31A-37a-205 - Sponsored captives.
31A-37a-205. Sponsored captives.
In addition to the other provisions of this chapter, this section applies to a sponsoredcaptive insurance company under Chapter 37, Captive Insurance Companies Act, that has acertificate of authority as a special purpose financial captive insurance company pursuant to thischapter.
(1) A sponsored captive insurance company may have a certificate of authority as aspecial purpose financial captive insurance company under this chapter.
(2) (a) For purposes of a sponsored captive insurance company having a certificate ofauthority as a special purpose financial captive insurance company, "general account" means theassets and liabilities of the sponsored captive insurance company not attributable to a protectedcell.
(b) For purposes of applying Chapter 27a, Insurer Receivership Act, to a sponsoredcaptive insurance company having a certificate of authority as a special purpose financial captiveinsurance company, the definition of "insolvency" and "insolvent" in Section 31A-37a-102 shallbe applied separately to:
(i) each protected cell; and
(ii) the special purpose financial captive insurance company's general account.
(3) (a) A participant in a sponsored captive insurance company having a certificate ofauthority as a special purpose financial captive insurance company must be a ceding insurer,unless approved by the commissioner before a person becomes a participant.
(b) A change in a participant in a sponsored captive insurance company having acertificate of authority as a special purpose financial captive insurance company is subject toprior approval by the commissioner.
(4) Notwithstanding Section 31A-37-401, a special purpose financial captive insurancecompany that is a sponsored captive insurance company may issue a security to a person notdescribed in Section 31A-37-401 if the issuance to that person is approved by the commissionerbefore the issuance of the security.
(5) Notwithstanding Section 31A-37a-302, a sponsored captive insurance companyhaving a certificate of authority as a special purpose financial captive insurance company shall:
(a) at the time of initial application for a certificate of authority as a special purposefinancial captive insurance company, possess unimpaired paid-in capital and surplus of not lessthan $500,000; and
(b) maintain at least $500,000 of unimpaired paid-in capital and surplus of not less than$500,000 during the time that it holds a certificate of authority under this chapter.
(6) (a) For purposes of a sponsored captive insurance company having a certificate ofauthority as a special purpose financial captive insurance company, this Subsection (6) applies to:
(i) a security issued by the special purpose financial captive insurance company withrespect to a protected cell; or
(ii) a contract or obligation of the special purpose financial captive insurance companywith respect to a protected cell.
(b) A sponsored captive insurance company having a certificate of authority as a specialpurpose financial captive insurance company shall include with a security, contract, or obligationdescribed in Subsection (6)(a):
(i) the designation of the protected cell; and
(ii) a disclosure in a form and content satisfactory to the commissioner to the effect that
the holder of the security or a counterparty to the contract or obligation has no right or recourseagainst the special purpose financial captive insurance company and its assets other than againstan asset properly attributable to the protected cell.
(c) Notwithstanding the requirements of this Subsection (6) and subject to other statutesor rules including this chapter and Chapter 37, Captive Insurance Companies Act, a creditor,ceding insurer, or another person may not use a failure to include a disclosure described inSubsection (6)(b), in whole or part, as the sole basis to have recourse against:
(i) the general account of the special purpose financial captive insurance company; or
(ii) the assets of another protected cell of the special financial captive insurancecompany.
(7) In addition to Section 31A-37-401, a sponsored captive insurance company having acertificate of authority as a special purpose financial captive insurance company is subject to thefollowing with respect to a protected cell:
(a) (i) A sponsored captive insurance company having a certificate of authority as aspecial purpose financial captive insurance company shall establish a protected cell only for thepurpose of insuring or reinsuring risks of one or more reinsurance contracts with a ceding insurerwith the intent of facilitating an insurance securitization.
(ii) Subject to Subsection (7)(a)(iii), a sponsored captive insurance company having acertificate of authority as a special purpose financial captive insurance company shall establish aseparate protected cell with respect to a ceding insurer described in Subsection (7)(a)(i).
(iii) A sponsored captive insurance company having a certificate of authority as a specialpurpose financial captive insurance company shall establish a separate protected cell with respectto each reinsurance contract that is funded in whole or in part by a separate insurancesecuritization transaction.
(b) A sponsored captive insurance company having a certificate of authority as a specialpurpose financial captive insurance company may not sale, exchange, or transfer an asset by,between, or among any of its protected cells without the prior approval of the commissioner.
(8) (a) A sponsored captive insurance company having a certificate of authority as aspecial purpose financial captive insurance company shall attribute an asset or liability to aprotected cell and to the general account in accordance with the plan of operation approved bythe commissioner.
(b) Except as provided by Subsection (8)(a), a sponsored captive insurance companyhaving a certificate of authority as a special purpose financial captive insurance company maynot attribute an asset or liability between:
(i) its general account and a protected cell; or
(ii) its protected cells.
(c) A sponsored captive insurance company having a certificate of authority as a specialpurpose financial captive insurance company shall attribute:
(i) an insurance obligation, asset, or liability relating to a reinsurance contract enteredinto with respect to a protected cell; and
(ii) an insurance securitization transaction related to the obligation, asset, or liabilitydescribed in Subsection (8)(c)(i), including a security issued by the special purpose financialcaptive insurance company as part of the insurance securitization, to the protected cell.
(d) The following shall reflect an insurance obligation, asset, or liability relating to areinsurance contract and the insurance securitization transaction that are attributed to a protected
cell:
(i) a right, benefit, obligation, or a liability of a security attributable to a protected celldescribed in Subsection (8)(c);
(ii) the performance under a reinsurance contract and the related insurance securitizationtransaction; and
(iii) a tax benefit, loss, refund, or credit allocated pursuant to a tax allocation agreementto which the special purpose financial captive insurance company is a party, including a paymentmade by or due to be made to the special purpose financial captive insurance company pursuantto the terms of the tax allocation agreement.
(9) In addition to Section 31A-37a-502:
(a) Chapter 27a, Insurer Receivership Act, applies to each protected cell of a sponsoredcaptive insurance company having a certificate of authority as a special purpose financial captiveinsurance company.
(b) A proceeding or action taken by the commissioner pursuant to Chapter 27a, InsurerReceivership Act, with respect to a protected cell of a sponsored captive insurance companyhaving a certificate of authority as a special purpose financial captive insurance company maynot be the sole basis for a proceeding pursuant to Chapter 27a, Insurer Receivership Act, withrespect to:
(i) another protected cell of the special purpose financial captive insurance company; or
(ii) the special purpose financial captive insurance company's general account.
(c) (i) Except as provided in Subsection (9)(c)(ii), the receiver of a special purposefinancial captive insurance company shall ensure that the assets attributable to one protected cellare not applied to the liabilities attributable to:
(A) another protected cell; or
(B) the special purpose financial captive insurance company's general account.
(ii) Notwithstanding Subsection (9)(c)(i), if an asset or liability is attributable to morethan one protected cell, the receiver shall deal with the asset or liability in accordance with theterms of a relevant governing instrument or contract.
(d) The insolvency of a protected cell of a sponsored captive insurance company having acertificate of authority as a special purpose financial captive insurance company may not be thesole basis for the commissioner to prohibit:
(i) a payment by the special purpose financial captive insurance company made pursuantto a special purpose financial captive insurance company security or reinsurance contract withrespect to another protected cell; or
(ii) an action required to make a payment described in Subsection (9)(d)(i).
Enacted by Chapter 302, 2008 General Session