{As Amended by Senate Committee of the Whole}
As Amended by Senate Committee
As Amended by House Committee
Session of 2025
HOUSE BILL No. 2334
By Committee on Insurance
Requested by Representative Tarwater
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AN ACT concerning insurance; relating to captive insurance companies;
providing for incorporated cell captive insurance companies and
protected cell captive insurance companies; enacting the Kansas
protected cell captive insurance company act; {providing for the
redomestication of a foreign or alien captive insurance company;}
providing for a provisional certificate of authority; expanding the types
of insurance that a captive insurance company may provide; extending
the period of time in-between financial examinations conducted by the
commissioner; {exempting a redomesticated foreign or alien captive
insurance company from paying premium tax for one year; }
amending K.S.A. 40-4304, 40-4312 and 40-4314 and K.S.A. 2024
Supp. 40-4302 and 40-4308 and repealing the existing sections.
Be it enacted by the Legislature of the State of Kansas:
New Section 1. Sections 1 through 10, and amendments thereto, shall
be known and may be cited as the Kansas protected cell captive insurance
company act.
New Sec. 2. (a) One or more sponsors may form a protected cell
captive insurance company under this act. This act shall apply to protected
cell captive insurance companies.
(b) A protected cell captive insurance company shall be incorporated
as a stock insurer with its capital divided into shares and held by the
stockholders as a mutual corporation, as a nonprofit corporation with one
or more members or as a limited liability company.
New Sec. 3. As used in this act, unless the context requires otherwise:
(a) "Act" means the Kansas protected cell captive insurance company
act;
(b) "general account" means all assets and liabilities of a protected
cell captive insurance company not attributable to a protected cell;
(c) "participant" means a person or an entity, authorized to be a
participant by section 5, and amendments thereto, or any affiliate of a
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participant, that is insured by a protected cell captive insurance company if
the losses of the participant are limited through a participant contract;
(d) "participant contract" means a contract by which a protected cell
captive insurance company insures the risks of a participant and limits the
losses of each such participant to its pro rata share of the assets of one or
more protected cells identified in such participant contract;
(e) "protected cell" means a separate account that is established by a
protected cell captive insurance company formed or licensed pursuant to
this act and in which an identified pool of assets and liabilities are
segregated and insulated by means of this act from the remainder of the
protected cell captive insurance company's assets and liabilities in
accordance with the terms of one or more participant contracts to fund the
liability of the protected cell captive insurance company with respect to the
participants as set forth in the participant contracts;
(f) "protected cell assets" means all assets, contract rights and general
intangibles identified with and attributable to a specific protected cell of a
protected cell captive insurance company;
(g) "protected cell captive insurance company" means any captive
insurance company:
(1) In which the minimum capital and surplus required by the chapter
are provided by one or more sponsors;
(2) that is formed or licensed under this act;
(3) that insures the risks of separate participants through participant
contracts; and
(4) that funds its liability to each participant through one or more
protected cells and segregates the assets of each protected cell from the
assets of other protected cells and from the assets of the protected cell
captive insurance company's general account;
(h) "protected cell liabilities" means all liabilities and other
obligations identified with and attributed to a specific protected cell of a
protected cell captive insurance company; and
(i) "protected cell liabilities" means all liabilities and other
obligations identified with and attributed to a specific protected cell of a
protected cell captive insurance company; and
(j) "sponsor" means any person or entity that is approved by the
commissioner to provide all or part of the capital and surplus required by
this act and organize and operate a protected cell captive insurance
company.
New Sec. 4. In addition to the information required by K.S.A. 40-
4302, and amendments thereto, each applicant-protected cell captive
insurance company shall file with the commissioner the following:
(a) Materials demonstrating how the applicant will account for the
loss and expense experience of each protected cell at a level of detail
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found to be sufficient by the commissioner, and how it will report such
experience to the commissioner;
(b) a statement acknowledging that all financial records of the
applicant, including records pertaining to any protected cells, shall be
made available for inspection or examination by the commissioner or the
commissioner's designated agent;
(c) all contracts or sample contracts between the applicant and any
participants; and
(d) evidence that expenses shall be allocated to each protected cell in
a fair and equitable manner.
New Sec. 5. A protected cell captive insurance company formed or
licensed under this chapter may establish and maintain one or more
incorporated or unincorporated protected cells to insure risks of one or
more participants, subject to the following conditions:
(a) (1) A protected cell captive insurance company may establish one
or more protected cells if the commissioner has approved in writing a plan
of operation or amendments to a plan of operation submitted by the
protected cell captive insurance company with respect to each protected
cell. A plan of operation includes, but is not limited to, the specific
business objectives and investment guidelines of the protected cell, except
that the commissioner may require additional information in the plan of
operation. The commissioner may put into effect a plan of operation or
amendments to a plan of operation on or before the date that the approval
is signed if the effective date is not earlier than the date that the plan of
operation or amendments to the plan of operation were filed with the
department;
(2) upon the commissioner's written approval of the plan of operation,
the protected cell captive insurance company, in accordance with the
approved plan of operation, may attribute insurance obligations with
respect to its insurance business to the protected cell;
(3) a protected cell shall have its own distinct name or designation
that shall include the words "protected cell" or "incorporated cell." An
incorporated cell formed as a series of a limited liability company shall
bear a distinct name or designation as reflected in its formation documents
and include the words "series cell." Such names or designations may also
be reasonably abbreviated, including, without limitation, pc or p.c. for
"protected cell," ic, i.c., ipc, or i.p.c. for "incorporated cell" and sc, s.c.,
spc or s.p.c. for "series cell";
(4) the protected cell captive insurance company shall transfer all
assets attributable to a protected cell to one or more separately established
and identified protected cell accounts bearing the name or designation of
such protected cell. Protected cell assets shall be held in the protected cell
accounts for the purpose of satisfying the obligations of such protected
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cell;
(5) an incorporated protected cell may be organized and operated in
any form of business organization authorized by the commissioner,
including, but not limited to, an individual series of a limited liability
company as provided for in the Kansas revised limited liability company
act. Each incorporated protected cell of a protected cell captive insurer
shall be treated as a captive insurer for purposes of this act and shall have
the power to enter into contracts, including an individual series of a limited
liability company. Unless otherwise permitted by the organizational
documents of a protected cell captive insurer, each incorporated protected
cell of the protected cell captive insurer shall have the same directors,
secretary and registered office as the protected cell captive insurer; and
(6) all attributions of assets and liabilities between a protected cell
and the general account shall be in accordance with the plan of operation
and participant contracts approved by the commissioner. No other
attribution of assets or liabilities shall be made by a protected cell captive
insurance company between the protected cell captive insurance
company's general account and its protected cells. Any attribution of assets
and liabilities between the general account and a protected cell shall be in
cash or in readily marketable securities with established market values.
(b) The creation of a protected cell does not create, with respect to
such protected cell, a legal person separate from the protected cell captive
insurance company unless the protected cell is an incorporated cell.
Amounts attributed to a protected cell under this section, including assets
transferred to a protected cell account, are deemed to be owned by the
protected cell. No protected cell captive insurance company shall be, or
represent itself as a trustee with respect to those protected cell assets of
such protected cell account. Notwithstanding the provisions of this
subsection, the protected cell captive insurance company may allow for a
security interest to attach to protected cell assets or a protected cell
account when in favor of a creditor of the protected cell and otherwise
allowed under applicable law.
(c) This act shall not be construed to prohibit the protected cell
captive insurance company from contracting with or arranging for an
investment advisor, commodity trading advisor or other third party to
manage the protected cell assets of a protected cell if all remuneration,
expenses and other compensation of the third-party advisor or manager are
payable from the protected cell assets of such protected cell and not from
the protected cell assets of other protected cells or the assets of the
protected cell captive insurance company's general account.
(d) (1) A protected cell captive insurance company shall establish
administrative and accounting procedures necessary to properly identify
the one or more protected cells of the protected cell captive insurance
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company and the protected cell assets and protected cell liabilities
attributable to the protected cells. The directors of a protected cell captive
insurance company shall keep protected cell assets and protected cell
liabilities:
(A) Separate and separately identifiable from the assets and liabilities
of the protected cell captive insurance company's general account; and
(B) attributable to one protected cell that is separate and separately
identifiable from protected cell assets and protected cell liabilities
attributable to other protected cells.
(2) If subsection (d)(1) is violated, then the remedy of tracing is
applicable to protected cell assets when commingled with protected cell
assets of other protected cells or the assets of the protected cell captive
insurance company's general account. The remedy of tracing shall not be
construed as an exclusive remedy.
(e) When establishing a protected cell, the protected cell captive
insurance company shall attribute to the protected cell assets a value that is
at least equal to the reserves and other insurance liabilities attributed to
such protected cell.
(f) Each protected cell shall be accounted for separately on the books
and records of the protected cell captive insurance company 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.
(g) No asset of a protected cell shall be chargeable with liabilities
arising out of any other insurance business that the protected cell captive
insurance company may conduct.
(h) No sale, exchange or other transfer of assets shall be made by
such protected cell captive insurance company between or among any of
its protected cells without the consent of such protected cells.
(i) No sale, exchange, transfer of assets, dividend or distribution shall
be made from a protected cell to another protected cell captive insurance
company or participant without the commissioner's approval. In no event
shall the commissioner's approval be given if the sale, exchange, transfer,
dividend or distribution would result in the insolvency or impairment of a
protected cell.
(j) All attributions of assets and liabilities to the protected cells and
the general account shall be in accordance with the plan of operation
approved by the commissioner. No other attribution of assets or liabilities
shall be made by a protected cell captive insurance company between its
general account and any protected cell or between any protected cells. The
protected cell captive insurance company shall attribute all insurance
obligations, assets and liabilities relating to a reinsurance contract entered
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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 protected cell captive insurance company is a party, including any
payments made by or due to be made to the protected cell captive
insurance company pursuant to the terms of such agreement, shall reflect
the insurance obligations, assets and liabilities relating to the reinsurance
contract that are attributed to such protected cell.
(k) In connection with the conservation, rehabilitation or liquidation
of a protected cell captive insurance company, the assets and liabilities of a
protected cell shall, to the extent that the commissioner determines that
such assets and liabilities are separable, at all times be kept separate from
and shall not be commingled with those of other protected cells and the
protected cell captive insurance company.
(l) Each protected cell captive insurance company shall annually file
with the commissioner such financial reports as required by the
commissioner. Any such financial report shall include, without limitation,
accounting statements detailing the financial experience of each protected
cell.
(m) Each protected cell captive insurance company shall notify the
commissioner in writing within 10 business days of any protected cell that
is insolvent or otherwise unable to meet its claim or expense obligations.
(n) No participant contract shall take effect without the
commissioner's prior written approval. The addition of each new protected
cell, the withdrawal of any participant or the termination of any existing
protected cell shall constitute a change in the plan of operation requiring
the commissioner's prior written approval.
(o) The business written by a protected cell captive insurance
company, with respect to each protected cell, shall be:
(1) Fronted by an insurance company licensed under the laws of any
state;
(2) reinsured by a reinsurer authorized or approved by this state; or
(3) 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 amount of
security provided shall be not less than the reserves associated with those
liabilities that are neither fronted nor reinsured, including reserves for
losses, allocated loss adjustment expenses, incurred but not reported losses
and unearned premiums for business written through the participant's
protected cell. The commissioner may require the protected cell captive
insurance company to increase the funding of any security arrangement
established under this subsection. If the form of security is a letter of
credit, the letter of credit shall be issued or confirmed by a bank approved
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by the commissioner. A trust maintained pursuant to this subsection shall
be established in a form and upon such terms approved by the
commissioner.
(p) Notwithstanding this act or other laws of Kansas, and in addition
to article 36 of chapter 40 of the Kansas Statutes Annotated, and
amendments thereto, in the event of an insolvency of a protected cell
captive insurance company in which the commissioner determines that one
or more protected cells remain solvent, the commissioner may separate
such cells from the protected cell captive insurance company and may
allow, on application of the protected cell captive insurance company, for
the conversion of such protected cells into one or more new or existing
protected cell captive insurance companies or one or more other captive
insurance companies, pursuant to such plan of operation as the
commissioner deems acceptable.
(q) Biographical affidavits shall not be required for participants in
unincorporated cells. Biographical affidavits shall be required for owners
of incorporated cells, including series members of a series LLC.
(r) A protected cell captive insurance company formed or licensed
under this act may establish and operate unincorporated and incorporated
protected cells.
New Sec. 6. (a) Associations, corporations, limited liability
companies, partnerships, trusts and other business entities may be
participants in any protected cell captive insurance company formed or
licensed under this chapter.
(b) A sponsor may be a participant in a protected cell captive
insurance company.
(c) A participant shall not be required to be a shareholder of the
protected cell captive insurance company or any affiliate thereof.
(d) A participant shall insure only such participant's own risks
through a protected cell captive insurance company, unless otherwise
approved by the commissioner.
New Sec. 7. (a) Notwithstanding the provisions of section 4, and
amendments thereto, the assets of two or more protected cells may be
combined for purposes of investment, and such combination shall not be
construed as defeating the segregation of such assets for accounting or
other purposes.
(b) Notwithstanding any other provision of this act, the commissioner
may approve the use of alternative reliable methods of valuation and
rating.
New Sec. 8. (a) Except as otherwise provided in this section the
insurers supervision, rehabilitation and liquidation act shall apply to a
protected cell captive insurance company.
(b) Upon any order of supervision, rehabilitation, or liquidation of a
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protected cell captive insurance company, the receiver shall manage the
assets and liabilities of the protected cell captive insurance company
pursuant to this section.
(c) Notwithstanding the provisions of the insurers supervision,
rehabilitation and liquidation act:
(1) No assets of a protected cell shall be used to pay any expenses or
claims other than those attributable to such protected cell; and
(2) a protected cell captive insurance company's capital and surplus
shall be available at all times to pay any expenses of or claims against the
protected cell captive insurance company.
New Sec. 9. (a) The pleadings in any legal action brought by or
against a protected cell captive insurance company shall specify which
protected cell or cells should be named as a party to the suit. If the general
account is party to this suit, it shall be separately identified in the
pleadings as if it were a protected cell.
(b) A legal action brought against a protected cell captive insurance
company that does not specify one or more protected cells shall be deemed
to have been brought against the general account only.
(c) Any protected cell that is not named in the pleadings of the legal
action shall not be deemed to be a party to the legal action. Any protected
cell that is erroneously named as a party or named without proper cause
shall be entitled to prompt dismissal from the legal action.
(d) Unless specified by the plan of operation, participant contract or
other prior contractual agreement, the assets of one protected cell may not
be encumbered or seized to satisfy the obligations of or a judgment against
any other protected cell. No protected cell shall have a duty to defend the
rights and obligations of any other protected cell.
(e) In any legal action involving a protected cell captive insurance
company or a protected cell, any papers, documents or property of a
nonparty protected cell shall be afforded the same status during discovery
as the documents or property of any other unrelated third party. A nonparty
protected cell shall have standing to appear and petition for any
appropriate relief to protect the confidentiality of its papers or documents.
New Sec. 10. (a) (1) Upon the application of a protected cell captive
insurance company, one of its protected cells may be converted to any
form of captive insurance company authorized pursuant to chapter 40 of
the Kansas Statutes Annotated, and amendments thereto, with the consent
of the commissioner. The commissioner may issue to the converting
protected cell a certificate of authority with an effective date of its original
date of formation as a protected cell.
(2) The following shall be the criteria for determining the filing or
submission requirements of:
(A) A series of a limited liability company, the cell shall file
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organizational documents with the secretary of state that comply with
article 43 of chapter 40 and chapters 17 and 56A of the Kansas Statutes
Annotated, and amendments thereto, as applicable. The organizational
documents shall include the date of formation as a series. Upon
conversion, the formation date of the series shall be deemed as the
formation date of the new entity. The new entity shall possess all assets
and liabilities, including outstanding insurance liabilities, owned by the
predecessor series;
(B) any other type of incorporated protected cell entity, then the
converting protected cell shall submit amended organizational documents
to the secretary of state that comply with article 43 of chapter 40 and
chapters 17 and 56A of the Kansas Statutes Annotated, and amendments
thereto, as applicable; or
(C) neither a series of a limited liability company nor an incorporated
protected cell, the cell shall file organizational documents with the
secretary of state that comply with article 43 of chapter 40 and chapters 17
and 56A of the Kansas Statutes Annotated, and amendments thereto, as
applicable, or any other applicable provision governing formation of that
type of entity. The organizational documents shall include the date of
formation as a cell. Upon conversion, the formation date of the cell shall
be deemed as the formation date of the new entity. The new entity shall
possess all assets and liabilities, including outstanding insurance liabilities,
owned by the predecessor cell.
(b) A captive insurance company may apply to the commissioner for
conversion to become a protected cell captive insurance company under
any form permitted under this section. Upon compliance with this section,
approval by the commissioner and the filing of amended organizational
documents with the secretary of state, the captive insurance company shall
be issued a revised certificate of authority. The effective date of the revised
protected cell captive insurance company's certificate of authority shall
remain the same as the effective date of the prior captive insurance
company.
{New Sec. 11. (a) A foreign or alien insurer may become a domestic
captive insurance company by complying with all of the requirements of
this chapter relating to the organization and licensing of a domestic
captive insurance company of the same type with the approval of the
commissioner. A company redomesticating to this state pursuant to this
section may be organized under any lawful corporate form permitted by
this chapter.
(b) A redomestication pursuant to this section shall be authorized
for insurance companies domiciled in foreign or alien jurisdictions that
authorize the redomestication of insurance companies where, as a result
of the actions taken by the company pursuant to this section to
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redomesticate to this state, shall no longer be a domestic legal entity of
foreign or alien jurisdiction. A company wishing to redomesticate
pursuant this section shall provide evidence that the applicable
regulatory authority of its domicile consents to the redomestication.
(c) An insurance company wishing to redomesticate under this
section shall file organizational documents with the secretary of state
that comply with article 43 of chapter 40 and chapters 17 and 56A of the
Kansas Statutes Annotated, and amendments thereto, as applicable, or
any other applicable provision governing formation of that type of entity.
(d) The company shall file a copy of the secretary of state's
acknowledgement letter with the commissioner, who shall then issue a
certificate of authority, pursuant to K.S.A. 40-4302, and amendments
thereto.
(e) Upon the completion of a redomestication under this section,
the captive insurance company shall be subject to the laws of this state
and shall be considered domiciled in this state. The captive insurance
company shall be deemed to have a formation date corresponding to its
original formation date in the foreign or alien domicile.
(f) For the purposes of the financial examination required
pursuant to K.S.A. 40-4308, and amendments thereto, any examination
conducted by the foreign or alien domicile that is substantially similar to
an examination that would have been done in this state had the company
been domiciled in this state shall be recognized for the purposes of
establishing the period of time when the next examination is due.}
Sec. 11.{12.} K.S.A. 2024 Supp. 40-4302 is hereby amended to read
as follows: 40-4302. (a) Any captive insurance company, when permitted
by its organizational documents, may apply to the commissioner for a
certificate of authority to do any and all insurance comprised in K.S.A. 40-
901 et seq., 40-1102(1)(a), (1)(c) through (1)(n), and amendments thereto,
and to issue life, accident and health insurance policies provided, except
that:
(1) NoA pure captive insurance company shall not insure any risks
other than those of its parent and affiliated companies and, upon prior
approval of the commissioner, any controlled unaffiliated business up to
5% of total direct written premium or combination thereof;
(2) no association captive insurance company shall insure any risks
other than those of its association and those of the member organizations
of its association. No association captive insurance company shall expose
itself to loss on any one risk or hazard in an amount exceeding 10% of its
paid-up capital and surplus;
(3) no captive insurance company shall provide personal lines of
insurance, workers' compensation, employers' liability insurance coverage,
long-term care coverage, critical care coverage, surety, title insurance,
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credit insurance or any component thereof, except that a technology-
enabled fiduciary financial institution insurance company shall be
permitted to provide contracts of suretyship and credit insurance in
accordance with K.S.A. 2024 Supp. 40-4354, and amendments thereto;
(4) noa captive insurance company shall accept or cede may provide
workers compensation insurance, insurance in the nature of workers
compensation insurance and the reinsurance except as provided in K.S.A.
40-4311, and amendments thereto of such policies unless prohibited by
federal law, the provisions of chapter 40 of the Kansas Statutes Annotated,
and amendments thereto, or any other state having jurisdiction over the
transaction;
(5) a captive insurance company may provide excess or stop-loss
accident and health insurance unless prohibited by federal law or the laws
of the state having jurisdiction over the transaction;
(6) any captive insurance company may provide workers
compensation insurance, insurance in the nature of workers'
compensation insurance and reinsurance of such policies unless
prohibited by federal law, the laws of the state of Kansas or any other
state having jurisdiction over the transaction;
(7) no captive insurance company shall provide accident and health,
accident and health, life insurance or annuities on a direct basis;
(6)(8) no captive insurance company authorized as a life insurance
company shall transact business other than life insurance; and
(7)(9) no captive insurance company authorized to transact business
under article 9 or 11 of chapter 40 of the Kansas Statutes Annotated, and
amendments thereto, shall engage in the business of life insurance.
(b) No captive insurance company organized under the laws of this
state shall do any insurance business in this state unless such captive
insurance company:
(1) It First obtains from the commissioner a certificate of authority
authorizing it to do insurance business in this state;
(2) has its board of directors, members, partners, managers,
committee of managers or other governing body holds hold at least one
meeting each year in this state;
(3) it maintains its principal place of business in this state; and
(4) it authorizes the commissioner to accept service of process on its
behalf in accordance with K.S.A. 40-218, and amendments thereto.
(c) Before receiving a certificate of authority, an applicant captive
insurance company shall file with the commissioner:
(1) A copy of the applicant captive insurance company's
organizational documents; and
(2) a plan of operation or a feasibility study describing the anticipated
activities and results of the applicant captive insurance company that shall
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include:
(A) The company's loss prevention program of its parent and
insureds, as applicable;
(B) historical and expected loss experience of the risks to be insured
or reinsured by the applicant captive insurance company;
(C) pro forma financial statements and projections of the proposed
business operations of the applicant captive insurance company;
(D) an analysis of the adequacy of the applicant captive insurance
company's proposed premiums, assets and capital and surplus levels
relative to the risks to be insured or reinsured by the captive insurance
company;
(E) a statement of the applicant captive insurance company's net
retained limited liability on any contract of insurance or reinsurance it that
such insurance company intends to issue and the nature of any reinsurance
it intends to cede;
(F) a statement certifying that the applicant captive insurance
company's investment policy is in compliance with this act and specifying
the type of investments to be made;
(G) a statement identifying the geographic areas in which the
applicant captive insurance company intends to operate;
(H) a statement identifying the persons or organizations that will
perform the applicant captive insurance company's major operational
functions, including management, underwriting, accounting, asset
investment, claims adjusting and loss control and the adequacy of the
expertise, experience and character of such persons or organizations; and
(I) whenever required by the commissioner, an appropriate opinion
by a qualified independent actuary regarding the adequacy of the applicant
captive insurance company's proposed capital, surplus and premium levels;
(3) a description of the coverages, deductibles, coverage limits, rates
and forms, together with any additional information that the commissioner
may require;
(4) such other items deemed to be relevant by the commissioner in
ascertaining whether the proposed captive insurance company will be able
to meet its obligations; and
(5) any modification or change in the items required under this
subsection that shall require the prior approval of the commissioner.
(d) Notwithstanding any other provision of this act, the commissioner
may issue a provisional certificate of authority to any applicant captive
insurance company if the commissioner deems that the public interest will
be served by the issuance of such a provisional certificate.
(1) As a condition precedent to the issuance of a provisional
certificate of authority under this subsection, the applicant shall have filed
a complete application containing all information required in subsection
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(c) and paid all necessary fees. The commissioner shall have made a
preliminary finding that the expertise, experience and character of the
person who shall control and manage the applicant captive are
acceptable.
(2) The commissioner may by order limit the authority of any
provisional certificate holder in any way deemed to be necessary in order
to protect insureds and the public. The commissioner may revoke a
provisional certificate holder if the interests of the insureds or the public
are endangered. If the applicant fails to complete the regular application
for a certificate of authority, the provisional certificate of authority shall
terminate by operation of law.
(3) The commissioner may enact all rules and regulations necessary
to implement a program for the issuance of provisional certificates of
authority.
(d)(e) Each captive insurance company not in existence on January 1,
2018, shall pay to the commissioner a nonrefundable fee of $10,000 up to
$2,500 for examining, investigating and processing its application for a
certificate of authority. The commissioner is authorized to retain legal,
financial, actuarial, analysis and examination services from outside the
department, the reasonable costs of which shall be charged against the
applicant. In addition, it shall pay a renewal fee of $2,500 for each year
thereafter of $10,000.
(e)(f) Each captive insurance company already in existence on
January 1, 2018, shall pay an annual renewal fee of $110 until January 1,
2028, after which date, the provisions of subsection (d) (e) shall apply.
(f)(g) If the commissioner is satisfied that the documents and
statements that such captive insurance company has filed comply with the
provisions of this act, the commissioner may grant a certificate of
authority authorizing a:
(1) Captive insurance company other than a technology-enabled
fiduciary financial institution to do insurance business in this state until
March 1 thereafter, which certificate of authority may be renewed; and
(2) technology-enabled fiduciary financial institution insurance
company to do insurance business in this state until the later of March 1
thereafter or the maturity date of the last payment-in-kind asset held by
such technology-enabled fiduciary financial institution insurance company
pursuant to this act.
(g)(h) Information submitted under this section shall be and remain
confidential, and shall not be made public by the commissioner or any
employee or agent of the commissioner without the written consent of the
company, except that:
(1) Such information may be discoverable by a party in a civil action
or contested case to which the captive insurance company that submitted
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such information is a party, upon a showing by the party seeking to
discover such information that:
(A) The information sought is relevant to and necessary for the
furtherance of such action or case;
(B) the information sought is unavailable from other non-confidential
nonconfidential sources;
(C) a subpoena issued by a judicial or administrative officer or
competent jurisdiction has been submitted to the commissioner; and
(D) the privacy of a qualified policyholder shall be protected in any
court proceeding concerning such qualified policyholder if the technology-
enabled fiduciary financial institution insurance company so petitions the
court. Upon the filing of such petition, any information, including, but not
limited to, an instrument, inventory, statement or verified report produced
by the technology-enabled fiduciary financial institution insurance
company regarding a policy issued to a qualified policyholder or payment-
in-kind assets held by the technology-enabled fiduciary financial
institution insurance company to satisfy claims of such qualified
policyholder, all payment-in-kind policies, all petitions relevant to such
information and all court orders thereon, shall be sealed upon filing and
shall not be made a part of the public record of the proceeding, except that
such petition shall be available to the court, the commissioner, the
technology-enabled fiduciary financial institution insurance company, their
attorneys and to such other interested persons as the court may order upon
a showing of good cause;
(2) the commissioner may disclose such information to a public
officer having jurisdiction over the regulation of insurance in another state,
provided that:
(A) Such public official shall agree in writing to maintain the
confidentiality of such information; and
(B) the laws of the state in which such public official serves requires
such information to be and to remain confidential;
(3) access may also be granted to the national association of
insurance commissioners and its affiliates, and the international
association of supervisors and its affiliates. Such parties must agree in
writing prior to receiving the information to provide to it the same
confidential treatment as required by this section, unless the company
gives prior written consent; and
(4) the privacy of those who have established an affiliated fidfin trust
or alternative asset custody account shall be protected in any court
proceeding concerning such trust or custody account if the acting trustee,
custodian, trustor or any beneficiary so petition the court. Upon the filing
of such a petition, the instrument, inventory, statement filed by any trustee
or custodian, annual verified report of the trustee or custodian and all
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petitions relevant to trust administration and all court orders thereon shall
be sealed upon filing and shall not be made a part of the public record of
the proceeding, except that such petition shall be available to the court, the
trustor, the trustee, the custodian, any beneficiary, their attorneys and to
such other interested persons as the court may order upon a showing of
good cause.
Sec. 12.{13.} K.S.A. 40-4304 is hereby amended to read as follows:
40-4304. (a) No captive insurance company shall be issued a certificate of
authority unless it such company shall possess and thereafter maintain
unimpaired paid-in capital and surplus of not less than:
(1) In the case of a pure captive insurance company, not less than
$250,000, in the case of a pure captive insurance company; and
(2) in the case of an association captive insurance company
incorporated as a stock insurer, not less than $500,000, in the case of an
association captive insurance company incorporated as a stock insurer;
and
(3) $100,000, in the case of a protected cell captive insurance
company.
(b) Such capital may be in the form of cash or, upon approval of the
commissioner, an irrevocable letter of credit issued by a bank chartered by
the state of Kansas or the United States comptroller of currency, domiciled
in Kansas, and approved by the commissioner.
(c) In connection with the issuance of a certificate of authority, the
commissioner may prescribe additional minimum capital and surplus
based upon the type, volume and nature of the insurance business
transacted.
(d) Loans of minimum capital and surplus funds shall be prohibited.
Notwithstanding the foregoing, the minimum capital and surplus funds
may be received by the issuance of a surplus note as approved by the
commissioner.
(e) No pure captive insurance company shall make a loan or an
investment in its parent company or affiliates without prior written
approval of the commissioner, and any such loan or investment shall be
evidenced by documentation approved by the commissioner.
Sec. 13.{14.} K.S.A. 2024 Supp. 40-4308 is hereby amended to read
as follows: 40-4308. (a) Whenever the commissioner deems necessary, but
at least once every three five years, the commissioner may make, or direct
to be made, a financial examination of any captive insurance company in
the process of organization or applying for admission or doing business in
Kansas. The commissioner may engage in continuous analysis for the
preparation of the examination. In addition, at the commissioner's
discretion, the commissioner may make, or direct to be made, a market
regulation examination of any insurance company doing business in
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Kansas.
(b) In scheduling and determining the nature, scope and frequency of
examinations of financial condition, the commissioner shall consider such
matters as the results of financial statement analyses and ratios, changes in
management or ownership, actuarial opinions, reports of independent
certified public accountants and other criteria as set forth in the examiner's
handbook adopted by the national association of insurance commissioners
in effect when the commissioner exercises discretion under this subsection.
(c) The commissioner shall have free access to the books and papers
of any such company that relate to its business and to the books and papers
kept by any of its agents and may examine under oath, which the
commissioner shall be empowered to administer, the directors, officers,
agents or employees of any such company in relation to its affairs,
transactions and condition.
(d) For the purpose of such analysis, the commissioner may require
reports and other documents be filed with the commissioner.
(e) The commissioner may also examine or investigate any person, or
the business of any person, insofar as such examination or investigation is,
in the sole discretion of the commissioner, necessary or material to the
examination of the company, but such examination or investigation shall
not infringe upon or extend to any communications or information
accorded privileged or confidential status under any other laws of this
state.
(f) Upon determining that an examination should be conducted, the
commissioner or the commissioner's designee shall appoint one or more
examiners to perform the examination and instruct such examiners as to
the scope of the examination. The commissioner may also employ such
other guidelines or procedures as the commissioner may deem appropriate.
(g) When making an examination under this act, the commissioner
may retain attorneys, appraisers, independent actuaries, independent
certified public accountants or other professionals and specialists as
examiners, the reasonable cost of which shall be paid by the company that
is the subject of the examination.
(h) (1) Not later than 30 days following completion of the
examination or at such earlier time as the commissioner shall prescribe,
the examiner in charge shall file with the deparment a verified written
report of examination under oath. Not later than 30 days following receipt
of the verified report, the department shall transmit the report to the
company examined, together with a notice that shall afford such company
examined a reasonable opportunity of not more than 30 days to make a
written submission or rebuttal with respect to any matters contained in the
examination report.
(2) Within 30 days of the end of the period allowed for the receipt of
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written submissions or rebuttals, the commissioner shall fully consider and
review the report, together with any written submissions or rebuttals and
any relevant portions of the examiners' workpapers, and enter an order:
(A) Adopting the examination report as filed or with modification or
corrections. If the examination report reveals that the company is operating
in violation of any law, rule and regulation or prior order of the
commissioner, the commissioner may order the company to take any
action the commissioner considers necessary and appropriate to cure such
violations;
(B) rejecting the examination report with directions to the examiners
to reopen the examination for purposes of obtaining additional data,
documentation or information; or
(C) call for and conduct a fact-finding hearing in accordance with
K.S.A. 40-281, and amendments thereto, for purposes of obtaining
additional documentation, data, information and testimony.
(3) All orders entered as a result of revelations contained in the final
examination report shall be accompanied by findings and conclusions
resulting from the commissioner's consideration and review of the
examination report, relevant examiner work papers and any written
submissions or rebuttals. Within 30 days of the issuance of the adopted
report, the company shall file affidavits executed by each of its directors
stating under oath that they have received a copy of the adopted report and
related orders.
(4) Upon the adoption of the examination report of an association
captive insurance company, the commissioner shall hold the content of the
examination report as private and confidential as to the pure captive
insurance company. Nothing contained in this act shall be construed to
limit the commissioner's authority to use and, if appropriate, to make
public any final or preliminary examination report in the furtherance of
any legal or regulatory action that the commissioner may, in the
commissioner's discretion, deem appropriate.
(i) Nothing contained in this act shall be construed to limit the
commissioner's authority to terminate or suspend any examination in order
to pursue other legal or regulatory action pursuant to the insurance laws of
this state.
(j) All examination reports, preliminary examination reports or
results, working papers, recorded information, documents and copies
thereof produced by, obtained by or disclosed to the commissioner or any
other person in the course of an examination made under this section are
confidential and are not subject to subpoena and may not be made public
by the commissioner or an employee or agent of the commissioner without
the written consent of the company, except to the extent provided in this
subsection. Nothing in this subsection shall prevent the commissioner
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from using such information in furtherance of the commissioner's
regulatory authority under this act. The commissioner may grant access to
such information to public officers having jurisdiction over the regulation
of insurance in any other state or country or to law enforcement officers of
Kansas or any other state or agency of the federal government at any time.
Access may also be granted to the national association of insurance
commissioners and its affiliates and the international association of
insurance supervisors and its affiliates. Persons receiving such information
must agree in writing prior to receiving the information to provide to it the
same confidential treatment as required by this section, unless the prior
written consent of the company to which it pertains has been obtained.
(k) The commissioner may receive documents, materials or
information, including otherwise confidential and privileged documents,
materials or information, from the national association of insurance
commissioners, and its affiliates and subsidiaries, and from regulatory and
law enforcement officials of other foreign or domestic jurisdictions and
shall maintain as confidential or privileged any document, material or
information received with notice or the understanding that it is confidential
or privileged under the laws of the jurisdiction that is the source of the
document, material or information. Documents received pursuant to this
section shall not be subject to disclosure pursuant to the open records act,
K.S.A. 45-215 et seq., and amendments thereto.
Sec. 14.{15.} K.S.A. 40-4312 is hereby amended to read as follows:
40-4312. No captive insurance company shall be required to join a rating
organization or a policy form organization.
Sec. 15.{16.} K.S.A. 40-4314 is hereby amended to read as follows:
40-4314. (a) Each captive insurance company shall, at the time it files the
report required by K.S.A. 40-4307, and amendments thereto, pay a tax on
all premiums received on risks located in this state.
(b) Each captive insurance company shall pay the commissioner a tax
at the rate of
2
/10 of 1% on each dollar of direct premiums collected or
contracted for, during the year ending December 31 next preceding, on
policies or contracts of insurance written by the captive insurance
company, after deducting from the direct premiums subject to the tax
amounts paid to policyholders as return premiums with respect to such
preceding year only, which amounts shall include only dividends or
distributions of unabsorbed premiums or premium deposits returned or
credited to policyholders, up to a maximum tax for such year of $500,000,
except that no tax shall be due or payable as a consideration received for
annuity contracts.
(c) Each captive insurance company shall pay to the commissioner no
later than March 1 of each year a tax at the rate of
1
/10 of 1% on each dollar
assumed reinsurance premiums collected or contracted for, during the year
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end December 31 next preceding, on policies or contracts of insurance
written by the captive insurance company, up to a maximum tax for such
year of $300,000. However, no such tax applies to premiums for risks or
portion of risks that are subject to taxation on a direct basis pursuant to
subsection (b), and no such tax shall be payable in connection with the
receipt of assets in exchange for the assumption of loss reserves and other
liabilities of another insurer under common ownership and control if such
transaction is part of a plan to discontinue the operations of such other
insurer and if the intent of the company by the state or any county, city or
municipality within Kansas, except ad valorem taxes on real and personal
property used in the production of income.
(d) {(1) A company redomesticating under section 11, and
amendments thereto, shall only be liable for taxes due pursuant to
subsections (b) and (c) on premiums paid to the company after
redomestication.
(2) A company redomesticating under this section after July 1 of any
year shall only be subject to one-half (1/2) of the minimum premium tax
specified in subsection (b) and (c).
(3) An foreign or alien company redomesticating pursuant to section
11, and amendments thereto, shall report all premium taxes due
pursuant to subsection (b) and (c), but may, in either its first or its
second year of operations, but not both, after redomesticating into this
state, elect to forego the payment of premium taxes. A company making
such an election that surrenders its certificate of authority or
redomesticates to another jurisdiction within five years of
redomestication into this state shall immediately pay a tax in an amount
equal to the foregone premium tax plus 10% per annum from the date
the foregone premium.
(e)} The tax provided in this section shall be calculated on an annual
basis, notwithstanding that policies or contracts of insurance or contracts
of reinsurance are issued on a multi-year basis. In the case of multi-year
policies or contracts, the premium shall be prorated for purposes of
determining the tax under this section.
(e){(f)} The tax provided for in this section shall constitute all taxes
collectible under the laws of the state of Kansas from any captive
insurance company, and no other occupation tax or any other tax shall be
levied or collected from any captive insurance company by the state or
any political subdivision thereof.
Sec. 16.{17.} K.S.A. 40-4304, 40-4312 and 40-4314 and K.S.A. 2024
Supp. 40-4302 and 40-4308 are hereby repealed.
Sec. 17.{18.} This act shall take effect and be in force from and after
its publication in the statute book Kansas register.
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