(18) "Industrial insured group" means any group of industrial 107
139	154		insureds that collectively: 108
140	155		(A) Directly or indirectly own, control or hold with power to vote all 109
141	156		of the outstanding voting securities or other voting interests of an 110
142	157		industrial insured captive insurance company incorporated as a stock 111
143	158		insurer; 112
144	159		(B) Have complete voting control over an industrial insured captive 113
145	160		insurance company incorporated as a mutual corporation or formed as 114
146	161		a limited liability company; or 115
147	162		(C) Constitute all of the subscribers of an industrial insured captive 116
148	163		insurance company formed as a reciprocal insurer. 117
149	164		(19) "Insurance securitization" or "securitization" means a transaction 118
150	165		or a group of related transactions, which may include capital market 119
151	166		offerings, that are effected through related risk transfer instruments and 120
152	167		facilitating administrative agreements, in which all or part of the result 121
153	168		of such transaction is used to fund a special purpose financial captive 122
154	169		insurance company's obligations under a reinsurance contract with a 123
155	170		ceding insurer and by which: 124
156	171		(A) A special purpose financial captive insurance company directly 125
157	172		or indirectly obtains proceeds through the issuance of securities by such 126
158	173		company or any other person; or 127
	174	+	Raised Bill No. 6433
	175	+
	176	+
	177	+
	178	+	LCO No. 2558 6 of 19
	179	+
159	180		(B) A person provides, for the benefit of a special purpose financial 128
160	181		captive insurance company, one or more letters of credit or other assets 129
161	182		that the commissioner has authorized such company to treat as 130
162	183		admitted assets for purposes of its annual report. "Insurance 131
163	184		securitization" or "securitization" does not include the issuance of a 132
164	185		letter of credit for the benefit of the commissioner to satisfy all or part of 133
165	186		a special purpose financial captive insurance company's capital and 134
166		-	surplus requirements under section 38a-91dd. 135 Substitute Bill No. 6433
167		-
168		-
169		-	LCO 6 of 18
170		-
	187	+	surplus requirements under section 38a-91dd. 135
171	188		(20) "Member organization" means any individual, corporation, 136
172	189		limited liability company, partnership, association or other entity that 137
173	190		belongs to an association. 138
174	191		(21) "Mutual corporation" means a corporation organized without 139
175	192		stockholders and includes a nonprofit corporation with members. 140
176	193		(22) "Parent" means any individual, corporation, limited liability 141
177	194		company, partnership or other entity that directly or indirectly owns, 142
178	195		controls or holds with power to vote more than fifty per cent of the 143
179	196		outstanding voting: 144
180	197		(A) Securities of a pure captive insurance company organized as a 145
181	198		stock insurer; or 146
182	199		(B) Membership interests of a pure captive insurance company 147
183	200		organized as a nonprofit corporation or as a limited liability company. 148
184	201		(23) "Participant" means any association, corporation, limited liability 149
185	202		company, partnership, trust or other entity, and any affiliated company 150
186	203		or controlled unaffiliated business thereof, that is insured by a 151
187	204		sponsored captive insurance company pursuant to a participant 152
188	205		contract. 153
189	206		(24) "Participant contract" means a contract entered into by a 154
190	207		sponsored captive insurance company and a participant by which the 155
191	208		sponsored captive insurance company insures the risks of the 156
	209	+	Raised Bill No. 6433
	210	+
	211	+
	212	+
	213	+	LCO No. 2558 7 of 19
	214	+
192	215		participant and limits the losses of each such participant to its pro rata 157
193	216		share of the assets of one or more protected cells identified in such 158
194	217		participant contract. 159
195	218		(25) "Protected cell" means a separate account established by a 160
196	219		sponsored captive insurance company, in which assets are maintained 161
197	220		for one or more participants in accordance with the terms of one or more 162
198	221		participant contracts to fund the liability of the sponsored captive 163
199	222		insurance company assumed on behalf of such participants as set forth 164
200		-	in such participant contracts. 165 Substitute Bill No. 6433
201		-
202		-
203		-	LCO 7 of 18
204		-
	223	+	in such participant contracts. 165
205	224		(26) "Pure captive insurance company" means any company that 166
206	225		insures risks of its parent and affiliated companies or controlled 167
207	226		unaffiliated business. 168
208	227		(27) "Reinsurance contract" means a contract entered into by a special 169
209	228		purpose financial captive insurance company and a ceding insurer by 170
210	229		which the special purpose financial captive insurance company agrees 171
211	230		to provide reinsurance to the ceding insurer for risks associated with the 172
212	231		ceding insurer's insurance or reinsurance business. 173
213	232		(28) "Risk retention group" means a captive insurance company 174
214	233		organized under the laws of this state pursuant to the federal Liability 175
215	234		Risk Retention Act of 1986, 15 USC 3901 et seq., as amended from time 176
216	235		to time, as a stock insurer or mutual corporation, a reciprocal or other 177
217	236		limited liability entity. 178
218	237		(29) "Security" has the same meaning as provided in section 36b-3 and 179
219	238		includes any form of debt obligation, equity, surplus certificate, surplus 180
220	239		note, funding agreement, derivative or other financial instrument that 181
221	240		the commissioner designates as a security for purposes of this section 182
222	241		and sections 38a-91bb to 38a-91tt, inclusive. 183
223	242		(30) "Special purpose financial captive insurance company" means a 184
224	243		company that is licensed by the commissioner in accordance with 185
225	244		section 38a-91bb. 186
	245	+	Raised Bill No. 6433
	246	+
	247	+
	248	+
	249	+	LCO No. 2558 8 of 19
	250	+
226	251		(31) "Special purpose financial captive insurance company security" 187
227	252		means a security issued by (A) a special purpose financial captive 188
228	253		insurance company, or (B) a third party, the proceeds of which are 189
229	254		obtained directly or indirectly by a special purpose financial captive 190
230	255		insurance company. 191
231	256		(32) "Sponsor" means any association, corporation, limited liability 192
232	257		company, partnership, trust or other entity that is approved by the 193
233	258		commissioner to organize and operate a sponsored captive insurance 194
234	259		company and to provide all or part of the required unimpaired paid-in 195
235		-	capital and surplus. 196 Substitute Bill No. 6433
236		-
237		-
238		-	LCO 8 of 18
239		-
	260	+	capital and surplus. 196
240	261		(33) "Sponsored captive insurance company" means a captive 197
241	262		insurance company: 198
242	263		(A) In which the minimum required unimpaired paid-in capital and 199
243	264		surplus are provided by one or more sponsors; 200
244	265		(B) That insures risks of its participants only through separate 201
245	266		participant contracts; and 202
246	267		(C) That funds its liability to each participant through one or more 203
247	268		protected cells and segregates the assets of each protected cell from the 204
248	269		assets of other protected cells and from the assets of the sponsored 205
249	270		captive insurance company's general account. 206
250	271		(34) "Surplus note" means an unsecured subordinated debt obligation 207
251	272		possessing characteristics consistent with the National Association of 208
252	273		Insurance Commissioners Statement of Statutory Accounting Principles 209
253	274		No. 41, as amended from time to time, and as modified or supplemented 210
254	275		by the commissioner. 211
255	276		Sec. 2. Subsection (a) of section 38a-91oo of the general statutes is 212
256	277		repealed and the following is substituted in lieu thereof (Effective October 213
257	278		1, 2025): 214
258	279		(a) Unless otherwise provided in sections 38a-91aa to 38a-91tt, 215
	280	+	Raised Bill No. 6433
	281	+
	282	+
	283	+
	284	+	LCO No. 2558 9 of 19
	285	+
259	286		inclusive, as amended by this act, no provision of this title shall apply to 216
260	287		captive insurance companies, unless expressly included therein, except 217
261	288		for the following: (1) Sections 38a-2, 38a-8, 38a-16, 38a-17, 38a-54 to 38a-218
262	289		59, inclusive, 38a-69a, 38a-102h and 38a-250 to 38a-266, inclusive, and 219
263	290		chapter 704c; and (2) subsection (d) of section 38a-72 and sections 38a-220
264	291		73 and 38a-129 to 38a-140, inclusive, which shall apply only to captive 221
265	292		insurance companies formed as risk retention groups. 222
266	293		Sec. 3. (NEW) (Effective October 1, 2025) (a) (1) Any captive insurance 223
267	294		company domiciled in this state and organized as an agency captive 224
268	295		insurance company, association captive insurance company, industrial 225
269		-	insured captive insurance company, pure captive insurance company, 226 Substitute Bill No. 6433
270		-
271		-
272		-	LCO 9 of 18
273		-
	296	+	insured captive insurance company, pure captive insurance company, 226
274	297		risk retention group or special purpose financial insurance company 227
275	298		may, with the commissioner's prior written approval, convert into a 228
276	299		protected cell. 229
277	300		(2) Any such conversion of a captive insurance company, in 230
278	301		accordance with the provisions of subdivision (1) of this subsection, 231
279	302		shall be subject to the provisions of sections 38a-91aa to 38a-91tt, 232
280	303		inclusive, of the general statutes, as amended by this act, as applicable, 233
281	304		and such captive insurance company's plan of operation approved by 234
282	305		the commissioner, without affecting the converted captive insurance 235
283	306		company's assets, rights, benefits, obligations or liabilities. 236
284	307		(b) Any conversion of a captive insurance company into a protected 237
285	308		cell shall be deemed to be a continuation of such converted captive 238
286	309		insurance company's existence together with all of such captive 239
287	310		insurance company's assets, rights, benefits, obligations and liabilities 240
288	311		as a protected cell. Any such conversion of a captive insurance company 241
289	312		shall be deemed to occur without any transfer or assignment of such 242
290	313		captive insurance company's assets, rights, benefits, obligations or 243
291	314		liabilities, and without the creation of any reversionary interest in, or 244
292	315		impairment of, any such assets, rights, benefits, obligations or liabilities. 245
293	316		(c) Any conversion of a captive insurance company shall not be 246
	317	+	Raised Bill No. 6433
	318	+
	319	+
	320	+
	321	+	LCO No. 2558 10 of 19
	322	+
294	323		construed to limit any rights or protections applicable to such captive 247
295	324		insurance company under subsection (c) of section 38a-91bb of the 248
296	325		general statutes, as applicable, that existed immediately prior to the date 249
297	326		of such conversion. 250
298		-	(d) Any captive insurance company that converts into a protected 251
299		-	~~cell,~~ in accordance with the provisions of this section, shall perform such 252
300		-	conversion, in accordance with chapter 601 or 613 of the general statutes, 253
	327	+	(d) Any captive insurance company that converts into a protected cell 251
	328	+	in accordance with the provisions of this section shall perform such 252
	329	+	conversion in accordance with chapter 601 or 613 of the general statutes, 253
301	330		as applicable, or in accordance with any such provisions of the general 254
302	331		statutes applicable to the formation of any other type of legal entity 255
303	332		permissible under the laws of this state, as applicable. 256
304	333		(e) Any sponsored captive insurance company, including a 257
305		-	sponsored captive insurance company licensed as a special purpose 258 Substitute Bill No. 6433
306		-
307		-
308		-	LCO 10 of 18
309		-
	334	+	sponsored captive insurance company licensed as a special purpose 258
310	335		financial insurance company, may, (1) with the prior consent of each 259
311	336		participant of the affected protected cell or as otherwise permitted 260
312	337		pursuant to a participation agreement, or the consent of the affected 261
313		-	incorporated protected cell, (2) upon application of ~~the sponsor, and (3)~~ 262
314		-	with the commissioner's prior ~~written approval, sell, transfer, assign or~~ 263
315		-	otherwise convey a protected ~~cell, together with all of such protected~~ 264
316		-	cell's assets, rights, benefits, ~~obligations and liabilities, to a new or~~ 265
317		-	~~existing sponsored captive insurance company~~ or sponsored captive 266
318		-	insurance company licensed ~~as a special purpose financial insurance~~ 267
319		-	company, pursuant to any plan ~~of operation approved by the~~ 268
320		-	commissioner. 269
321		-	(f) Any sale, transfer, assignment or conveyance of a protected cell, in 270
322		-	accordance with the provisions of subsection (e) of this section, shall be 271
323		-	deemed to be a continuation of such protected cell's existence, together 272
	338	+	incorporated protected cell, (2) upon application of such sponsored 262
	339	+	captive insurance company, and (3) with the commissioner's prior 263
	340	+	written approval, sell, transfer, assign or otherwise convey a protected 264
	341	+	cell together with all of such protected cell's assets, rights, benefits, 265
	342	+	obligations and liabilities to a new or existing sponsored captive 266
	343	+	insurance company or sponsored captive insurance company licensed 267
	344	+	as a special purpose financial insurance company, pursuant to any plan 268
	345	+	of operation approved by the commissioner. 269
	346	+	(f) Any sale, transfer, assignment or conveyance of a protected cell in 270
	347	+	accordance with the provisions of subsection (e) of this section shall be 271
	348	+	deemed to be a continuation of such protected cell's existence together 272
324	349		with all of such protected cell's assets, rights, benefits, obligations and 273
325	350		liabilities, as a protected cell of the transferee sponsored captive 274
326	351		insurance company. 275
327		-	(g) No sale, transfer, assignment or conveyance of a protected cell, in 276
328		-	accordance with the provisions of subsection (e) of this section, shall 277
	352	+	(g) No sale, transfer, assignment or conveyance of a protected cell in 276
	353	+	accordance with the provisions of subsection (e) of this section shall 277
	354	+	Raised Bill No. 6433
	355	+
	356	+
	357	+
	358	+	LCO No. 2558 11 of 19
	359	+
329	360		limit any rights or protections applicable to the transferred protected 278
330	361		cell and the transferor sponsored captive insurance company or 279
331	362		sponsored captive insurance company licensed as a special purpose 280
332	363		financial insurance company under this chapter, as applicable, that 281
333	364		existed immediately prior to the date of such sale, transfer, assignment 282
334	365		or conveyance. 283
335	366		Sec. 4. Section 38a-91rr of the general statutes is repealed and the 284
336	367		following is substituted in lieu thereof (Effective October 1, 2025): 285
337	368		(a) Each sponsored captive insurance company may establish and 286
338	369		maintain one or more protected cells, subject to the following 287
339	370		conditions: 288
340	371		(1) The stockholders of a sponsored captive insurance company shall 289
341		-	be limited to its participants and sponsors, except that a sponsored 290 Substitute Bill No. 6433
342		-
343		-
344		-	LCO 11 of 18
345		-
	372	+	be limited to its participants and sponsors, except that a sponsored 290
346	373		captive insurance company may issue nonvoting securities to other 291
347	374		persons on terms approved by the commissioner; 292
348	375		(2) Each sponsored captive insurance company shall account 293
349	376		separately on the books and records of such company for each protected 294
350	377		cell to reflect the financial condition and results of operations of such 295
351	378		protected cell, net income or loss, dividends or other distributions to 296
352	379		participants and such other factors as may be provided in the participant 297
353	380		contract or required by the commissioner; 298
354	381		(3) No liabilities arising out of any other insurance business the 299
355	382		sponsored captive insurance company may conduct shall be chargeable 300
356	383		against the assets of a protected cell; 301
357	384		(4) No sponsored captive insurance company shall make any sale, 302
358	385		exchange or other transfer of assets, dividend or distribution between 303
359	386		or among any of its protected cells without the consent of such protected 304
360	387		cells; 305
361	388		(5) No protected cell shall make any sale, exchange or other transfer 306
	389	+	Raised Bill No. 6433
	390	+
	391	+
	392	+
	393	+	LCO No. 2558 12 of 19
	394	+
362	395		of assets, dividend or distribution to a sponsor or participant without 307
363	396		the commissioner's approval. The commissioner shall not approve such 308
364	397		sale, exchange or other transfer if it would result in insolvency or 309
365	398		impairment with respect to a protected cell; 310
366	399		(6) (A) Except as otherwise specified, each sponsored captive 311
367	400		insurance company shall attribute assets and liabilities to the protected 312
368	401		cells and the general account in accordance with the plan of operation 313
369	402		approved by the commissioner, and shall not attribute any other assets 314
370	403		or liabilities between its general account and any protected cell or 315
371	404		between any protected cells. For purposes of this subdivision, "general 316
372	405		account" means all assets and liabilities of a sponsored captive insurance 317
373	406		company that are not attributable to a protected cell. 318
374	407		(B) Each sponsored captive insurance company shall attribute all 319
375	408		insurance obligations, assets and liabilities relating to a reinsurance 320
376		-	contract entered into with respect to a protected cell to such protected 321 Substitute Bill No. 6433
377		-
378		-
379		-	LCO 12 of 18
380		-
	409	+	contract entered into with respect to a protected cell to such protected 321
381	410		cell. The performance under such reinsurance contract and any tax 322
382	411		benefits, losses, refunds or credits allocated pursuant to a tax allocation 323
383	412		agreement to which the sponsored captive insurance company is a 324
384	413		party, including any payments made by or due to be made to the 325
385	414		sponsored captive insurance company pursuant to the terms of such 326
386	415		agreement, shall reflect such obligations, assets and liabilities relating to 327
387	416		such reinsurance contract; 328
388	417		(7) Each sponsored captive insurance company shall file annually 329
389	418		with the commissioner such financial reports as the commissioner shall 330
390	419		require, including, but not limited to, accounting statements detailing 331
391	420		the financial experience of each protected cell; 332
392	421		(8) Each sponsored captive insurance company shall notify the 333
393	422		commissioner in writing not later than ten business days after any 334
394	423		protected cell becomes insolvent or otherwise unable to meet its claim 335
395	424		or expense obligations; 336
396	425		(9) No participant contract shall take effect without the 337
	426	+	Raised Bill No. 6433
	427	+
	428	+
	429	+
	430	+	LCO No. 2558 13 of 19
	431	+
397	432		commissioner's prior written approval. The addition of each new 338
398	433		protected cell or the withdrawal of any participant or termination of any 339
399	434		existing protected cell shall constitute a change in the sponsored captive 340
400	435		insurance company's plan of operation and shall require the 341
401	436		commissioner's prior written approval; 342
402	437		(10) If required by the commissioner, the business written by a 343
403	438		sponsored captive insurance company with respect to each protected 344
404	439		cell shall be (A) fronted by an insurance company licensed under the 345
405	440		laws of any state, (B) reinsured by a reinsurer authorized or approved 346
406	441		by this state, or (C) secured by a trust fund in the United States for the 347
407	442		benefit of policyholders and claimants or funded by an irrevocable letter 348
408	443		of credit or other arrangement that is acceptable to the commissioner. 349
409	444		The commissioner may require the sponsored captive insurance 350
410	445		company to increase the funding of any security arrangement 351
411	446		established under this subdivision. If the form of security is a letter of 352
412		-	credit, the letter of credit shall be issued or confirmed by a bank 353 Substitute Bill No. 6433
413		-
414		-
415		-	LCO 13 of 18
416		-
	447	+	credit, the letter of credit shall be issued or confirmed by a bank 353
417	448		approved by the commissioner. A trust maintained pursuant to this 354
418	449		subdivision shall be established in a form and upon such terms 355
419	450		approved by the commissioner; and 356
420	451		(11) A protected cell of a sponsored captive insurance company may, 357
421	452		with the commissioner's prior written approval, establish one or more 358
422	453		separate accounts and may allocate assets to such accounts to provide 359
423	454		for the insurance risks of one or more participants, or controlled 360
424	455		unaffiliated business of such participants, subject to the following: 361
425	456		(A) The income, gains and losses, realized or unrealized, from assets 362
426	457		allocated to a separate account shall be credited to or charged against 363
427	458		the account, without regard to other income, gains or losses of the 364
428	459		protected cell; 365
429	460		(B) Amounts allocated to a separate account pursuant to this 366
430	461		subdivision are owned by the protected cell and such protected cell shall 367
431	462		not be, nor hold itself out to be, a trustee with respect to such amounts; 368
	463	+	Raised Bill No. 6433
	464	+
	465	+
	466	+
	467	+	LCO No. 2558 14 of 19
	468	+
432	469		(C) Unless otherwise approved by the commissioner, assets allocated 369
433	470		to a separate account shall be valued in accordance with the laws and 370
434	471		regulations of this state otherwise applicable to the protected cell's 371
435	472		assets; 372
436	473		(D) To the extent provided under the applicable contracts, such 373
437	474		portion of the assets of any such protected cell equal to the reserves and 374
438	475		other contract liabilities with respect to such account shall not be 375
439	476		chargeable with liabilities arising out of any other business the protected 376
440	477		cell may conduct; 377
441	478		(E) No sale, exchange or other transfer of assets may be made by any 378
442	479		protected cell between any of such protected cell's separate accounts or 379
443	480		between any other investment account and one or more of such 380
444	481		protected cell's separate accounts unless, in the case of a transfer into a 381
445	482		separate account, such transfer is made solely to establish the account 382
446	483		or to support the operation of the contracts with respect to the separate 383
447		-	account to which the transfer is made, and unless such transfer, whether 384 Substitute Bill No. 6433
448		-
449		-
450		-	LCO 14 of 18
451		-
	484	+	account to which the transfer is made, and unless such transfer, whether 384
452	485		into or from a separate account, is made (i) by a transfer of cash, or (ii) 385
453	486		by a transfer of securities that has a readily determinable market value, 386
454	487		provided such transfer of securities is approved by the commissioner. 387
455	488		The commissioner may approve other transfers among such accounts if 388
456	489		the commissioner determines such transfers would be equitable; and 389
457	490		(F) To the extent any protected cell deems it necessary for compliance 390
458	491		with any applicable federal or state laws, such protected cell, with 391
459	492		respect to any separate account, including, but not limited to, any 392
460	493		separate account that is a management investment company or a unit 393
461	494		investment trust, may provide for persons having an interest therein 394
462	495		appropriate voting and other rights and special procedures for the 395
463	496		conduct of the business of such account, including, but not limited to, 396
464	497		special rights and procedures relating to investment policy, investment 397
465	498		advisory services, selection of independent public accountants and the 398
466	499		selection of a committee to manage the business of such account. Such 399
467	500		committee members are not required to be affiliated with such protected 400
	501	+	Raised Bill No. 6433
	502	+
	503	+
	504	+
	505	+	LCO No. 2558 15 of 19
	506	+
468	507		cell. 401
469	508		(b) Each sponsored captive insurance company may combine the 402
470	509		assets of two or more protected cells for purposes of investment and 403
471	510		such combination shall not be construed as defeating the segregation of 404
472	511		such assets for accounting or other purposes. Each sponsored captive 405
473	512		insurance company shall comply with all applicable investment 406
474	513		requirements under this chapter, except that the commissioner shall 407
475	514		waive compliance with such requirements for sponsored captive 408
476	515		insurance companies to the extent that credit for reinsurance ceded to 409
477	516		reinsurers is allowed pursuant to section 38a-91kk. The commissioner 410
478	517		may approve the use of alternative reliable methods of valuation and 411
479	518		rating for purposes of this subsection. 412
480	519		(c) Each sponsored captive insurance company, including a 413
481	520		sponsored captive insurance company licensed as a special purpose 414
482	521		financial captive insurance company, may establish and maintain one 415
483	522		or more protected cells as a separate corporation formed under chapter 416
484		-	601 or a limited liability company formed under chapter 613. This 417 Substitute Bill No. 6433
485		-
486		-
487		-	LCO 15 of 18
488		-
	523	+	601 or a limited liability company formed under chapter 613. This 417
489	524		section shall not be construed to limit any rights or protections 418
490	525		applicable to protected cells not established as corporations or limited 419
491	526		liability companies. 420
492	527		(d) (1) Each sponsored captive insurance company may establish and 421
493	528		maintain a protected cell as an incorporated protected cell. 422
494	529		(2) The articles of incorporation or articles of organization of an 423
495	530		incorporated protected cell shall refer to the sponsored captive 424
496	531		insurance company for which it is a protected cell and shall state that 425
497	532		the protected cell is incorporated or organized for the limited purposes 426
498	533		authorized by the sponsored captive insurance company's license. Such 427
499	534		company shall attach to and file with the articles of incorporation or 428
500	535		articles of organization a copy of the commissioner's prior written 429
501	536		approval, as required by subdivision (9) of subsection (a) of this section, 430
502	537		to add the incorporated protected cell. 431
	538	+	Raised Bill No. 6433
	539	+
	540	+
	541	+
	542	+	LCO No. 2558 16 of 19
	543	+
503	544		(e) Notwithstanding the provisions of chapter 704c: 432
504	545		(1) If the commissioner determines in the event of an insolvency of a 433
505	546		sponsored captive insurance company that one or more protected cells 434
506	547		remain solvent, the commissioner may separate such cells from such 435
507	548		company and may, on application of a sponsor, allow for the conversion 436
508	549		of such cells into one or more new or existing sponsored captive 437
509	550		insurance companies with a sponsor or sponsors, or one or more other 438
510	551		captive insurance companies, pursuant to such plan or plans of 439
511	552		operation as the commissioner deems acceptable; 440
512	553		(2) Upon the issuance by a court of any order of conservation, 441
513	554		rehabilitation or liquidation of a sponsored captive insurance company, 442
514	555		the receiver shall manage the assets and liabilities of such company in 443
515	556		accordance with the provisions of this section; 444
516	557		(3) The assets of a protected cell shall not be used to pay any expenses 445
517	558		or claims other than those attributable to such protected cell; 446
518		-	(4) A sponsored captive insurance company's capital and surplus 447 Substitute Bill No. 6433
519		-
520		-
521		-	LCO 16 of 18
522		-
	559	+	(4) A sponsored captive insurance company's capital and surplus 447
523	560		shall be available at all times to pay any expenses of or claims against 448
524	561		such company; 449
525	562		(5) In connection with the conservation, rehabilitation or liquidation 450
526	563		of a sponsored captive insurance company, the assets and liabilities of 451
527	564		each protected cell shall at all times be kept separate from, and shall not 452
528	565		be commingled with, the assets and liabilities of any other protected cell 453
529	566		or the sponsored captive insurance company; 454
530	567		(6) Unless the sponsor consents and the commissioner has granted 455
531	568		prior written approval, the assets of a sponsored captive insurance 456
532	569		company's general account shall not be used to pay any expense or claim 457
533	570		attributable solely to one or more protected cells of the sponsored 458
534	571		captive insurance company. If the assets of a sponsored captive 459
535	572		insurance company's general account are used to pay expenses or claims 460
536	573		attributable solely to one or more of the company's protected cells, the 461
	574	+	Raised Bill No. 6433
	575	+
	576	+
	577	+
	578	+	LCO No. 2558 17 of 19
	579	+
537	580		sponsor shall not be required to contribute additional capital and 462
538	581		surplus to the company's general account. Notwithstanding any 463
539	582		provision of this subdivision, the sponsor shall satisfy the minimum 464
540	583		capital and surplus requirements applicable to such sponsor in order to 465
541	584		maintain its license; and 466
542	585		(7) A sponsored captive insurance company's capital and surplus 467
543	586		shall at all times be available to pay any expense of, or claim against, the 468
544	587		sponsored captive insurance company. 469
545	588		(f) Consistent with the provisions of this section, a creditor of a 470
546	589		sponsored captive insurance company shall have recourse against any 471
547	590		asset attributable to a protected cell if it is a creditor of the protected cell. 472
548	591		A creditor of a protected cell shall not have any recourse against any 473
549	592		asset attributable to another protected cell or in the sponsored captive 474
550	593		insurance company's general account. 475
551	594		(g) When a sponsored captive insurance company has an obligation 476
552	595		to a creditor arising from a transaction, or otherwise imposed, with 477
553		-	respect to a particular protected cell, the obligation shall: 478 Substitute Bill No. 6433
554		-
555		-
556		-	LCO 17 of 18
557		-
	596	+	respect to a particular protected cell, the obligation shall: 478
558	597		(1) Extend only to the assets attributable to the protected cell, and the 479
559	598		creditor shall be entitled to recourse only against the assets attributable 480
560	599		to such protected cell; and 481
561	600		(2) Not extend to any asset of another protected cell or in the 482
562	601		sponsored captive insurance company's general account, and the 483
563	602		creditor shall not be entitled to recourse against any asset attributable to 484
564	603		another protected cell or in the company's general account. 485
565	604		(h) When an obligation of a sponsored captive insurance company 486
566	605		relates solely to such company's general account, a creditor shall, with 487
567	606		respect to such obligation, be entitled to recourse only against the assets 488
568	607		in such account. 489
569	608		(i) The establishment of one or more protected cells alone, without 490
	609	+	Raised Bill No. 6433
	610	+
	611	+
	612	+
	613	+	LCO No. 2558 18 of 19
	614	+
570	615		more, shall not, by itself, constitute (1) a fraudulent conveyance, (2) 491
571	616		evidence of intent by a sponsored captive insurance company to 492
572	617		defraud creditors, or (3) the conduct of business by a sponsored captive 493
573	618		insurance company for any other fraudulent purpose. 494
574	619		(j) (1) In the event of an insolvency of any protected cell of a 495
575	620		sponsored captive insurance company, the commissioner may separate 496
576	621		such protected cell from the sponsored captive insurance company and 497
577	622		allow for the conversion of such protected cell into a new protected cell 498
578	623		of another sponsored captive insurance company or into a captive 499
579	624		insurance company. 500
580		-	(2) Any such conversion of a protected cell, in accordance with the 501
581		-	provisions of subdivision (1) of this subsection, shall be deemed to be a 502
	625	+	(2) Any such conversion of a protected cell in accordance with the 501
	626	+	provisions of subdivision (1) of this subsection shall be deemed to be a 502
582	627		continuation of such protected cell's existence together with all of such 503
583	628		protected cell's assets, rights, benefits, obligations and liabilities as a 504
584	629		new protected cell or captive insurance company, as applicable. Any 505
585	630		such conversion of a protected cell shall be deemed to occur without any 506
586	631		transfer or assignment of such protected cell's assets, rights, benefits, 507
587	632		obligations or liabilities, and without the creation of any reversionary 508
588	633		interest in, or impairment of, any such assets, rights, benefits, 509
589		-	obligations or liabilities. 510 Substitute Bill No. 6433
590		-
591		-
592		-	LCO 18 of 18
593		-
	634	+	obligations or liabilities. 510
594	635		This act shall take effect as follows and shall amend the following
595	636		sections:
596	637
597	638		Section 1 October 1, 2025 38a-91aa
598	639		Sec. 2 October 1, 2025 38a-91oo(a)
599	640		Sec. 3 October 1, 2025 New section
600	641		Sec. 4 October 1, 2025 38a-91rr
601	642
602		-	INS Joint Favorable Subst.
	643	+	Statement of Purpose:
	644	+	To: (1) Expand the applicability of the insurance penalty provision to
	645	+	captive insurance companies; (2) allow any captive insurance company
	646	+	to convert into one or more protected cells without impacting such
	647	+	company's assets, rights, benefits, obligations and liabilities; (3) allow
	648	+	any protected cell to be sold, transferred, assigned or conveyed to a new
	649	+	Raised Bill No. 6433
	650	+
	651	+
	652	+
	653	+	LCO No. 2558 19 of 19
	654	+
	655	+	or existing sponsored captive insurance company with all of such
	656	+	protected cell's assets, rights, benefits, obligations and liabilities; and (4)
	657	+	allow the commissioner to separate any insolvent protected cell from
	658	+	any sponsored captive insurance company and address the insolvency
	659	+	of such protected cell separate from the financial condition of such
	660	+	sponsored captive insurance company.
	661	+	[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except
	662	+	that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not
	663	+	underlined.]
603	664