Sec. 38a-88a. Connecticut insurance reinvestment funds, authorized. Tax
credits. Regulations. (a) As used in this section:
(1) "Facility" means an insurance business facility;
(2) "Insurance business" means a business with a North American Industry Classification System code of 524113 to 524298, inclusive, that is engaged in the business of
insuring risks or of providing services necessary to the business of insuring risks;
(3) "New job" means a job that did not exist in the business of a subject insurance
business in this state prior to the subject insurance business's application to the commissioner for an eligibility certificate under this section for a new facility and that is filled
by a new employee, but does not include a job created when an employee is shifted
from an existing location of the subject insurance business in this state to a new facility;
(4) "New employee" means a person who resides in Connecticut and is hired by a
subject insurance business to fill a position for a new job or a person shifted from an
existing location of the subject insurance business outside this state to a new facility in
this state, provided (A) in no case shall the total number of new employees allowed for
purposes of this credit exceed the total increase in the taxpayer's employment in this
state, which increase shall be the difference between (i) the number of employees employed by the subject insurance business in this state at the time of application for an
eligibility certificate to the commissioner plus the number of new employees who would
be eligible for inclusion under the credit allowed under this section without regard to
this calculation, and (ii) the highest number of employees employed by the subject
insurance business in this state in the year preceding the subject insurance business's
application for an eligibility certificate to the commissioner, and (B) a person shall be
deemed to be a "new employee" only if such person's duties in connection with the
operation of the facility are on a regular, full-time, or equivalent thereof, and permanent basis;
(5) "New facility" means a facility which (A) is acquired by, leased to, or constructed by, a subject insurance business on or after the date of the subject insurance
business's application to the commissioner for an eligibility certificate under this section, unless, upon application of the subject insurance business and upon good and
sufficient cause shown, the commissioner waives the requirement that such activity take
place after the application, and (B) was not in service or use during the one-year period
immediately prior to the date of the subject insurance business's application to said
commissioner for an eligibility certificate under this section, unless upon application
of the subject insurance business and upon good and sufficient cause shown, the commissioner consents to waiving the one-year period;
(6) "Related person" means (A) a corporation, limited liability company, partnership, association or trust controlled by the taxpayer or subject insurance business, as
the case may be, (B) an individual, corporation, limited liability company, partnership,
association or trust that is in control of the taxpayer or subject insurance business, as
the case may be, (C) a corporation, limited liability company, partnership, association
or trust controlled by an individual, corporation, limited liability company, partnership,
association or trust that is in control of the taxpayer or subject insurance business, as
the case may be, or (D) a member of the same controlled group as the taxpayer or subject
insurance business, as the case may be. For purposes of this section, "control", with
respect to a corporation, means ownership, directly or indirectly, of stock possessing
fifty per cent or more of the total combined voting power of all classes of the stock of
such corporation entitled to vote. "Control", with respect to a trust, means ownership,
directly or indirectly, of fifty per cent or more of the beneficial interest in the principal
or income of such trust. The ownership of stock in a corporation, of a capital or profits
interest in a partnership or association or of a beneficial interest in a trust shall be determined in accordance with the rules for constructive ownership of stock provided in
Section 267(c) of the Internal Revenue Code of 1986, or any subsequent corresponding
internal revenue code of the United States, as from time to time amended, other than
paragraph (3) of Section 267(c) of said internal revenue code;
(7) "Moneys of the taxpayer" means all amounts invested in a fund, directly or
indirectly, on behalf of a taxpayer, including but not limited to (A) direct investments
made by the taxpayer, and (B) loans made to the fund for the benefit of the taxpayer
which loans are guaranteed by the taxpayer, provided no amounts represented by any
such loan shall be used for the purpose of obtaining any tax credit by any person making
such loan against any tax levied by this state;
(8) "Income year" means (A) with respect to corporations subject to taxation under
chapter 208, the income year as determined under said chapter, (B) with respect to
insurance companies, hospital and medical services corporations subject to taxation
under chapter 207, the income year as determined under said chapter, and (C) with
respect to taxpayers subject to taxation under chapter 229, the taxable year determined
under chapter 229;
(9) "Taxpayer" means any person as defined in section 12-1, whether or not subject
to any taxes levied by this state; and
(10) "Commissioner" means the Commissioner of Economic and Community Development.
(b) (1) On or before July 1, 2000, the commissioner shall register managers of
funds created for the purpose of investing in insurance businesses. Any manager registered under this subsection shall have its primary place of business in this state. Each
applicant shall submit an application under oath to the commissioner to be registered
and shall furnish evidence satisfactory to the commissioner of its financial responsibility,
integrity, and professional competence to manage investments. Failure to maintain adequate fiduciary standards shall constitute cause for the commissioner to revoke, after
hearing, any registration granted under this section. The fund manager shall make a
report on or before the first day of March in each year, under oath, to the Commissioner of
Revenue Services specifying the name, address and Social Security number or employer
identification number of each investor, the year during which each investment was made
by each investor, the amount of each investment and a description of the fund's investment objectives and relative performance.
(2) There shall be allowed as a credit against the tax imposed under chapter 207,
208 or 229 or section 38a-743 an amount equal to the following percentage of the moneys
of the taxpayer invested through a fund manager in an insurance business with respect
to the following income years of the taxpayer: (A) With respect to the income year in
which the investment in the subject insurance business was made and the two next
succeeding income years, zero per cent; (B) with respect to the third full income year
succeeding the year in which the investment in the subject insurance business was made
and the three next succeeding income years, ten per cent; (C) with respect to the seventh
full income year succeeding the year in which the investment in the subject insurance
business was made and the two next succeeding income years, twenty per cent. The
sum of all tax credit granted pursuant to the provisions of this subsection shall not exceed
fifteen million dollars with respect to investments made by a fund or funds in any single
insurance business, and with respect to all investments made by a fund shall not exceed
the total amount originally invested in such fund. Any fund manager may apply to the
Commissioner of Economic and Community Development for a credit that exceeds the
limitations established by this subdivision. The commissioner shall evaluate the benefits
of such application and make recommendations to the General Assembly if he determines that the proposal would be of economic benefit to the state.
(3) The credit allowed by this subsection may be claimed only by a taxpayer who
has invested in an insurance business through a fund (A) which has a total asset value
of not less than thirty million dollars for the income year for which the initial credit is
taken; (B) has not less than three investors who are not related persons with respect to
each other or to any insurance business in which any investment is made other than
through the fund at the date the investment is made; and (C) which invests only in
insurance businesses that are not related persons with respect to each other.
(4) The credit allowed by this subsection may be claimed only with respect to a
subject insurance business which (A) occupies the new facility for which an eligibility
certificate has been issued by the commissioner and with respect to which the certification required under subdivision (6) of this subsection has been issued as its home office,
and (B) employs not less than twenty-five per cent of its total work force in new jobs.
(5) The credit allowed by this subsection may be claimed only with respect to an
income year for which a certification of continued eligibility required under subdivision
(6) of this subsection has been issued. If, with respect to any year for which a tax credit
is claimed, any subject insurance business ceases at any time to employ at least twenty-five per cent of its total work force in new jobs, then, except as provided in subdivision
(6) of this subsection, the entitlement to the credit allowed by this subsection shall not
be allowed for the taxable year in which such employment ceases, and there shall not
be a pro rata application of the credit to such taxable year; provided, if the reason for
such cessation is the dissolution, liquidation or reorganization of such insurance business
in a bankruptcy or delinquency proceeding, as defined in section 38a-905, the credit
shall be allowed.
(6) The commissioner, upon application, shall issue an eligibility certificate for an
insurance business occupying a new facility in this state and employing new employees,
after it has been established, to his satisfaction, that subject insurance business has
complied with the provisions of this subsection. If the commissioner determines that
such requirements have been met as a result of transactions with a related person for other
than bona fide business purposes, he shall deny such application. The commissioner shall
require the subject insurance business to submit annually such information as may be
necessary to determine whether the appropriate occupancy and employment requirements have been met at all times during an income year. If the commissioner determines
that such requirements have been so met, he shall issue a certification of continued
eligibility to that effect to the subject insurance business on or before the first day of
the third month following the close of the subject insurance business's income year.
(7) The commissioner shall, upon request, provide a copy of the eligibility certificate and the certification required under subdivision (6) of this subsection to the Commissioner of Revenue Services.
(8) (A) If (i) the number of new employees on account of which a taxpayer claimed
the credit allowed by this subsection decreases to less than twenty-five per cent of its
total work force for more than sixty days during any of the taxable years for which a
credit is claimed, (ii) those employees are not replaced by other employees who have
not been shifted from an existing location of the subject insurance business in this state,
and (iii) the subject insurance business has relocated operations conducted in the new
facility to a location outside this state, the taxpayer shall be required to recapture a
percentage, as determined under the provisions of subparagraph (B) of this subdivision,
of the credit allowed under this subsection on its tax return and no subsequent credit
shall be allowed. If the credit claimed by the taxpayer under this subsection is attributable
to investments made in more than one insurance business, the credit recaptured and
disallowed under this subdivision shall be that portion of the credit attributable to the
investment in the insurance business as described in subparagraphs (A)(i) to (A)(iii),
inclusive, of this subdivision.
(B) If the taxpayer is required under the provisions of subparagraph (A) of this
subdivision to recapture a portion of the credit during (i) the first year such credit was
claimed, then ninety per cent of the credit allowed shall be recaptured on the tax return
required to be filed for such year, (ii) the second of such years, then sixty-five per cent
of the credit allowed for the entire period of eligibility shall be recaptured on the tax
return required to be filed for such year, (iii) the third of such years, then fifty per cent
of the credit allowed for the entire period of eligibility shall be recaptured on the tax
return required to be filed for such year, (iv) the fourth of such years, then thirty per
cent of the credit allowed for the entire period of eligibility shall be recaptured on the
tax return required to be filed for such year, (v) the fifth of such years, then twenty per
cent of the credit allowed for the entire period of eligibility shall be recaptured on the
tax return required to be filed for such year, and (vi) the sixth or subsequent of such
years, then ten per cent of the credit allowed for the entire period of eligibility shall be
recaptured on the tax return required to be filed for such year. Any credit recaptured
pursuant to this subdivision shall not be in excess of the credit that would be allowed
for the applicable investment. The Commissioner of Revenue Services may recapture
such credits from the taxpayer who has claimed such credits. If the commissioner is
unable to recapture all or part of such credits from such taxpayer, the commissioner
may seek to recapture such credits from any taxpayer who has assigned such credits to
another taxpayer. If the commissioner is unable to recapture all or part of such credits
from any such taxpayer, the commissioner may recapture such credits from the fund.
(C) The recapture provisions of this subdivision shall not apply and tax credits may
continue to be claimed under this subsection if, for the entire period that the credit is
applicable, such decrease in the percentage of total work force employed in this state
does not result in an actual decrease in the number of persons employed by the subject
insurance business in this state on a regular, full-time, or equivalent thereof, and permanent basis as compared to the number of new employees on account of which the taxpayer
claimed the credit allowed by this subsection.
(c) (1) As used in this subsection:
(A) "Allocation date" means the date an insurance reinvestment fund receives an
investment of eligible capital equaling the amount of credits against the tax imposed
under chapter 207 and section 38a-743 allocated to taxpayers who invest in such insurance reinvestment fund;
(B) "Eligible business" means a business that has its principal business operations
in Connecticut, has fewer than two hundred fifty employees at the time of investment
and not more than ten million dollars in net income in the previous year;
(C) "Eligible capital" means an investment of cash by a taxpayer in an insurance
reinvestment fund that fully funds the purchase price of an equity interest in the insurance
reinvestment fund or an eligible debt instrument issued by an insurance reinvestment
fund, at par value or a premium, that (i) has an original maturity date of at least five
years after the date of issuance, (ii) has a repayment schedule that is not faster than a
level principal amortization over five years, and (iii) has no interest, distribution or
payment features tied to the insurance reinvestment fund's profitability or the success
of the investments;
(D) "Green technology business" means an eligible business with not less than
twenty-five per cent of its employment positions being positions in which green technology is employed or developed and may include the occupation codes identified as green
jobs by the Department of Economic and Community Development and the Labor Department for such purposes;
(E) "Income year" means the income year as determined in chapter 207 for the
taxpayer;
(F) "Insurance reinvestment fund" means a Connecticut partnership, corporation,
trust or limited liability company, whether organized on a profit or not-for-profit basis,
that (i) is managed by at least two principals or persons that have at least four years of
experience each in managing venture capital or private equity funds, with at least fifty
million dollars of such funds from people unaffiliated with the manager, (ii) has received
an equity investment of capital other than eligible capital equal to no less than five per
cent of the total amount of the eligible capital to be invested in such insurance reinvestment fund, and (iii) is not, or will not be after the receipt of eligible capital, controlled
by or under common control with, one or more insurance companies. An investment of
eligible capital shall not result in insurance company control unless such investment
exceeds forty million dollars per taxpayer and results in insurance companies having
the right to vote more than fifty per cent of the equity interests of the insurance reinvestment fund cash invested in such insurance reinvestment fund, provided this provision
shall not prohibit the interim control of an insurance reinvestment fund by one or more
insurance companies upon a breach of any payment obligation of the insurance reinvestment fund or contractual or other agreement by the insurance reinvestment fund that is
designed to ensure compliance with this section; and
(G) "Principal business operations" means at least eighty per cent of the business
organization's employees reside in the state or eighty per cent of the business payroll
is paid to individuals living in this state.
(2) A taxpayer that makes an investment of eligible capital shall, in the year of
investment, earn a vested credit against the premium tax imposed pursuant to chapter
207 and section 38a-743. Such credit shall be available as follows: (A) Commencing
with the tax return due for the first to third, inclusive, tax years, zero per cent; (B)
commencing with the tax return due for the fourth to seventh, inclusive, tax years, not
more than ten per cent; and (C) commencing with the tax return due for the eighth to
tenth, inclusive, tax years, not more than twenty per cent. The maximum amount of
eligible capital for which credits may be allowed under this subsection shall not result
in more than forty million dollars of tax credits being used in any one year exclusive of
any carried forward credits and no fund shall apply for more than the total amount of
credits available under this section.
(3) On or before July 1, 2010, the Commissioner of Economic and Community
Development shall begin to accept applications for certification as an insurance reinvestment fund and for allocations of tax credits under this subsection. Applications shall
include: (A) The amount of eligible capital the applicant will raise; (B) a nonrefundable
application fee of seven thousand five hundred dollars; (C) evidence of satisfaction of
the requirements of the definition of "insurance reinvestment fund" pursuant to subparagraph (F) of subdivision (1) of this subsection; (D) an affidavit by each taxpayer committing an investment of eligible capital; (E) a business plan detailing (i) the approximate
percentage of eligible capital the applicant will invest in eligible businesses by the third,
fifth, seventh and ninth anniversaries of its allocation date, (ii) the industry segments
listed by the North American Industrial Classification System code and percentage of
eligible capital in which the applicant will invest, (iii) the number of jobs that will be
created or retained as a result of the applicant's investments once all eligible capital has
been invested, (iv) the percentage of eligible capital to be invested in eligible businesses
primarily engaged in conducting research and development or manufacturing, processing or assembling technology-based products; and (v) a revenue impact assessment
demonstrating that the applicant's business plan has a revenue neutral or positive impact
on the state; (F) a commitment to invest at least twenty-five per cent of its eligible capital
in green technology businesses; and (G) a commitment to invest by the third anniversary
of its allocation date, three per cent of its eligible capital in preseed investments in
consultation with Connecticut Innovations, Incorporated, pursuant to the corporation's
program for preseed financing established pursuant to section 32-41x. The commissioner may require the applicant to obtain a revenue impact assessment conducted by
an independent third party.
(4) Applications for tax credits pursuant to this subsection shall be accepted and
approved on a first-come, first-served basis with all applications received on the same
date deemed to be received simultaneously and approvals being made on a pro rata basis
if such applications exceed the amount of remaining credits.
(5) The commissioner shall issue an allocation of credits subject to confirmation
on a form prescribed by the commissioner by the fund that an investment of eligible
capital was received within five business days. If an insurance reinvestment fund does
not receive an investment of eligible capital equaling the amount of credits against the
tax imposed under chapter 207 and section 38a-743 allocated to a taxpayer, for which
it filed an affidavit with its application prior to the fifth business day after receipt of
certification, the insurance reinvestment fund shall notify the commissioner by overnight common carrier delivery service and that portion of eligible capital allocated to the
insurance company shall be forfeited. Such insurance reinvestment fund and forfeiting
taxpayer shall each be assessed a twenty-five-thousand-dollar administrative penalty.
The commissioner shall reallocate the forfeited eligible capital among all other remaining taxpayers that invested eligible capital.
(6) To continue to be certified, an insurance reinvestment fund shall (A) be in compliance with the investment parameters set forth in its business plan, provided an insurance reinvestment fund may apply to the commissioner to amend its business plan based
on unavoidable or reasonably unanticipated changes to various conditions, including,
but not limited to, the general economic climate of the state or particular sectors of the
economy, technological advances and high employment and revenue growth opportunities, with approval for such changes not to be unreasonably withheld by the commissioner; (B) be in compliance with the revenue impact assessment provided in the application demonstrating that the fund's business plan continues to have a revenue neutral or
positive impact on the state; (C) have invested sixty per cent of its eligible capital in
eligible businesses by the fourth anniversary of its allocation date; and (D) have invested
one hundred per cent of its eligible capital in eligible businesses by the tenth anniversary
of its allocation date, with a minimum of twenty-five per cent of eligible capital invested
in green technology businesses. An insurance reinvestment fund shall only invest eligible capital in eligible businesses, bank deposits, certificates of deposit or other fixed
income securities and may not invest more than fifteen per cent of its eligible capital in
any one eligible business without prior approval of the commissioner.
(7) Not later than January thirty-first annually, each insurance reinvestment fund
shall report to the commissioner: (A) The amount of eligible capital remaining at the
end of the preceding year; (B) each investment in an eligible business during the preceding year and, with respect to each eligible business, its location and North American
Industrial Classification System code; (C) the percentage of eligible capital invested in
green technology businesses; and (D) distributions made by the insurance reinvestment
fund in the preceding year. In the annual report due in the third, fifth, seventh and ninth
years after its allocation date, each insurance reinvestment fund shall also report to the
commissioner its compliance with the investment parameters set forth in its business
plan and the revenue impact assessment provided in the application demonstrating that
the fund's business plan continues to have a revenue neutral or positive impact on the
state. Each insurance reinvestment fund shall provide to the commissioner annual
audited financial statements.
(8) To make a distribution or payment, an insurance reinvestment fund must have
invested one hundred per cent of its eligible capital in eligible businesses, with a minimum of twenty-five per cent of eligible capital invested in green technology businesses,
with principal business operations in this state at the time of such determination, except:
(A) Distributions related to the payment of any projected increase in federal or state
taxes, including penalties and interest related to state and federal income taxes, of the
equity owners of the insurance reinvestment fund resulting from the earnings or other
tax liability of the insurance reinvestment fund to the extent that the increase is related
to the ownership, management or operation of the insurance reinvestment fund; (B)
payments of interest and principal on the debt of the insurance reinvestment fund, provided after such payment, the insurance reinvestment fund still has cash and other marketable securities in an amount that, when added to the cumulative investments it has
made in eligible recipients, equals not less than sixty per cent of the eligible capital
invested in such reinvestment fund; or (C) payments related to the reasonable costs
and expenses of forming, syndicating, managing and operating the fund, provided the
distribution or payment is not made directly or indirectly to an insurance company that
has invested eligible capital in the insurance reinvestment fund, including: (i) Reasonable and necessary fees paid for professional services, including legal and accounting
services, related to the formation and operation of the insurance reinvestment fund; and
(ii) an annual management fee in an amount that does not exceed two and one-half per
cent of the eligible capital of the insurance reinvestment fund. The state shall receive a
share of any distribution, except as set forth in subparagraphs (A), (B) and (C) of this
subsection and distributions made to return any equity capital invested in the insurance
reinvestment fund that is not eligible capital, in the following percentages: (I) Ten per
cent when less than eighty per cent but more than sixty per cent of the jobs set forth in
the insurance reinvestment fund's business plan are created or retained, and (II) twenty
per cent when sixty per cent or less of the jobs set forth in the insurance reinvestment
fund's business plan are created or retained.
(9) The commissioner shall review each annual report to ensure compliance with
subdivisions (6), (7) and (8) of this subsection. A material variation of subdivision (6),
(7) or (8) of this subsection is grounds for decertification of the insurance reinvestment
fund. If the commissioner determines that an insurance reinvestment fund is not in
compliance with subdivision (6), (7) or (8) of this subsection or the investment parameters of its business plan, the commissioner shall notify the officers of the insurance
reinvestment fund, in writing, that the insurance reinvestment fund may be subject to
decertification after the one hundred twentieth day after the date of mailing the notice,
unless the deficiencies are waived by the commissioner or are corrected and the insurance reinvestment fund returns to compliance with subdivisions (6), (7) and (8) of this
subsection.
(10) Decertification of an insurance reinvestment fund shall cause the forfeiture of
future credits against the tax imposed by chapter 207 and section 38a-743 to be claimed
with respect to an insurance reinvestment fund when (A) such decertification occurs on
or before the fourth anniversary of the fund's allocation date, and (B) such fund has
invested less than sixty per cent of its eligible capital in eligible businesses by said
anniversary. The commissioner shall send written notice to the last-known address of
each taxpayer whose credit against the tax imposed by chapter 207 is subject to recapture
or forfeiture.
(d) The tax credit allowed by this section shall only be available for investments
(1) in funds that are not open to additional investments or investors beyond the amount
subscribed at the formation of the fund, or (2) under subsection (c) of this section, in
insurance reinvestment funds that are not open to additional investments or investors
after submission of the insurance reinvestments fund's application to the commissioner
pursuant to subsection (c) of this section. On and after June 30, 2010, no eligibility
certificate shall be provided under subdivision (6) of subsection (b) of this section for
investments made in an insurance business. On or after July 1, 2011, no credit shall be
allowed under subdivision (2) or (6) of subsection (b) of this section for an investment
of less than one million dollars for which the commissioner has issued an eligibility
certificate. A fund manager who has received an eligibility certificate but is not yet
eligible to receive a certificate of continued eligibility shall provide documentation satisfactory to the commissioner not later than June 30, 2011, of its investment of one million
dollars or more. Such documentation shall include, but is not limited to, cancelled
checks, wire transfers, investment agreements or other documentation as the commissioner may request. On and after July 1, 2011, the commissioner shall revoke the certificate of eligibility for any insurance business for which its fund manager failed to provide
sufficient documentation of said investment of not less than one million dollars. Any
credit allowed under subsection (b) or subsection (g) of this section that has not been
claimed prior to January 1, 2010, may be carried forward pursuant to subsection (i) of
this section.
(e) The maximum amount of credit allowed under subsection (c) of this section
shall be two hundred million dollars in aggregate and forty million dollars per year.
(f) (1) The Commissioner of Revenue Services may treat one or more corporations
that are properly included in a combined corporation business tax return under section
12-223 as one taxpayer in determining whether the appropriate requirements under this
section are met. Where corporations are treated as one taxpayer for purposes of this
subsection, then the credit shall be allowed only against the amount of the combined
tax for all corporations properly included in a combined return that, under the provisions
of subdivision (2) of this subsection, is attributable to the corporations treated as one
taxpayer. (2) The amount of the combined tax for all corporations properly included in
a combined corporation business tax return that is attributable to the corporations that
are treated as one taxpayer under the provisions of this subsection shall be in the same
ratio to such combined tax that the net income apportioned to this state of each corporation treated as one taxpayer bears to the net income apportioned to this state, in the
aggregate, of all corporations included in such combined return. Solely for the purpose
of computing such ratio, any net loss apportioned to this state by a corporation treated as
one taxpayer or by a corporation included in such combined return shall be disregarded.
(g) Any taxpayer allowed a credit under subsection (b) of this section may assign
such credit to another person, provided such person may claim such credit only with
respect to a calendar year for which the assigning taxpayer would have been eligible to
claim such credit. The fund manager shall include in the report filed with the Commissioner of Revenue Services in accordance with subdivision (1) of subsection (b) of
this section information requested by the commissioner regarding such assignments
including the current holders of credits as of the end of the preceding calendar year.
Any taxpayer allowed a credit under subsection (c) of this section may transfer such
credit to an affiliate of such taxpayer.
(h) No taxpayer shall be eligible for a credit under this section and either section
12-217e or section 12-217m for the same investment. No two taxpayers shall be eligible
for any tax credit with respect to the same investment, employee or facility.
(i) Any tax credit not used in the income year for which it was allowed may be
carried forward for the five immediately succeeding income years until the full credit
has been allowed.
(j) The commissioner, with the approval of the Commissioner of Revenue Services
and the Secretary of the Office of Policy and Management, may adopt regulations in
accordance with chapter 54 to carry out the purposes of this section.
(P.A. 94-214, S. 1, 4; P.A. 95-79, S. 139, 189; 95-303, S. 2, 3; P.A. 97-292, S. 1, 4; P.A. 98-214, S. 31; P.A. 00-170,
S. 30, 31, 42; P.A. 01-139, S. 3; June Sp. Sess. P.A. 01-6, S. 39, 72, 80, 85; P.A. 02-24, S. 1; P.A. 06-159, S. 21; P.A. 08-82, S. 1; P.A. 10-75, S. 14; P.A. 11-104, S. 6, 7; 11-140, S. 2.)
History: P.A. 94-214, effective June 7, 1994, and applicable (1) to income years of corporations under chapter 208
commencing on or after January 1, 1994, (2) to income years of insurance companies, hospital and medical services
corporations under chapter 207 commencing on or after January 1, 1994, or (3) taxable years of taxpayers under chapter
229 commencing on or after January 1, 1994, as the case may be; P.A. 95-79 redefined "related person" to include a limited
liability company, effective May 31, 1995; P.A. 95-303 added Subsec. (a)(7) defining "moneys of the taxpayer" and (a)(8)
defining "income year", amended Subsec. (c) to add reference to Sec. 38a-743 and to delete Subsec. (c)(1) and (2), and
added new Subsec. (c)(1) to (3) re amount of credit, made technical changes to Subsec. (d), added proviso to Subsec. (f)
re dissolution as the result of bankruptcy or delinquency proceeding, added provision to Subsec. (i) re credit claimed which
is attributable to investments in more than one insurance business, deleted reference to Ch. 207 in Subsec. (l), and made
technical changes to Subsec. (m), effective July 6, 1995, and applicable (1) to income years of corporations under Ch. 208
commencing on or after January 1, 1995, (2) to income years of insurance companies, hospital and medical services
corporations under Ch. 207 commencing on or after January 1, 1995, or (3) to taxable years of taxpayers under Ch. 229
commencing on or after January 1, 1995, as the case may be; P.A. 97-292 added Subsec. (a)(9) and (10) defining "taxpayer"
and "commissioner", amended Subsec. (b) to transfer from Insurance Commissioner to the Commissioner of Economic
and Community Development responsibility for registration of fund managers and add application requirements, Subsec.
(c) to add cap for sum of all tax credit granted and provision for application for credit to exceed cap, Subsec. (d) to
prohibit investments by related persons, Subsec. (e) to delete requirement of incorporation in this state, Subsec. (i) to allow
Commissioner of Revenue Services to recapture credits from any taxpayer who has assigned credits to another taxpayer
or from the fund, Subsec. (j) to delete existing language and to provide that tax credit is only available for investments in
fund not open to additional investments beyond the amount subscribed at formation of fund, Subsec. (l) to add requirement
re reporting of assignments and made technical changes, effective July 8, 1997, and applicable to income years commencing
on or after January 1, 1997; P.A. 98-214 amended Subsec. (f) to delete reference to "subsection (d)" of Sec. 38a-905; P.A.
00-170 amended Subsec. (b) to provide that registration of fund managers be accomplished prior to July 1, 2000, and
amended Subsec. (j) to restrict the applicability of the tax credit under this section to funds created prior to July 1, 2000,
effective May 26, 2000; P.A. 01-139 amended Subsec. (e) to substitute "commissioner" for "Insurance Commissioner";
June Sp. Sess. P.A. 01-6 amended Subsec. (f) to add liquidation and reorganization to provision for treatment of credits
in certain bankruptcy or delinquency cases, amended Subsec. (i) to make a technical change and add new Subdiv. (3) re
application of recapture provisions and amended Subsec. (j) to provide that no credit shall be allowed for investments
made after December 31, 2015, effective July 1, 2001; P.A. 02-24 amended Subsec. (f) to substitute "a bankruptcy" for
"bankruptcy"; P.A. 06-159 amended Subsec. (h) to require commissioner, rather than taxpayer, to provide a copy of
eligibility certificate and certificaton, effective June 6, 2006; P.A. 08-82 amended Subsec. (a)(2) to redefine "insurance
business" by adding provision re businesses with North American Industry Classification System codes of 524113 to
524298, inclusive, and made a technical change in Subsec. (a)(4), (5) and (7); P.A. 10-75 redefined "new employee" in
Subsec. (a)(4) to require person to reside in Connecticut, redesignated existing Subsecs. (b) to (i) as Subsecs. (b)(1) to
(b)(8), added new Subsec. (c) re tax credits for investments of eligible capital, redesignated existing Subsec. (j) as Subsec.
(d) and amended same by designating existing provision re funds not open to investment as Subdiv. (1), adding Subdiv.
(2) re funds under Subsec. (c) not open to investment and establishing deadlines re eligibility certificates, added new
Subsec. (e) re maximum credit, redesignated existing Subsecs. (k) to (o) as Subsecs. (f) to (j) and made technical changes,
effective July 1, 2010; P.A. 11-104 made technical changes in Subsecs. (b)(4) and (c)(3), effective July 8, 2011; P.A. 11-140 amended Subsec. (g) to allow transfer of credits to a taxpayer's affiliate, effective July 8, 2011.
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Sec. 38a-91aa. *(See end of section for amended version and effective date.)
Definitions. As used in sections 38a-91aa to 38a-91qq, inclusive:
(1) "Affiliated company" means any company in the same corporate system as a
parent, an industrial insured or a member organization by virtue of common ownership,
control, operation or management.
(2) "Association" means any legal association of individuals, corporations, limited
liability companies, partnerships, associations or other entities that has been in continuous existence for at least one year, where the association itself or some or all of the
member organizations:
(A) Own, control or hold with power to vote all of the outstanding voting securities
of an association captive insurance company incorporated as a stock insurer;
(B) Have complete voting control over an association captive insurance company
incorporated as a mutual insurer; or
(C) Constitute all of the subscribers of an association captive insurance company
formed as a reciprocal insurer.
(3) "Association captive insurance company" means any company that insures risks
of the member organizations of the association and their affiliated companies.
(4) "Captive insurance company" means any pure captive insurance company, association captive insurance company, industrial insured captive insurance company or
risk retention group that is domiciled in this state and formed or licensed under the
provisions of sections 38a-91aa to 38a-91qq, inclusive.
(5) "Commissioner" means the Insurance Commissioner.
(6) "Controlled unaffiliated business" means any company:
(A) That is not in the corporate system of a parent and affiliated companies;
(B) That has an existing contractual relationship with a parent or affiliated company; and
(C) Whose risks are insured by a pure captive insurance company in accordance
with section 38a-91qq.
(7) "Excess workers' compensation insurance" means, in the case of an employer
that has insured or self-insured its workers' compensation risks in accordance with
applicable state or federal law, insurance in excess of a specified per-incident or aggregate limit established by the commissioner.
(8) "Industrial insured" means an insured:
(A) Who procures the insurance of any risk or risks by use of the services of a full-time employee acting as an insurance manager or buyer;
(B) Whose aggregate annual premiums for insurance on all risks total at least
twenty-five thousand dollars; and
(C) Who has at least twenty-five full-time employees.
(9) "Industrial insured captive insurance company" means any company that insures
risks of the industrial insureds that comprise the industrial insured group and their affiliated companies.
(10) "Industrial insured group" means any group of industrial insureds that collectively:
(A) Own, control or hold with power to vote all of the outstanding voting securities
of an industrial insured captive insurance company incorporated as a stock insurer;
(B) Have complete voting control over an industrial insured captive insurance company incorporated as a mutual insurer; or
(C) Constitute all of the subscribers of an industrial insured captive insurance company formed as a reciprocal insurer.
(11) "Member organization" means any individual, corporation, limited liability
company, partnership, association or other entity that belongs to an association.
(12) "Mutual corporation" means a corporation organized without stockholders and
includes a nonprofit corporation with members.
(13) "Parent" means a corporation, limited liability company, partnership, other
entity or individual that directly or indirectly owns, controls or holds with power to vote
more than fifty per cent of the outstanding voting:
(A) Securities of a pure captive insurance company organized as a stock corporation; or
(B) Membership interests of a pure captive insurance company organized as a nonprofit corporation.
(14) "Pure captive insurance company" means any company that insures risks of
its parent and affiliated companies or controlled unaffiliated business.
(15) "Risk retention group" means a captive insurance company organized under
the laws of this state pursuant to the federal Liability Risk Retention Act of 1986, 15
USC 3901 et seq., as amended from time to time, as a stock or mutual corporation, a
reciprocal or other limited liability entity.
(P.A. 08-127, S. 1.)
*Note: On and after July 1, 2012, this section, as amended by section 56 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91aa. Definitions. As used in sections 38a-91aa to 38a-91tt, inclusive:
(1) "Affiliated company" means any company in the same corporate system as a
parent, an industrial insured or a member organization by virtue of common ownership,
control, operation or management.
(2) "Alien captive insurance company" means any insurance company formed to
write insurance business for its parent and affiliated companies and licensed pursuant
to the laws of an alien jurisdiction that imposes statutory or regulatory standards on
companies transacting the business of insurance in such jurisdiction that the commissioner deems to be acceptable.
(3) "Association" means any legal association of individuals, corporations, limited
liability companies, partnerships, associations or other entities that has been in continuous existence for at least one year, where the association itself or some or all of the
member organizations:
(A) Directly or indirectly own, control or hold with power to vote all of the outstanding voting securities or other voting interests of an association captive insurance company incorporated as a stock insurer;
(B) Have complete voting control over an association captive insurance company
incorporated as a mutual corporation or formed as a limited liability company; or
(C) Constitute all of the subscribers of an association captive insurance company
formed as a reciprocal insurer.
(4) "Association captive insurance company" means any company that insures risks
of the member organizations of an association, and includes a company that also insures
risks of such member organizations' affiliated companies or of the association.
(5) "Branch business" means any insurance business transacted in this state by a
branch captive insurance company.
(6) "Branch captive insurance company" means any alien captive insurance company licensed by the commissioner to transact the business of insurance in this state
through a business unit with a principal place of business in this state.
(7) "Branch operations" means any business operations in this state of a branch
captive insurance company.
(8) "Captive insurance company" means any (A) pure captive insurance company,
association captive insurance company, industrial insured captive insurance company,
risk retention group, sponsored captive insurance company or special purpose financial
captive insurance company that is domiciled in this state and formed or licensed under
the provisions of sections 38a-91aa to 38a-91tt, inclusive, or (B) branch captive insurance company.
(9) "Ceding insurer" means an insurance company, approved by the commissioner
and licensed or otherwise authorized to transact the business of insurance or reinsurance
in its state or country of domicile, that cedes risk to a special purpose financial captive
insurance company pursuant to a reinsurance contract.
(10) "Commissioner" means the Insurance Commissioner.
(11) "Controlled unaffiliated business" means any person:
(A) Who, (i) in the case of a pure captive insurance company, is not in the corporate
system of a parent and the parent's affiliated companies, or (ii) in the case of an industrial
insured captive insurance company, is not in the corporate system of an industrial insured
and the industrial insured's affiliated companies;
(B) Who, (i) in the case of a pure captive insurance company, has an existing contractual relationship with a parent or one of the parent's affiliated companies, or (ii) in
the case of an industrial insured captive insurance company, has an existing contractual
relationship with an industrial insured or one of the industrial insured's affiliated companies; and
(C) Whose risks are managed by a pure captive insurance company or an industrial
insured captive insurance company, as applicable, in accordance with section 38a-91qq.
(12) "Excess workers' compensation insurance" means, in the case of an employer
that has insured or self-insured its workers' compensation risks in accordance with
applicable state or federal law, insurance in excess of a specified per-incident or aggregate limit established by the commissioner.
(13) "Incorporated protected cell" means a protected cell that is established as a
corporation or a limited liability company, separate from the sponsored captive insurance company with which it has entered into a participant contract.
(14) "Industrial insured" means an insured:
(A) Who procures the insurance of any risk or risks by use of the services of a full-time employee acting as an insurance manager or buyer;
(B) Whose aggregate annual premiums for insurance on all risks total at least
twenty-five thousand dollars; and
(C) Who has at least twenty-five full-time employees.
(15) "Industrial insured captive insurance company" means any company that insures risks of the industrial insureds that comprise an industrial insured group, and
includes a company that also insures risks of such industrial insureds' affiliated companies.
(16) "Industrial insured group" means any group of industrial insureds that collectively:
(A) Directly or indirectly own, control or hold with power to vote all of the outstanding voting securities or other voting interests of an industrial insured captive insurance
company incorporated as a stock insurer;
(B) Have complete voting control over an industrial insured captive insurance company incorporated as a mutual corporation or formed as a limited liability company; or
(C) Constitute all of the subscribers of an industrial insured captive insurance company formed as a reciprocal insurer.
(17) "Insurance securitization" or "securitization" means a transaction or a group
of related transactions, which may include capital market offerings, that are effected
through related risk transfer instruments and facilitating administrative agreements, in
which all or part of the result of such transaction is used to fund a special purpose
financial captive insurance company's obligations under a reinsurance contract with a
ceding insurer and by which:
(A) A special purpose financial captive insurance company directly or indirectly
obtains proceeds through the issuance of securities by such company or any other person; or
(B) A person provides, for the benefit of a special purpose financial captive insurance company, one or more letters of credit or other assets that the commissioner has
authorized such company to treat as admitted assets for purposes of its annual report.
"Insurance securitization" or "securitization" does not include the issuance of a letter
of credit for the benefit of the commissioner to satisfy all or part of a special purpose
financial captive insurance company's capital and surplus requirements under section
38a-91dd.
(18) "Member organization" means any individual, corporation, limited liability
company, partnership, association or other entity that belongs to an association.
(19) "Mutual corporation" means a corporation organized without stockholders and
includes a nonprofit corporation with members.
(20) "Parent" means any individual, corporation, limited liability company, partnership or other entity that directly or indirectly owns, controls or holds with power to vote
more than fifty per cent of the outstanding voting:
(A) Securities of a pure captive insurance company organized as a stock insurer; or
(B) Membership interests of a pure captive insurance company organized as a nonprofit corporation or as a limited liability company.
(21) "Participant" means any association, corporation, limited liability company,
partnership, trust or other entity, and any affiliated company thereof, that is insured by
a sponsored captive insurance company pursuant to a participant contract.
(22) "Participant contract" means a contract entered into by a sponsored captive
insurance company and a participant by which the sponsored captive insurance company
insures the risks of the 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.
(23) "Protected cell" means a separate account established by a sponsored captive
insurance company, in which assets are maintained for one or more participants in accordance with the terms of one or more participant contracts to fund the liability of the
sponsored captive insurance company assumed on behalf of such participants as set
forth in such participant contracts.
(24) "Pure captive insurance company" means any company that insures risks of
its parent and affiliated companies or controlled unaffiliated business.
(25) "Reinsurance contract" means a contract entered into by a special purpose
financial captive insurance company and a ceding insurer by which the special purpose
financial captive insurance company agrees to provide reinsurance to the ceding insurer
for risks associated with the ceding insurer's insurance or reinsurance business.
(26) "Risk retention group" means a captive insurance company organized under
the laws of this state pursuant to the federal Liability Risk Retention Act of 1986, 15
USC 3901 et seq., as amended from time to time, as a stock insurer or mutual corporation,
a reciprocal or other limited liability entity.
(27) "Security" has the same meaning as provided in section 36b-3 and includes
any form of debt obligation, equity, surplus certificate, surplus note, funding agreement,
derivative or other financial instrument that the commissioner designates as a security
for purposes of sections 38a-91aa to 38a-91tt, inclusive.
(28) "Special purpose financial captive insurance company" means a company that
is licensed by the commissioner in accordance with section 38a-91bb.
(29) "Special purpose financial captive insurance company security" means a security issued by (A) a special purpose financial captive insurance company, or (B) a third
party, the proceeds of which are obtained directly or indirectly by a special purpose
financial captive insurance company.
(30) "Sponsor" means any association, corporation, limited liability company, partnership, trust or other entity that is approved by the commissioner to organize and operate
a sponsored captive insurance company and to provide all or part of the required unimpaired paid-in capital and surplus.
(31) "Sponsored captive insurance company" means a captive insurance company:
(A) In which the minimum required unimpaired paid-in capital and surplus are
provided by one or more sponsors;
(B) That insures risks of its participants only through separate participant contracts; and
(C) 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 sponsored captive insurance company's general account.
(32) "Surplus note" means an unsecured subordinated debt obligation possessing
characteristics consistent with the National Association of Insurance Commissioners
Statement of Statutory Accounting Principles No. 41, as amended from time to time,
and as modified or supplemented by the commissioner."
(P.A. 08-127, S. 1; Oct. Sp. Sess. P.A. 11-1, S. 56.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 redefined "association", "association captive
insurance company", "captive insurance company", "controlled unaffiliated business", "industrial insured captive insurance company", "industrial insured group" and "parent", defined "alien captive insurance company", "branch business",
"branch captive insurance company", "branch operations", "ceding insurer", "incorporated protected cell", "insurance
securitization", "participant", "participant contract", "protected cell", "reinsurance contract", "security", "special purpose
financial captive insurance company", "special purpose financial captive insurance company security", "sponsor", "sponsored captive insurance company" and "surplus note", and made technical changes, effective July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91bb. *(See end of section for amended version and effective date.)
Captive insurance companies. Licenses. Fees. (a) Any captive insurance company,
when permitted by its articles of association, charter or other organizational document,
may apply to the Insurance Commissioner for a license to do the business of life insurance, annuities, health insurance, as defined in section 38a-469, and commercial risk
insurance, as defined in section 38a-663, provided:
(1) No pure captive insurance company may insure any risks other than those of its
parent and affiliated companies or controlled unaffiliated business;
(2) No association captive insurance company may insure any risks other than those
of the member organizations of its association, and their affiliated companies;
(3) No industrial insured captive insurance company may insure any risks other
than those of the industrial insureds that comprise the industrial insured group, and their
affiliated companies;
(4) No risk retention group may insure any risks other than those of its members
and owners;
(5) No captive insurance company may provide private passenger motor vehicle or
homeowner's insurance coverage or any component thereof;
(6) No captive insurance company may accept or cede reinsurance except as provided in section 38a-91kk;
(7) Any captive insurance company that provides life insurance, annuities or health
insurance shall comply with all applicable state and federal laws.
(b) No captive insurance company shall do any insurance business in this state
unless:
(1) It first obtains from the Insurance Commissioner a license authorizing it to do
insurance business in this state;
(2) Its board of directors or committee of managers or, in the case of a reciprocal
insurer, its subscribers' advisory committee holds at least one meeting each year in
this state;
(3) It maintains its principal place of business in this state; and
(4) It appoints a registered agent to accept service of process and to otherwise act
on its behalf in this state. Whenever such registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the Insurance
Commissioner shall be an agent of such captive insurance company upon whom any
process, notice or demand may be served.
(c) (1) To be considered for a license, a captive insurance company shall:
(A) File with the commissioner a certified copy of its organizational documents, a
statement under oath of its president and secretary showing its financial condition, and
any other statements or documents required by the commissioner; and
(B) Submit to the commissioner for approval a description of the coverages, deductibles, coverage limits and rates and such additional information as the commissioner
may require. In the event of any subsequent material change in any item in such description, the captive insurance company shall submit to the commissioner for approval an
appropriate revision and shall not offer any additional kinds of insurance until a revision
of such description is approved by the commissioner. The captive insurance company
shall inform the commissioner of any material change in rates not later than thirty days
after the adoption of such change.
(2) Each applicant captive insurance company shall also file with the commissioner
evidence of the following:
(A) The amount and liquidity of the company's assets relative to the risks to be
assumed;
(B) The adequacy of the expertise, experience and character of the persons who
will manage the company;
(C) The overall soundness of the company's plan of operation;
(D) The adequacy of the loss prevention programs of the company's insureds; and
(E) Such other factors deemed relevant by the commissioner in ascertaining whether
the proposed captive insurance company will be able to meet its policy obligations.
(3) Information submitted pursuant to this subsection shall be and shall remain
confidential and shall not be made public by the commissioner or an employee or agent
of the commissioner without the written consent of the company, except that:
(A) Such information may be discoverable by a party in a civil action or contested
case to which the captive insurance company that submitted such information is a party
upon a showing by the party seeking to discover such information that:
(i) The information sought is relevant to and necessary for the furtherance of such
action or case;
(ii) The information sought is unavailable from other nonconfidential sources; and
(iii) A subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the commissioner, provided such submission requirement
shall not apply to a risk retention group; and
(B) The commissioner may, in the commissioner's discretion, disclose such information to a public official having jurisdiction over the regulation of insurance in another
state, provided:
(i) Such public official agrees, in writing, to maintain the confidentiality of such
information; and
(ii) The laws of the state in which such public official serves require such information to be and to remain confidential.
(d) (1) Each captive insurance company shall pay to the commissioner a nonrefundable fee of eight hundred dollars for examining, investigating and processing its application for license, and the commissioner may retain legal, financial and examination services from outside the department, the reasonable cost of which may be charged against
the applicant. The provisions of subdivisions (2) to (5), inclusive, of subsection (k) of
section 38a-14 shall apply to examinations, investigations and processing conducted
under this section.
(2) Each captive insurance company shall pay a license fee for the first year of
licensure and a renewal fee for each year thereafter as set forth in section 38a-11.
(e) If the commissioner finds that the documents and statements that a captive insurance company has filed comply with the provisions of sections 38a-91aa to 38a-91qq,
inclusive, the commissioner may grant a license authorizing the company to do insurance
business in this state until April first thereafter. The captive insurance company may
apply to renew such license on such forms as the commissioner prescribes.
(P.A. 08-127, S. 2.)
*Note: On and after July 1, 2012, this section, as amended by section 57 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91bb. Captive insurance companies. Licenses. Fees. (a) Any captive
insurance company, when permitted by its articles of association, charter or other organizational document, may apply to the Insurance Commissioner for a license to do the
business of insurance against any kind of loss, damage or liability properly a subject
of insurance, if such insurance is not prohibited by law or is not disapproved by the
commissioner as being contrary to public policy, including life insurance, annuities,
health insurance, as defined in section 38a-469, and commercial risk insurance, as defined in section 38a-663, provided:
(1) No pure captive insurance company may insure any risks other than those of its
parent and affiliated companies or controlled unaffiliated business;
(2) No association captive insurance company may insure any risks other than those
of its association, the member organizations of its association, and the member organizations' affiliated companies;
(3) No industrial insured captive insurance company may insure any risks other
than those of (A) the industrial insureds that comprise the industrial insured group, (B)
the industrial insureds' affiliated companies, or (C) the industrial insureds' controlled
unaffiliated businesses;
(4) No risk retention group may insure any risks other than those of its members
and owners;
(5) No captive insurance company may provide private passenger motor vehicle or
homeowner's insurance coverage or any component thereof;
(6) No captive insurance company may accept or cede reinsurance except as provided in section 38a-91kk;
(7) Any captive insurance company may provide excess workers' compensation
insurance to its parent and affiliated companies, unless prohibited by the laws of the
state having jurisdiction over the transaction or by federal law. Any captive insurance
company may reinsure a workers' compensation qualified self-insured plan of its parent
and affiliated companies, unless prohibited by federal law;
(8) Any captive insurance company that provides life insurance, annuities or health
insurance shall comply with all applicable state and federal laws.
(b) No captive insurance company shall do any insurance business in this state
unless:
(1) It first obtains from the Insurance Commissioner a license authorizing it to do
insurance business in this state;
(2) Its board of directors or committee of managers or, in the case of a reciprocal
insurer, its subscribers' advisory committee holds at least one meeting each year in
this state;
(3) It maintains its principal place of business in this state; and
(4) It appoints a registered agent to accept service of process and to otherwise act
on its behalf in this state. Whenever such registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the Insurance
Commissioner shall be an agent of such captive insurance company upon whom any
process, notice or demand may be served.
(c) (1) To be considered for a license, a captive insurance company shall:
(A) File with the commissioner a certified copy of its organizational documents, a
statement under oath of its president and secretary showing its financial condition, and
any other statements or documents required by the commissioner; and
(B) Submit to the commissioner for approval a description of the coverages, deductibles, coverage limits and rates and such additional information as the commissioner
may require. In the event of any subsequent material change in any item in such description, the captive insurance company shall submit to the commissioner for approval an
appropriate revision and shall not offer any additional kinds of insurance until a revision
of such description is approved by the commissioner. The captive insurance company
shall inform the commissioner of any material change in rates not later than thirty days
after the adoption of such change.
(2) Each applicant captive insurance company shall also file with the commissioner
evidence of the following:
(A) The amount and liquidity of the company's assets relative to the risks to be
assumed;
(B) The adequacy of the expertise, experience and character of the persons who
will manage the company;
(C) The overall soundness of the company's plan of operation;
(D) The adequacy of the loss prevention programs of the company's insureds; and
(E) Such other factors deemed relevant by the commissioner in ascertaining whether
the proposed captive insurance company will be able to meet its policy obligations.
(3) Each applicant sponsored captive insurance company shall also file with the
commissioner:
(A) Materials demonstrating how the applicant will account for the loss and expense
experience of each protected cell at a level of detail deemed sufficient by the commissioner, and how it will report such experience to the commissioner;
(B) A statement acknowledging that all financial records of the sponsored captive
insurance company, including records pertaining to any protected cells, shall be made
available for examination or inspection or by the commissioner or the commissioner's
designee;
(C) All contracts or sample contracts between the sponsored captive insurance company and any participants; and
(D) Evidence that expenses shall be allocated to each protected cell in a fair and
equitable manner.
(4) Each applicant special purpose financial captive insurance company shall also:
(A) Include with its plan of operation:
(i) A complete description of all significant transactions, including reinsurance,
reinsurance security arrangements, securitizations, related transactions or arrangements,
and to the extent not included in the transactions listed in this clause, a complete description of all parties other than the special purpose financial captive insurance company
and the ceding insurer that will be involved in the issuance of special purpose financial
captive insurance company securities and a description of any pledge, hypothecation
or grant of a security interest in any of the special purpose financial captive insurance
company's assets and in any stock or limited liability company interest in the special
purpose financial captive insurance company;
(ii) The source and form of the special purpose financial captive insurance company's capital and surplus;
(iii) The proposed investment policy of the special purpose financial captive insurance company;
(iv) A description of the underwriting, reporting and claims payment methods by
which losses covered by the reinsurance contract will be reported, accounted for and
settled;
(v) Pro forma balance sheets and income statements illustrating one or more adverse
case scenarios, as determined under criteria required by the commissioner, for the performance of the special purpose financial captive insurance company under all reinsurance
contracts; and
(vi) The proposed rate and method for discounting reserves, if the special purpose
financial captive insurance company is requesting authority to discount its reserves;
(B) Submit an affidavit of its president, a vice president, its treasurer or its chief
financial officer that includes the following statements, that to the best of such person's
knowledge and belief after reasonable inquiry:
(i) The proposed organization and operation of the special purpose financial captive
insurance company comply with all applicable provisions of this chapter;
(ii) The special purpose financial captive insurance company's investment policy
reflects and takes into account the liquidity of assets and the reasonable preservation,
administration and management of such assets with respect to the risks associated with
the reinsurance contract and the insurance securitization transaction. With respect to a
special purpose financial captive insurance company, "management" means the board
of directors, managing board or other individual or individuals vested with overall responsibility for the management of the affairs of such company, including, but not
limited to, officers or other agents elected or appointed to act on behalf of such company; and
(iii) The reinsurance contract and any arrangement for securing the special purpose
financial captive insurance company's obligations under such reinsurance contract, including, but not limited to, any agreements or other documentation to implement such
arrangement, comply with the provisions of this chapter;
(C) Include with its application:
(i) Copies of all agreements and documentation described in subparagraph (A) of
this subdivision unless otherwise approved by the commissioner, and any other statements or documents required by the commissioner to evaluate the special purpose financial captive insurance company's application for licensure; and
(ii) An opinion of qualified legal counsel, in a form acceptable to the commissioner,
that the offer and sale of any special purpose financial captive insurance company securities complies with all applicable registration requirements or applicable exemptions
from or exceptions to such requirements of the federal securities laws and that the offer
and sale of securities by the special purpose financial captive insurance company itself
comply with all registration requirements or applicable exemptions from or exceptions
to such requirements of the securities laws of this state. Such opinion shall not be required
as part of the application if the special purpose financial captive insurance company
includes a specific statement in its plan of operation that such opinions will be provided
to the commissioner in advance of the offer or sale of any special purpose financial
captive insurance company securities.
(5) A sponsored captive insurance company may apply to be licensed as a special
purpose financial captive insurance company. Such company shall be subject to the
provisions of sections 38a-91aa to 38a-91tt, inclusive, applicable to a sponsored captive
insurance company and to a special purpose financial captive insurance company. In
the event of conflict between such provisions applicable to a sponsored captive insurance
company and to a special purpose financial captive insurance company, the provisions
applicable to a special purpose financial captive insurance company shall control.
(6) Information submitted pursuant to this subsection shall be and shall remain
confidential and shall not be made public by the commissioner or an employee or agent
of the commissioner without the written consent of the company, except that:
(A) Such information may be discoverable by a party in a civil action or contested
case to which the captive insurance company that submitted such information is a party
upon a showing by the party seeking to discover such information that:
(i) The information sought is relevant to and necessary for the furtherance of such
action or case;
(ii) The information sought is unavailable from other nonconfidential sources; and
(iii) A subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the commissioner, provided such submission requirement
shall not apply to a risk retention group; and
(B) The commissioner may, in the commissioner's discretion, disclose such information to a public official having jurisdiction over the regulation of insurance in another
state, provided:
(i) Such public official agrees, in writing, to maintain the confidentiality of such
information; and
(ii) The laws of the state in which such public official serves require such information to be and to remain confidential.
(d) (1) Each captive insurance company shall pay to the commissioner a nonrefundable fee of eight hundred dollars for examining, investigating and processing its application for a license. The commissioner may retain legal, financial and examination services
from outside the department for the licensing and financial oversight of a captive insurance company, the reasonable cost of which may be charged against such company.
The provisions of subdivisions (2) to (5), inclusive, of subsection (k) of section 38a-14
shall apply to this subdivision.
(2) Each captive insurance company shall pay a license fee for the first year of
licensure and a renewal fee for each year thereafter as set forth in section 38a-11.
(e) (1) If the commissioner finds that the documents and statements that a captive
insurance company, other than a special purpose financial captive insurance company,
has filed comply with the provisions of sections 38a-91aa to 38a-91tt, inclusive, the
commissioner may grant a license authorizing the company to do insurance business in
this state until April first thereafter. The captive insurance company may apply to renew
such license on such forms as the commissioner prescribes.
(2) (A) The commissioner may grant a license authorizing a special purpose financial captive insurance company to do reinsurance business in this state until April first
thereafter upon the commissioner's finding that (i) the proposed plan of operation provides for a reasonable and expected successful operation, (ii) the terms of the reinsurance
contract and related transactions comply with sections 38a-91aa to 38a-91tt, inclusive,
(iii) the proposed plan of operation is not hazardous to any ceding insurer, and (iv)
the insurance regulator of the state of domicile of each ceding insurer has notified the
commissioner in writing or has otherwise provided assurance satisfactory to the commissioner that such regulator has approved or has not disapproved the transaction, provided
the commissioner shall not be precluded from issuing a license to a special purpose
financial captive insurance company if such regulator has not responded with respect
to all or any part of the transaction.
(B) In conjunction with granting such license, the commissioner may issue an order
to the special purpose financial captive insurance company of any additional provisions,
terms or conditions regarding the organization, licensing or operation of such company
that are not inconsistent with the provisions of this chapter and are deemed appropriate
by the commissioner.
(3) The commissioner shall not grant a license to a branch captive insurance company unless the alien captive insurance company grants the commissioner authority to
examine the alien captive insurance company in the jurisdiction in which the alien captive insurance company is formed."
(P.A. 08-127, S. 2; Oct. Sp. Sess. P.A. 11-1, S. 57.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 amended introductory language in Subsec.
(a) and Subsec. (a)(2), and added Subsec. (a)(7), re types of insurance that captive insurance companies, association captive
insurance companies and industrial insured captive insurance companies may provide, amended Subsec. (c) by adding
new Subdiv. (3) re additional filing requirements for sponsored captive insurance companies, Subdiv. (4) re additional
filing requirements for special purpose financial captive insurance companies and Subdiv. (5) re requirements applicable
to a sponsored captive insurance company applying to be licensed as a special purpose financial captive insurance company
and by redesignating existing Subdiv. (3) as Subdiv. (6), made technical and conforming changes in Subsec. (d), amended
Subsec. (e) by designating existing provisions as Subdiv. (1), and making a conforming change therein, adding Subdiv.
(2) re licensure requirements for a special purpose financial captive insurance company, and adding Subdiv. (3) re licensure
requirements for a branch captive insurance company, effective July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91dd. *(See end of section for amended version and effective date.)
Capital and surplus requirements. (a) The Insurance Commissioner shall not issue a
license to a captive insurance company or allow the company to retain such license
unless the company has and maintains unimpaired paid-in capital and surplus of:
(1) In the case of a pure captive insurance company, not less than two hundred fifty
thousand dollars;
(2) In the case of an association captive insurance company, not less than seven
hundred fifty thousand dollars;
(3) In the case of an industrial insured captive insurance company, not less than
five hundred thousand dollars; and
(4) In the case of a risk retention group, not less than one million dollars.
(b) The commissioner may adopt regulations, in accordance with chapter 54, to
establish additional capital and surplus requirements based upon the type, volume and
nature of insurance business transacted.
(c) Capital and surplus may be in the form of cash or an irrevocable letter of credit
issued by a bank chartered by this state or a member bank of the Federal Reserve System
and approved by the commissioner.
(P.A. 08-127, S. 4.)
*Note: On and after July 1, 2012, this section, as amended by section 58 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91dd. Capital and surplus requirements. (a)(1) The Insurance Commissioner shall not issue a license to a captive insurance company or allow the company
to retain such license unless the company has and maintains unimpaired paid-in capital
and surplus of:
(A) In the case of a pure captive insurance company, not less than two hundred fifty
thousand dollars;
(B) In the case of an association captive insurance company, not less than five
hundred thousand dollars;
(C) In the case of an industrial insured captive insurance company, not less than
five hundred thousand dollars;
(D) In the case of a risk retention group, not less than one million dollars;
(E) In the case of a sponsored captive insurance company, not less than five hundred
thousand dollars;
(F) In the case of a special purpose financial captive insurance company, not less
than two hundred fifty thousand dollars; and
(G) In the case of a sponsored captive insurance company licensed as a special
purpose financial captive insurance company, not less than five hundred thousand
dollars.
(2) (A) The Insurance Commissioner shall not issue a license to a branch captive
insurance company or allow the company to retain such license unless the company
has and maintains, as security for the payment of liabilities attributable to the branch
operations:
(i) Not less than two hundred fifty thousand dollars; and
(ii) Reserves on such insurance policies or such reinsurance contracts as may be
issued or assumed by the branch captive insurance company through its branch operations, including reserves for losses, allocated loss adjustment expenses, incurred but not
reported losses and unearned premiums with regard to business written through the
branch operations. The commissioner may permit a branch captive insurance company
to credit against any such reserves any security for loss reserves that the branch captive
insurance company posts with a ceding insurer or is posted by a reinsurer with the branch
captive insurance company, so long as such security remains posted.
(B) The amounts required under subparagraph (A) of this subdivision may be held,
with the prior approval of the commissioner, in the form of (i) a trust formed under a
trust agreement and funded by assets acceptable to the commissioner, (ii) an irrevocable
letter of credit issued or confirmed by a bank approved by the commissioner, (iii) with
respect to the amount required under subparagraph (A)(i) of this subdivision only, cash
on deposit with the commissioner, or (iv) any combination thereof.
(b) The commissioner may adopt regulations, in accordance with chapter 54, to
establish additional capital and surplus requirements based upon the type, volume and
nature of insurance business transacted.
(c) Except as specified in subdivision (2) of subsection (a) of this section, capital
and surplus may be in the form of cash or an irrevocable letter of credit issued by a bank
approved by the commissioner."
(P.A. 08-127, S. 4; Oct. Sp. Sess. P.A. 11-1, S. 58.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 redesignated existing Subsec. (a) as Subsec.
(a)(1), amended Subsec. (a)(1)(B) to change association captive insurance companies' capital and surplus requirements
from $750,000 to $500,000, added Subsec. (a)(1)(E) to (a)(1)(G) re capital and surplus requirements for sponsored captive
insurance companies, special purpose financial captive insurance companies and sponsored captive insurance companies
licensed as special purpose financial captive insurance companies, added Subsec. (a)(2) re security and reserve requirements
for branch captive insurance companies, amended Subsec. (c) to delete requirement that a bank issuing an irrevocable
letter of credit be chartered by the state or a member of the Federal Reserve System, and made conforming and technical
changes, effective July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91ee. *(See end of section for amended version and effective date.)
Payment of dividends and other distributions. No captive insurance company may
pay a dividend out of, or other distribution with respect to, capital or surplus without
the prior approval of the Insurance Commissioner. Approval of an ongoing plan for the
payment of dividends or other distributions shall be conditioned on the retention, at
the time of each payment, of capital or surplus in excess of amounts specified by, or
determined in accordance with formulas approved by, the commissioner.
(P.A. 08-127, S. 5.)
*Note: On and after July 1, 2012, this section, as amended by section 59 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91ee. Payment of dividends and other distributions. (a) No captive
insurance company may pay a dividend out of, or other distribution with respect to,
capital or surplus without the prior approval of the Insurance Commissioner. Approval
of an ongoing plan for the payment of dividends or other distributions shall be conditioned on the retention, at the time of each payment, of capital or surplus in excess of
amounts specified by, or determined in accordance with formulas approved by, the
commissioner.
(b) No special purpose financial captive insurance company may declare or pay a
dividend or distribution if such dividend or distribution would jeopardize the ability of
such company or any other person to fulfill such company's or other person's respective
obligations under such company's securitization agreements, reinsurance contract or
any related transaction."
(P.A. 08-127, S. 5; Oct. Sp. Sess. P.A. 11-1, S. 59.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 designated existing provisions as Subsec. (a)
and added Subsec. (b) re dividend declaration or distribution by a special purpose financial captive insurance company,
effective July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91ff. *(See end of section for amended version and effective date.)
Incorporation and formation. (a) A pure captive insurance company may be incorporated as a stock insurer with its capital divided into shares and held by the stockholders,
as a nonprofit corporation with one or more members or as a manager-managed limited
liability company.
(b) An association captive insurance company, an industrial insured captive insurance company or a risk retention group may be:
(1) Incorporated as a stock insurer with its capital divided into shares and held by
the stockholders;
(2) Incorporated as a mutual insurer without capital stock, the governing body of
which is elected by its insureds;
(3) Organized as a reciprocal insurer; or
(4) Organized as a manager-managed limited liability company.
(c) A captive insurance company incorporated or organized in this state shall have
not less than three incorporators or three organizers of whom at least one shall be a
resident of this state.
(d) In the case of a captive insurance company:
(1) Formed as a corporation, before the articles of incorporation are transmitted to
the Secretary of the State, the incorporators shall petition the Insurance Commissioner
to issue a certificate setting forth the commissioner's finding that the establishment and
maintenance of the proposed corporation will promote the general good of the state. In
arriving at such a finding the commissioner shall consider:
(A) The character, reputation, financial standing and purposes of the incorporators;
(B) The character, reputation, financial responsibility, insurance experience and
business qualifications of the officers and directors; and
(C) Such other aspects as the commissioner deems advisable.
(2) Formed as a reciprocal insurer, the organizers shall petition the commissioner
to issue a certificate setting forth the commissioner's finding that the establishment and
maintenance of the proposed association will promote the general good of the state. In
arriving at such a finding the commissioner shall consider the items set forth in subdivision (1) of this subsection.
(3) Formed as a limited liability company, before the articles of organization are
transmitted to the Secretary of the State, the organizers shall petition the commissioner
to issue a certificate setting forth the commissioner's finding that the establishment and
maintenance of the proposed company will promote the general good of the state. In
arriving at such a finding, the commissioner shall consider the items set forth in subdivision (1) of this subsection.
(4) The articles of incorporation and certificate set forth in subdivisions (1) to (3),
inclusive, of this subsection shall be transmitted to the Secretary of the State along with
any fees required by the Secretary of the State, who shall record both the articles of
incorporation and the certificate.
(e) The capital stock of a captive insurance company incorporated as a stock insurer
may be authorized with no par value.
(f) In the case of a captive insurance company:
(1) Formed as a corporation, at least one of the members of the board of directors
shall be a resident of this state;
(2) Formed as a reciprocal insurer, at least one of the members of the subscribers'
advisory committee shall be a resident of this state;
(3) Formed as a limited liability company, at least one of the managers shall be a
resident of this state.
(g) Other than captive insurance companies formed as limited liability companies
or as nonprofit corporations, captive insurance companies formed as corporations under
the provisions of sections 38a-91aa to 38a-91qq, inclusive, shall have the privileges and
be subject to the provisions of title 33 as well as the applicable provisions in sections
38a-91aa to 38a-91gg, inclusive. In the event of conflict between the provisions of title
33 and sections 38a-91aa to 38a-91qq, inclusive, the provisions of sections 38a-91aa
to 38a-91qq, inclusive, shall control.
(h) Captive insurance companies formed under the provisions of sections 38a-91aa
to 38a-91qq, inclusive:
(1) As limited liability companies shall have the privileges and be subject to the
provisions of chapter 613 and applicable provisions in sections 38a-91aa to 38a-91qq,
inclusive. In the event of a conflict between the provisions of chapter 613 and sections
38a-91aa to 38a-91qq, inclusive, the provisions of sections 38a-91aa to 38a-91qq, inclusive, shall control; or
(2) As nonprofit corporations shall have the privileges and be subject to the applicable provisions of title 33 and applicable provisions in sections 38a-91aa to 38a-91qq,
inclusive. In the event of conflict between the provisions of title 33 and sections 38a-91aa to 38a-91qq, inclusive, the provisions of sections 38a-91aa to 38a-91qq, inclusive,
shall control.
(i) The provisions of this chapter pertaining to mergers, consolidations and conversions shall apply in determining the procedures to be followed by captive insurance
companies in carrying out any of the transactions described in this chapter.
(j) Captive insurance companies formed as reciprocal insurers under the provisions
of sections 38a-91aa to 38a-91qq, inclusive, shall have the privileges and be subject to
the provisions of this title in addition to the applicable provisions of sections 38a-91aa
to 38a-91qq, inclusive. In the event of a conflict between the provisions of sections 38a-91aa to 38a-91qq, inclusive, and this title, the provisions of sections 38a-91aa to 38a-91qq, inclusive, shall control.
(k) The articles of incorporation or bylaws of a captive insurance company formed
as a corporation may authorize a quorum of its board of directors to consist of no fewer
than one-third of the fixed or prescribed number of directors.
(l) The subscribers' agreement or other organizing document of a captive insurance
company formed as a reciprocal insurer may authorize a quorum of its subscribers'
advisory committee to consist of no fewer than one-third of the number of its members.
(P.A. 08-127, S. 6; P.A. 10-5, S. 5.)
*Note: On and after July 1, 2012, this section, as amended by section 60 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91ff. Incorporation and formation. (a) A pure captive insurance company may be incorporated as a stock insurer with its capital divided into shares and
held by the stockholders, as a nonprofit corporation with one or more members or as a
manager-managed limited liability company.
(b) An association captive insurance company, an industrial insured captive insurance company or a risk retention group may be:
(1) Incorporated as a stock insurer with its capital divided into shares and held by
the stockholders;
(2) Incorporated as a mutual corporation without capital stock, the governing body
of which is elected by its insureds;
(3) Organized as a reciprocal insurer; or
(4) Organized as a manager-managed limited liability company.
(c) (1) A sponsored captive insurance company shall be incorporated as a stock
insurer with its capital divided into shares held by the stockholders, as a mutual corporation, as a nonprofit corporation with one or more members or as a manager-managed
limited liability company.
(2) One or more sponsors may apply to the commissioner to form a sponsored
captive insurance company. In evaluating the qualifications of a proposed sponsor, the
commissioner shall consider the type and structure of the proposed sponsor entity, its
experience in financial operations, financial stability and strength, business reputation
and such other facts deemed relevant by the commissioner.
(3) (A) Associations, corporations, limited liability companies, partnerships, trusts
and other business entities may be participants in a sponsored captive insurance company. No risk retention group shall be a sponsor or a participant of a sponsored captive
insurance company.
(B) A sponsor may be a participant in a sponsored captive insurance company.
(C) A participant need not be a stockholder of the sponsored captive insurance
company or any affiliate thereof.
(D) A participant shall insure only its own risks through a sponsored captive insurance company.
(d) (1) A special purpose financial captive insurance company may be incorporated
as a stock insurer with its capital divided into shares and held by its stockholders or as
a manager-managed limited liability company.
(2) A special purpose financial captive insurance company's organizational documents shall limit the special purpose financial captive insurance company's authority
to transact the business of insurance or reinsurance to those activities that the special
purpose financial captive insurance company conducts to accomplish its purposes described in sections 38a-91aa to 38a-91tt, inclusive. For purposes of this subdivision and
section 38a-91bb, in the case of a special purpose financial captive insurance company
formed (A) as a stock insurer, "organizational document" means such company's articles
of incorporation and bylaws, and (B) as a limited liability company, "organizational
document" means such company's articles of organization and operating agreement.
(3) A special purpose financial captive insurance company may reinsure the risks
of a ceding insurer only. A special purpose financial captive insurance company may
purchase, with the prior approval of the commissioner, reinsurance to cede the risks
assumed under a reinsurance contract.
(4) A captive insurance company that is engaged in, or will be engaged in, an insurance securitization on or after July 1, 2012, shall be deemed to be a special purpose
financial captive insurance company. The commissioner may require such captive insurance company to take any action that the commissioner determines is reasonably necessary to bring such company into compliance as a special purpose financial captive insurance company. The commissioner may issue an order as described in subparagraph (B)
of subdivision (2) of subsection (e) of section 38a-91bb.
(e) A branch captive insurance company may be established in this state to write
in this state only insurance or reinsurance of the employee benefit business of its parent
and affiliated companies that is subject to the Employee Retirement Income Security
Act of 1974, as amended from time to time. No branch captive insurance company shall
do any insurance business in this state unless it maintains the principal place of business
for its branch operations in this state.
(f) A captive insurance company incorporated or organized in this state shall have
not less than three incorporators or three organizers of whom at least one shall be a
resident of this state.
(g) In the case of a captive insurance company:
(1) Formed as a corporation, before the articles of incorporation are transmitted to
the Secretary of the State, the incorporators shall petition the Insurance Commissioner
to issue a certificate setting forth the commissioner's finding that the establishment and
maintenance of the proposed corporation will promote the general good of the state. In
arriving at such a finding the commissioner shall consider:
(A) The character, reputation, financial standing and purposes of the incorporators;
(B) The character, reputation, financial responsibility, insurance experience and
business qualifications of the officers and directors; and
(C) Such other aspects as the commissioner deems advisable.
(2) Formed as a reciprocal insurer, the organizers shall petition the commissioner
to issue a certificate setting forth the commissioner's finding that the establishment and
maintenance of the proposed association will promote the general good of the state. In
arriving at such a finding the commissioner shall consider the items set forth in subdivision (1) of this subsection.
(3) Formed as a limited liability company, before the articles of organization are
transmitted to the Secretary of the State, the organizers shall petition the commissioner
to issue a certificate setting forth the commissioner's finding that the establishment and
maintenance of the proposed company will promote the general good of the state. In
arriving at such a finding, the commissioner shall consider the items set forth in subdivision (1) of this subsection.
(4) The articles of incorporation and certificate set forth in subdivisions (1) to (3),
inclusive, of this subsection shall be transmitted to the Secretary of the State along with
any fees required by the Secretary of the State, who shall record both the articles of
incorporation and the certificate.
(h) In the case of a captive insurance company licensed as a branch captive insurance
company, the alien captive insurance company shall petition the commissioner to issue
a certificate setting forth the commissioner's finding that, after considering the character,
reputation, financial responsibility, insurance experience, and business qualifications
of the officers and directors of the alien captive insurance company, the licensing and
maintenance of the branch operations will promote the general good of the state. The
alien captive insurance company may register to do business in this state after the commissioner's certificate is issued.
(i) The capital stock of a captive insurance company incorporated as a stock insurer
may be authorized with no par value.
(j) In the case of a captive insurance company:
(1) Formed as a corporation, (A) at least one of the members of the board of directors
shall be a resident of this state, and (B) the articles of incorporation or bylaws of such
company may authorize a quorum of its board of directors to consist of no fewer than
one-third of the fixed or prescribed number of directors;
(2) Formed as a reciprocal insurer, (A) at least one of the members of the subscribers'
advisory committee shall be a resident of this state, and (B) the subscribers' agreement or
other organizing document of such company may authorize a quorum of its subscribers'
advisory committee to consist of no fewer than one-third of the number of its members;
(3) Formed as a limited liability company, at least one of the managers shall be a
resident of this state.
(k) Other than captive insurance companies formed as limited liability companies
or as nonprofit corporations, captive insurance companies formed as corporations under
the provisions of sections 38a-91aa to 38a-91tt, inclusive, shall have the privileges and
be subject to the provisions of title 33 as well as the applicable provisions in sections
38a-91aa to 38a-91tt, inclusive. In the event of conflict between the provisions of title
33 and sections 38a-91aa to 38a-91tt, inclusive, the provisions of sections 38a-91aa to
38a-91tt, inclusive, shall control.
(l) Captive insurance companies formed under the provisions of sections 38a-91aa
to 38a-91tt, inclusive:
(1) As limited liability companies shall have the privileges and be subject to the
provisions of chapter 613 and applicable provisions in sections 38a-91aa to 38a-91tt,
inclusive. In the event of a conflict between the provisions of chapter 613 and sections
38a-91aa to 38a-91tt, inclusive, the provisions of sections 38a-91aa to 38a-91tt, inclusive, shall control;
(2) As nonprofit corporations shall have the privileges and be subject to the applicable provisions of title 33 and applicable provisions in sections 38a-91aa to 38a-91tt,
inclusive. In the event of conflict between the provisions of title 33 and sections 38a-91aa to 38a-91tt, inclusive, the provisions of sections 38a-91aa to 38a-91tt, inclusive,
shall control; or
(3) As reciprocal insurers shall have the privileges and be subject to the provisions
of sections 38a-91aa to 38a-91tt, inclusive. In the event of conflict between the provisions of the sections specified in section 38a-91oo and the provisions of sections 38a-91aa to 38a-91tt, inclusive, the provisions of sections 38a-91aa to 38a-91tt, inclusive,
shall control.
(m) In the case of captive insurance companies formed as limited liability companies, reciprocal insurers or mutual corporations, any proxy appointed by a member,
subscriber or policyholder, as applicable, shall be valid if such proxy is appointed and
transmitted in accordance with the provisions of section 33-706.
(n) The provisions of this chapter pertaining to mergers, consolidations and conversions shall apply in determining the procedures to be followed by captive insurance
companies in carrying out any of the transactions described in this chapter."
(P.A. 08-127, S. 6; P.A. 10-5, S. 5; Oct. Sp. Sess. P.A. 11-1, S. 60.)
History: P.A. 08-127 effective January 1, 2009; P.A. 10-5 amended Subsec. (d) to delete former Subdiv. (1)(B) re
transmittal of articles of incorporation, certificate and organization fee to Secretary of the State, make technical changes
and add Subdiv. (4) re transmittal of articles of incorporation, certificate and fees to Secretary of the State, effective May
5, 2010; Oct. Sp. Sess. P.A. 11-1 redesignated existing Subsecs. (c) to (i) as Subsecs. (f), (g), (i), (j), (k), (l) and (n), added
new Subsec. (c) re formation of a sponsored captive insurance company, added new Subsec. (d) re formation of a special
purpose financial captive insurance company, added new Subsec. (e) re establishment of a branch captive insurance company, added new Subsec. (h) re issuance of a certificate to an alien captive insurance company, amended redesignated
Subsec. (j) by adding Subdivs. (1)(B) and (2)(B) re quorum, amended redesignated Subsec. (l) by adding Subdiv. (3) re
reciprocal insurers, added new Subsec. (m) re proxy for captive insurance companies formed as limited liability companies,
reciprocal insurers or mutual corporations, deleted former Subsecs. (j), (k) and (l) re reciprocal insurers and quorum, and
made conforming and technical changes, effective July 1, 2012 (Revisor's note: In Subsecs. (e) and (h), references to
"branch captive" were changed editorially by the Revisors to "branch captive insurance company" for accuracy).
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91gg. *(See end of section for amended version and effective date.)
Annual reports. (a) Captive insurance companies shall not be required to make any
annual report except as provided in sections 38a-91aa to 38a-91qq, inclusive.
(b) Prior to March first of each year, each captive insurance company shall submit
to the Insurance Commissioner a report of its financial condition verified by oath of two
of its executive officers. Each captive insurance company shall report using generally
accepted accounting principles, unless the commissioner approves the use of statutory
accounting principles, with any appropriate or necessary modifications or adaptations
required or approved or accepted by the commissioner for the type of insurance and
kinds of insurers to be reported upon, and as supplemented by additional information
required by the commissioner. Except as otherwise provided, each association captive
insurance company and each risk retention group shall file its report in the form required
by sections 38a-53 and 38a-53a. The commissioner may adopt regulations, in accordance with chapter 54, to establish the manner in which pure captive insurance companies and industrial insured captive insurance companies shall report. The provisions of
subsection (b) of section 38a-69a shall apply to each report filed pursuant to this section.
(c) Any pure captive insurance company or industrial insured captive insurance
company may make written application to the commissioner for approval to file the
required report at the end of the fiscal year. If the commissioner grants approval for
such alternative reporting date:
(1) The annual report shall be due sixty days after the end of the fiscal year; and
(2) In order to provide sufficient detail to support the premium tax return, the pure
captive insurance company or industrial insured captive insurance company shall file
prior to March first of each year for each calendar year-end such information as the
commissioner may prescribe verified by oath of two of its executive officers.
(P.A. 08-127, S. 7.)
*Note: On and after July 1, 2012, this section, as amended by section 61 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91gg. Annual reports. (a) Captive insurance companies shall not be
required to make any annual report except as provided in sections 38a-91aa to 38a-91tt,
inclusive.
(b) (1) (A) Prior to March first of each year and, in the case of pure captive insurance companies and industrial insured captive insurance companies, prior to March
fifteenth of each year, each captive insurance company other than a branch captive
insurance company shall submit to the Insurance Commissioner a report of its financial
condition verified by oath of two of its executive officers. The commissioner shall establish the form and content of the annual report to be filed by special purpose captive
insurance companies.
(B) In the case of branch captive insurance companies, prior to March first of each
year, each such company shall submit to the commissioner a copy of all reports and
statements required to be filed under the laws of the jurisdiction in which the alien
captive insurance company is formed. Such reports and statements shall be verified by
oath of two of its executive officers. If the commissioner is satisfied that the annual
report filed by the alien captive insurance company in its domiciliary jurisdiction provides adequate information concerning the financial condition of the alien captive insurance company, the commissioner may waive the requirement for completion of the
captive annual statement for business written in the alien jurisdiction.
(2) (A) Each captive insurance company other than a special purpose financial
captive insurance company shall report using generally accepted accounting principles,
unless the commissioner requires, approves or accepts the use of statutory accounting
principles or other comprehensive basis of accounting, with any appropriate or necessary
modifications or adaptations required or approved or accepted by the commissioner for
the type of insurance and kinds of insurers to be reported upon, and as supplemented
by additional information required by the commissioner. Except as otherwise provided,
each association captive insurance company and each risk retention group shall file its
report in the form required by sections 38a-53 and 38a-53a. The commissioner may
adopt regulations, in accordance with chapter 54, to establish the manner in which pure
captive insurance companies and industrial insured captive insurance companies shall
report. The provisions of subsection (b) of section 38a-69a shall apply to each report
filed pursuant to this section.
(B) Each special purpose financial captive insurance company shall report using
statutory accounting principles, unless the commissioner requires, approves or accepts
the use of generally accepted accounting principles or other comprehensive basis of
accounting, with any appropriate or necessary modifications or adaptations required or
approved or accepted by the commissioner and as supplemented by additional information required by the commissioner.
(c) (1) Any pure captive insurance company or industrial insured captive insurance
company may make written application to the commissioner for approval to file the
required report at the end of its fiscal year. If the commissioner grants approval for such
alternative reporting date:
(A) The annual report shall be due not later than seventy-five days after the end of
its fiscal year; and
(B) In order to provide sufficient detail to support the premium tax return, the pure
captive insurance company or industrial insured captive insurance company shall file
prior to March fifteenth of each year for each calendar year-end such information as the
commissioner may prescribe, verified by oath of two of its executive officers.
(2) Any branch captive insurance company may make written application to the
commissioner for approval to file the required reports and statements at the end of its
fiscal year. If the commissioner grants approval for such alternative reporting date, the
reports and statements shall be due not later than sixty days after the end of its fiscal year.
(3) Any special purpose financial captive insurance company may make written
application to the commissioner for approval to file the required report at the end of its
fiscal year. If the commissioner grants approval for such alternative reporting date, the
commissioner shall establish the content of any additional filing required from such
company."
(P.A. 08-127, S. 7; Oct. Sp. Sess. P.A. 11-1, S. 61.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 made a technical change in Subsec. (a), amended
Subsec. (b) to change due date for a pure captive insurance company's or industrial insured captive insurance company's
annual report from March 1 to March 15 and to add requirements for annual reports by branch captive insurance companies
and special purpose financial captive insurance companies, amended Subsec. (c) by designating existing provisions as
Subdiv. (1) and amending same to change alternative reporting due date for a pure captive insurance company's or industrial
insured captive insurance company's annual report from 60 days to not later than 75 days after the end of company's fiscal
year and due date of additional information required by commissioner from March 1 to March 15, and by adding Subdivs.
(2) and (3) re allowing a branch captive insurance company and a special purpose financial captive insurance company to
apply for approval of an alternative reporting date, effective July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91hh. *(See end of section for amended version and effective date.)
Examinations of captive insurance companies. Costs. Confidentiality of financial
examination workpapers and reports. (a) At least once every five years, and additionally whenever the Insurance Commissioner determines it to be prudent, the commissioner or the commissioner's designee shall visit each captive insurance company and
thoroughly inspect and examine its affairs to ascertain its financial condition, its ability
to fulfill its obligations and whether it has complied with the provisions of sections 38a-91aa to 38a-91qq, inclusive, and any applicable provisions of this title.
(b) In scheduling and determining the nature, scope and frequency of such examinations, 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 such other criteria as set forth in the
examiners' handbook adopted by the National Association of Insurance Commissioners
and in effect at the time the commissioner exercises discretion under this section.
(c) (1) To carry out examinations under this section, the commissioner may appoint
as examiners one or more competent persons, not officers of or connected with or interested in any insurance company, other than as a policyholder. The commissioner may
engage the services of attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists to assist in conducting
the examinations under this section as examiners, the cost of which shall be borne by
the company which is the subject of the examination. Notwithstanding the provisions
of this subdivision, no domestic captive insurance company subject to examination
under this section shall pay, as costs associated with the examination, the salaries, fringe
benefits, traveling and maintenance expenses of examining personnel of the Insurance
Department engaged in such examination if such domestic company is otherwise liable
to assessment levied under section 38a-47, except that such company shall pay the
traveling and maintenance expenses of examining personnel of the department when
such company is examined outside the state.
(2) In conducting the examination, the commissioner, the commissioner's actuary
or any examiner authorized by the commissioner may examine, under oath, the officers
and agents of such a company and all persons deemed to have material information
regarding the company's property or business. Each such company, its officers and
agents shall produce the books and papers, in its or their possession, relating to its
business or affairs, and any other person may be required to produce any book or paper,
in his custody, deemed to be relevant to such examination for the inspection of the
commissioner, the commissioner's actuary or examiners, when required. The officers
and agents of the company shall facilitate the examination and aid the examiners in
making the same so far as it is in their power to do so. The refusal of any company by
its officers, directors, employees or agents to submit to examination or to comply with
any reasonable written request of the examiners shall be grounds for suspension of, or
revocation of or nonrenewal of any license or authority held by the company to engage
in an insurance or other business subject to the commissioner's jurisdiction. Any such
proceedings for suspension, revocation or nonrenewal of any license or authority shall
be conducted pursuant to section 38a-91ii.
(3) In conducting the examination, the examiner shall observe those guidelines and
procedures set forth in the examiners' handbook adopted by the National Association
of Insurance Commissioners. The commissioner may also adopt such other guidelines
or procedures as the commissioner may deem appropriate.
(d) (1) Nothing contained in this section shall be construed to limit the commissioner's authority to terminate or suspend any examination in order to pursue legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions
made pursuant to any examination shall be prima facie evidence in any legal or regulatory
action.
(2) Nothing contained in this section shall be construed to limit the commissioner's
authority in such legal or regulatory action to use and, if appropriate, to make public
any final or preliminary examination report, any examiner or company workpapers or
other documents, or any other information discovered or developed during the course
of any examination.
(3) Not later than sixty days after completion of the examination, the examiner in
charge shall file, under oath, with the Insurance Department a verified written report of
examination. Upon receipt of the verified report, the Insurance Department shall transmit the report to the company examined, together with a notice which shall afford the
company examined a reasonable opportunity, not to exceed thirty days, to make a written
submission or rebuttal with respect to any matters contained in the examination report.
Not later than thirty days after the period allowed for the receipt of 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 examiner's 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, 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 violation; or (B) rejecting the examination report with directions
to the examiners to reopen the examination for purposes of obtaining additional data,
documentation or information, and refiling pursuant to subparagraph (A) of this subdivision; or (C) calling for an investigatory hearing with no less than twenty days notice to
the company for purposes of obtaining additional documentation, data, information and
testimony.
(e) (1) All orders entered pursuant to subdivision (3) of subsection (d) of this section
shall be accompanied by findings and conclusions resulting from the commissioner's
consideration and review of the examination report, relevant examiner workpapers and
any written submissions or rebuttals. The findings and conclusions, which form the
basis of any such order of the commissioner, shall be subject to review as provided in
section 38a-19.
(2) Any investigatory hearing conducted under subparagraph (C) of subdivision (3)
of subsection (d) of this section by the commissioner or authorized representative shall
be conducted as a nonadversarial confidential investigatory proceeding as necessary for
the resolution of any inconsistencies, discrepancies or disputed issues apparent (A) upon
the filed examination report, (B) raised by or as a result of the commissioner's review
of relevant workpapers, or (C) by the written submission or rebuttal of the company.
Not later than twenty days after conclusions of any such hearing, the commissioner shall
enter an order pursuant to subparagraph (A) of subdivision (3) of subsection (d) of this
section. The commissioner shall not appoint an examiner as an authorized representative
to conduct the hearing. The hearing shall proceed expeditiously with discovery by the
company limited to the examiner's workpapers which tend to substantiate any assertions
set forth in any written submission or rebuttal. The commissioner or the commissioner's
authorized representative may issue subpoenas for the attendance of any witnesses or
the production of any documents deemed relevant to the investigation whether under
the control of the department, the company or other persons. The documents produced
shall be included in the record and testimony taken by the commissioner or the commissioner's authorized representative shall be under oath and preserved for the record.
Nothing contained in this section shall require the department to disclose any information or records which would indicate or show the existence or content of any investigation
or activity of a criminal justice agency. The hearing shall proceed with the commissioner
or the commissioner's authorized representative posing questions to the persons subpoenaed. Thereafter the company and the Insurance Department may present testimony
relevant to the investigation. Cross-examination shall be conducted only by the commissioner or the commissioner's authorized representative. The company and the Insurance
Department shall be permitted to make closing statements and may be represented by
counsel of their choice.
(f) The commissioner may, if the commissioner deems it in the public interest,
publish any such report or the result of any such examination contained in such report
in one or more newspapers of the state.
(g) Nothing contained in this section shall prevent or be construed as prohibiting
the commissioner from disclosing the content of an examination report, preliminary
examination report or results, or any matter relating to such report to (1) the Insurance
Department of this or any other state or country, (2) law enforcement officials of this
or any other state, or (3) any agency of the federal government at any time, so long as
such agency or office receiving the report or matters relating to such report agrees, in
writing, that such documents shall be confidential.
(h) All 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 shall (1) be confidential, (2) not be subject
to subpoena, and (3) not be made public by the commissioner or any other person, except
to the extent provided in subsection (g) of this section. Access to such information may
be granted by the commissioner to the National Association of Insurance Commissioners, so long as it agrees, in writing, that such information shall be confidential.
(i) (1) The commissioner may engage the services of, from time to time, on an
individual basis, qualified actuaries, certified public accountants or other similar individuals who are independently practicing their professions, even though such persons
may, from time to time, be similarly employed or retained by persons subject to examination under this section.
(2) No cause of action shall arise nor shall any liability be imposed against the
commissioner, the commissioner's authorized representatives or any examiner appointed by the commissioner for any statements made or conduct performed in good
faith while carrying out the provisions of this section.
(3) No cause of action shall arise, nor shall any liability be imposed, against any
person for the act of communicating or delivering information or data to the commissioner or the commissioner's authorized representative examiner pursuant to an examination made under this section, if such act of communication or delivery was performed
in good faith and without fraudulent intent or the intent to deceive.
(4) This section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subdivision
(2) of this subsection.
(5) A person identified in subdivision (2) of this subsection shall be entitled to an
award of attorney's fees and costs if he is the prevailing party in a civil cause of action
for libel, slander or any other relevant tort arising out of activities in carrying out the
provisions of this section and the party bringing the action was not substantially justified
in doing so. For purposes of this section, a proceeding is "substantially justified" if it
had a reasonable basis in law or fact at the time that it was initiated.
(P.A. 08-127, S. 8; P.A. 09-74, S. 11, 12.)
*Note: On and after July 1, 2012, this section, as amended by section 62 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91hh. Examinations of captive insurance companies. Costs. Confidentiality of financial examination workpapers and reports. (a)(1) At least once
every three years, and additionally whenever the Insurance Commissioner determines
it to be prudent, the commissioner or the commissioner's designee shall visit each captive
insurance company and thoroughly inspect and examine its affairs to ascertain its financial condition, its ability to fulfill its obligations and whether it has complied with the
provisions of sections 38a-91aa to 38a-91tt, inclusive, and any applicable provisions of
this title. The commissioner may extend the three-year period to five years, provided a
captive insurance company is subject to a comprehensive annual audit during such period by independent auditors approved by the commissioner and of a scope satisfactory
to the commissioner.
(2) The examination of a branch captive insurance company pursuant to this section
shall be of branch business and branch operations only, as long as the branch captive
insurance company provides annually to the commissioner a certificate of compliance
or its equivalent, issued by or filed with the licensing authority of the jurisdiction in
which the branch captive insurance company is formed, and demonstrates to the commissioner's satisfaction that it is operating in sound financial condition in accordance
with all applicable laws and regulations of such jurisdiction.
(b) In scheduling and determining the nature, scope and frequency of such examinations, 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 such other criteria as set forth in the
examiners' handbook adopted by the National Association of Insurance Commissioners
and in effect at the time the commissioner exercises discretion under this section.
(c) (1) To carry out examinations under this section, the commissioner may appoint
as examiners one or more competent persons, not officers of or affiliated with or interested in any insurance company, other than as a policyholder. The commissioner may
engage the services of attorneys, appraisers, independent actuaries, independent certified public accountants, or other professionals and specialists to assist in conducting
the examinations under this section as examiners, the cost of which shall be borne by
the company which is the subject of the examination. Notwithstanding the provisions
of this subdivision, no domestic captive insurance company subject to examination
under this section shall pay, as costs associated with the examination, the salaries, fringe
benefits, traveling and maintenance expenses of examining personnel of the Insurance
Department engaged in such examination if such domestic company is otherwise liable
to assessment levied under section 38a-47, except that such company shall pay the
traveling and maintenance expenses of examining personnel of the department when
such company is examined outside the state.
(2) In conducting the examination, the commissioner, the commissioner's actuary
or any examiner authorized by the commissioner may examine, under oath, the officers
and agents of such a company and all persons deemed to have material information
regarding the company's property or business. Each such company, its officers and
agents shall produce the books and papers, in its or their possession, relating to its
business or affairs, and any other person may be required to produce any book or paper,
in his custody, deemed to be relevant to such examination for the inspection of the
commissioner, the commissioner's actuary or examiners, when required. The officers
and agents of the company shall facilitate the examination and aid the examiners in
making the same so far as it is in their power to do so. The refusal of any company by
its officers, directors, employees or agents to submit to examination or to comply with
any reasonable written request of the examiners shall be grounds for suspension of, or
revocation of or nonrenewal of any license or authority held by the company to engage
in an insurance or other business subject to the commissioner's jurisdiction. Any such
proceedings for suspension, revocation or nonrenewal of any license or authority shall
be conducted pursuant to section 38a-91ii.
(3) In conducting the examination, the examiner shall observe those guidelines and
procedures set forth in the examiners' handbook adopted by the National Association
of Insurance Commissioners. The commissioner may also adopt such other guidelines
or procedures as the commissioner may deem appropriate.
(d) (1) Nothing contained in this section shall be construed to limit the commissioner's authority to terminate or suspend any examination in order to pursue legal or regulatory action pursuant to the insurance laws of this state. Findings of fact and conclusions
made pursuant to any examination shall be prima facie evidence in any legal or regulatory
action.
(2) Nothing contained in this section shall be construed to limit the commissioner's
authority in such legal or regulatory action to use and, if appropriate, to make public
any final or preliminary examination report, any examiner or company workpapers or
other documents, or any other information discovered or developed during the course
of any examination.
(3) Not later than sixty days after completion of the examination, the examiner in
charge shall file, under oath, with the Insurance Department a verified written report of
examination. Upon receipt of the verified report, the Insurance Department shall transmit the report to the company examined, together with a notice which shall afford the
company examined a reasonable opportunity, not to exceed thirty days, to make a written
submission or rebuttal with respect to any matters contained in the examination report.
Not later than thirty days after the period allowed for the receipt of 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 examiner's 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, 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 violation; or (B) rejecting the examination report with directions
to the examiners to reopen the examination for purposes of obtaining additional data,
documentation or information, and refiling pursuant to subparagraph (A) of this subdivision; or (C) calling for an investigatory hearing with no less than twenty days notice to
the company for purposes of obtaining additional documentation, data, information and
testimony.
(e) (1) All orders entered pursuant to subdivision (3) of subsection (d) of this section
shall be accompanied by findings and conclusions resulting from the commissioner's
consideration and review of the examination report, relevant examiner workpapers and
any written submissions or rebuttals. The findings and conclusions, which form the
basis of any such order of the commissioner, shall be subject to review as provided in
section 38a-19.
(2) Any investigatory hearing conducted under subparagraph (C) of subdivision (3)
of subsection (d) of this section by the commissioner or authorized representative shall
be conducted as a nonadversarial confidential investigatory proceeding as necessary for
the resolution of any inconsistencies, discrepancies or disputed issues apparent (A) upon
the filed examination report, (B) raised by or as a result of the commissioner's review
of relevant workpapers, or (C) by the written submission or rebuttal of the company.
Not later than twenty days after conclusions of any such hearing, the commissioner shall
enter an order pursuant to subparagraph (A) of subdivision (3) of subsection (d) of this
section. The commissioner shall not appoint an examiner as an authorized representative
to conduct the hearing. The hearing shall proceed expeditiously with discovery by the
company limited to the examiner's workpapers which tend to substantiate any assertions
set forth in any written submission or rebuttal. The commissioner or the commissioner's
authorized representative may issue subpoenas for the attendance of any witnesses or
the production of any documents deemed relevant to the investigation whether under
the control of the department, the company or other persons. The documents produced
shall be included in the record and testimony taken by the commissioner or the commissioner's authorized representative shall be under oath and preserved for the record.
Nothing contained in this section shall require the department to disclose any information or records which would indicate or show the existence or content of any investigation
or activity of a criminal justice agency. The hearing shall proceed with the commissioner
or the commissioner's authorized representative posing questions to the persons subpoenaed. Thereafter the company and the Insurance Department may present testimony
relevant to the investigation. Cross-examination shall be conducted only by the commissioner or the commissioner's authorized representative. The company and the Insurance
Department shall be permitted to make closing statements and may be represented by
counsel of their choice.
(f) The commissioner may, if the commissioner deems it in the public interest,
publish any such report or the result of any such examination contained in such report
in one or more newspapers of the state.
(g) Nothing contained in this section shall prevent or be construed as prohibiting
the commissioner from disclosing the content of an examination report, preliminary
examination report or results, or any matter relating to such report to (1) insurance
regulatory officials of this or any other state or country, (2) law enforcement officials
of this or any other state, or (3) any agency of this or any other state or of the federal
government at any time, provided such agency or office receiving the report or matters
relating to such report agrees, in writing, that such documents shall be confidential.
(h) All workpapers, 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 shall (1) be confidential, (2) not be subject to
subpoena, and (3) not be made public by the commissioner or any other person, except
to the extent provided in subsection (g) of this section. Access to such information may
be granted by the commissioner to the National Association of Insurance Commissioners, as long as it agrees, in writing, that such information shall be confidential.
(i) (1) The commissioner may engage the services of, from time to time, on an
individual basis, qualified actuaries, certified public accountants or other similar individuals who are independently practicing their professions, even though such persons
may, from time to time, be similarly employed or retained by persons subject to examination under this section.
(2) No cause of action shall arise nor shall any liability be imposed against the
commissioner, the commissioner's authorized representatives or any examiner appointed by the commissioner for any statements made or conduct performed in good
faith while carrying out the provisions of this section.
(3) No cause of action shall arise, nor shall any liability be imposed, against any
person for the act of communicating or delivering information or data to the commissioner or the commissioner's authorized representative examiner pursuant to an examination made under this section, if such act of communication or delivery was performed
in good faith and without fraudulent intent or the intent to deceive.
(4) This section does not abrogate or modify in any way any common law or statutory privilege or immunity heretofore enjoyed by any person identified in subdivision
(2) of this subsection.
(5) A person identified in subdivision (2) of this subsection shall be entitled to an
award of attorney's fees and costs if he is the prevailing party in a civil cause of action
for libel, slander or any other relevant tort arising out of activities in carrying out the
provisions of this section and the party bringing the action was not substantially justified
in doing so. For purposes of this section, a proceeding is "substantially justified" if it
had a reasonable basis in law or fact at the time that it was initiated."
(P.A. 08-127, S. 8; P.A. 09-74, S. 11, 12; Oct. Sp. Sess. P.A. 11-1, S. 62.)
History: P.A. 08-127 effective January 1, 2009; P.A. 09-74 made technical changes in Subsecs. (c)(2), (g), (h) and
(i)(1), effective May 27, 2009; Oct. Sp. Sess. P.A. 11-1 redesignated existing Subsec. (a) as Subsec. (a)(1) and amended
same to change the time period for commissioner to conduct an examination from 5 to 3 years and add provision for
extending such period to 5 years, added Subsec. (a)(2) re examination of a branch captive insurance company, and made
technical changes in Subsecs. (c)(1), (g) and (h), effective July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91ii. *(See end of section for amended version and effective date.)
Suspension, revocation or refusal to renew license. (a) The commissioner may, at
any time, for cause, suspend, revoke or refuse to renew any license of a captive insurance
company, or in lieu of or in addition to suspension or revocation of such license, the
commissioner, after reasonable notice to and hearing of any holder of such license, may
impose a fine not to exceed ten thousand dollars. Such hearings may be held by the
commissioner or any person designated by the commissioner.
(b) Any captive insurance company aggrieved by the action of the commissioner
in suspending, revoking or refusing to renew a license or in imposing a fine may appeal
therefrom, in accordance with the provisions of section 4-183, except venue for such
appeal shall be in the judicial district of New Britain. Appeals under this section shall
be privileged in respect to the order of trial assignment.
(P.A. 08-127, S. 9.)
*Note: On and after July 1, 2012, this section, as amended by section 63 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91ii. Suspension, revocation or refusal to renew license. Amendment or modification of a special purpose financial captive insurance company's
license. (a)(1) The commissioner may, at any time, for cause, suspend, revoke or refuse
to renew any license of a captive insurance company, or in lieu of or in addition to
suspension or revocation of such license, the commissioner, after reasonable notice to
and hearing of any holder of such license, may impose a fine not to exceed ten thousand
dollars. Such hearings may be held by the commissioner or any person designated by
the commissioner. For purposes of this subsection, cause for such administrative action
shall include, but not be limited to, the following reasons: (A) Insolvency or impairment
of capital or surplus; (B) failure to meet the requirements of section 38a-91dd; (C) refusal
or failure to submit an annual report, as required by section 38a-91gg, or any other report
or statement required by law or by lawful order of the commissioner; (D) failure to
comply with the provisions of its own charter, bylaws or other organizational document;
(E) failure to submit to or pay the cost of examination or any legal obligation relative
thereto; (F) use of methods that, although not otherwise specifically prohibited by law,
nevertheless render its operation detrimental or its condition unsound with respect to
the public or to its policyholders; or (G) failure otherwise to comply with the laws of
this state.
(2) Any captive insurance company aggrieved by the action of the commissioner
in suspending, revoking or refusing to renew a license or in imposing a fine may appeal
therefrom, in accordance with the provisions of section 4-183, except venue for such
appeal shall be in the judicial district of New Britain. Appeals under this section shall
be privileged in respect to the order of trial assignment.
(b) (1) (A) The commissioner shall notify a special purpose financial captive insurance company not less than thirty days before suspending, revoking or refusing to
renew its license. Such notice shall state the basis for such suspension, revocation or
refusal to renew and the date of the hearing; and
(B) No prior notice or hearing shall be required if the grounds for suspension, revocation or refusal to renew of a special purpose financial captive insurance company's
license relate primarily to the financial condition or soundness of such company or to
a deficiency in its assets.
(2) The commissioner may amend or modify the license of a special purpose financial captive insurance company only if:
(A) The special purpose financial captive insurance company consents to such
amendment or modification; or
(B) The commissioner makes a showing of clear and convincing evidence demonstrating that such amendment or modification is necessary to avoid irreparable harm to
the special purpose financial captive insurance company or to the ceding insurer."
(P.A. 08-127, S. 9; Oct. Sp. Sess. P.A. 11-1, S. 63.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 redesignated existing Subsec. (a) as Subsec.
(a)(1) and amended same to add Subparas. (A) to (G) re causes for administrative action, redesignated existing Subsec.
(b) as Subsec. (a)(2), and added new Subsec. (b) re time period for notification to, and amendment or modification of the
license of, a special purpose financial captive insurance company, effective July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91jj. *(See end of section for amended version of subsection (a) and
effective date.) Applicability of state investment laws. Certain loans and investments required to be approved by commissioner. Loans of minimum capital and
surplus funds prohibited. *(a) Association captive insurance companies and risk retention groups shall comply with the investment requirements in this chapter, as applicable.
Notwithstanding any other provision of sections 38a-91aa to 38a-91qq, inclusive, the
commissioner may approve the use of alternative reliable methods of valuation and
rating.
(b) No pure captive insurance company or industrial insured captive insurance company shall be subject to any restrictions on allowable investments, except that the Insurance Commissioner may prohibit or limit any investment that threatens the solvency or
liquidity of any such company.
(c) No pure captive insurance company may make a loan to 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. Loans of minimum capital and surplus funds required in section 38a-91dd are prohibited.
(P.A. 08-127, S. 10.)
*Note: On and after July 1, 2012, subsection (a) of this section, as amended by section
64 of public act 11-1 of the October special session, is to read as follows:
"(a) Association captive insurance companies and risk retention groups shall comply
with the investment requirements in this chapter, as applicable. Notwithstanding any
other provision of sections 38a-91aa to 38a-91tt, inclusive, the commissioner may approve the use of alternative reliable methods of valuation and rating."
(P.A. 08-127, S. 10; Oct. Sp. Sess. P.A. 11-1, S. 64.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 made a technical change in Subsec. (a), effective
July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91kk. *(See end of section for amended version of subsection (c) and
effective date.) Reinsurance. (a) Any captive insurance company may assume reinsurance from any other insurer only on risks that such company is authorized to write
directly.
(b) A captive insurance company may only take credit for the reinsurance of risks
or portions of risks ceded to reinsurers that complies with the provisions of section 38a-85 or 38a-86.
*(c) For purposes of sections 38a-91aa to 38a-91qq, inclusive, insurance by a captive insurance company of any workers' compensation qualified self-insured plan of its
parent and affiliates shall be deemed to be reinsurance.
(P.A. 08-127, S. 11.)
*Note: On and after July 1, 2012, subsection (c) of this section, as amended by section
65 of public act 11-1 of the October special session, is to read as follows:
"(c) For purposes of sections 38a-91aa to 38a-91tt, inclusive, insurance by a captive
insurance company of any workers' compensation qualified self-insured plan of its parent and affiliates shall be deemed to be reinsurance."
(P.A. 08-127, S. 11; Oct. Sp. Sess. P.A. 11-1, S. 65.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 made a technical change in Subsec. (c), effective
July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91nn. *(See end of section for amended version and effective date.)
Premium receipts tax. (a) Each captive insurance company shall pay to the Commissioner of Revenue Services, in the month of February of each year, a tax at the rate of
thirty-eight hundredths of one per cent on the first twenty million dollars and two hundred
eighty-five thousandths of one per cent on the next twenty million dollars and nineteen
hundredths of one per cent on the next twenty million dollars and seventy-two thousandths of one per cent on each dollar thereafter, on the direct premiums collected or
contracted for on policies or contracts of insurance written by the captive insurance
company during the year ending December thirty-first next preceding, after deducting
from the direct premiums subject to the tax the amounts paid to policyholders as return
premiums which shall include dividends on unabsorbed premiums or premium deposits
returned or credited to policyholders, except that no tax shall be due or payable as to
considerations received for annuity contracts.
(b) The annual minimum aggregate tax to be paid by a captive insurance company
calculated under subsection (a) of this section shall be seven thousand five hundred
dollars, and the annual maximum aggregate tax shall be two hundred thousand dollars.
(c) A captive insurance company failing to file returns as required in this section
or failing to pay within the time required all taxes assessed by this section shall be subject
to penalty under section 12-229.
(d) Two or more captive insurance companies under common ownership and control shall be taxed as though they were a single captive insurance company.
(e) For the purposes of this section common ownership and control means:
(1) In the case of stock corporations, the direct or indirect ownership of eighty per
cent or more of the outstanding voting stock of two or more corporations by the same
shareholder or shareholders; and
(2) In the case of mutual or nonprofit corporations, the direct or indirect ownership
of eighty per cent or more of the surplus and the voting power of two or more corporations
by the same member or members.
(f) The tax provided for in this section shall constitute all taxes collectible under
the laws of this state from any captive insurance company, and no other occupation tax
or other taxes shall be levied or collected from any captive insurance company by the
state or any county, city or municipality within this state, except taxes on real and personal property used in the production of income.
(g) The tax provided for in this section shall be calculated on an annual basis, notwithstanding policies or contracts of insurance or contracts of reinsurance issued on a
multiyear basis. In the case of multiyear policies or contracts, the premium shall be
prorated for purposes of determining the tax under this section.
(P.A. 08-127, S. 14; P.A. 09-74, S. 13.)
*Note: On and after July 1, 2012, this section, as amended by section 66 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91nn. Direct premium receipts tax and assumed reinsurance premium receipts tax. Applicability of tax statutes. Captive insurance regulatory and
supervision account. (a) Each captive insurance company shall pay to the Commissioner of Revenue Services, on or before March first of each year, a tax at the rate of
(1) thirty-eight hundredths of one per cent on the first twenty million dollars, (2) two
hundred eighty-five thousandths of one per cent on the next twenty million dollars, (3)
nineteen hundredths of one per cent on the next twenty million dollars, and (4) seventy-two thousandths of one per cent on each dollar thereafter, on the direct premiums collected or contracted for on policies or contracts of insurance written by the captive
insurance company during the year ending December thirty-first next preceding, after
deducting from the direct premiums subject to the tax the amounts paid to policyholders
as return premiums which shall include dividends on unabsorbed premiums or premium
deposits returned or credited to policyholders, except that no tax shall be due or payable
as to considerations received for annuity contracts.
(b) Each captive insurance company shall pay to the Commissioner of Revenue
Services, in the month of March of each year, a tax at the rate of (1) two hundred fourteen
thousandths of one per cent on the first twenty million dollars, (2) one hundred forty-three thousandths of one per cent on the next twenty million dollars, (3) forty-eight
thousandths of one per cent on the next twenty million dollars, and (4) twenty-four
thousandths of one per cent on each dollar thereafter, on assumed reinsurance premiums
collected or contracted for on policies or contracts of insurance written by the captive
insurance company during the year ending December thirty-first next preceding, provided no tax under this subsection shall apply to premiums for risks or portions of risks
that are subject to taxation on a direct basis pursuant to subsection (a) of this section.
No tax under this subsection shall be payable in connection with the receipt of assets
in exchange for the assumption by a captive insurance company 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
parties to such transaction is to renew or maintain such business with the captive insurance company.
(c) (1) The annual minimum aggregate tax to be paid by a captive insurance company, other than a sponsored captive insurance company, calculated under subsection
(a) of this section shall be seven thousand five hundred dollars, and the annual maximum
aggregate tax calculated under subsections (a) and (b) of this section shall be two hundred
thousand dollars. In the case of a branch captive insurance company, the annual aggregate tax to be paid by such company shall apply only to the branch business of such
company.
(2) In the case of a sponsored captive insurance company, the annual minimum
aggregate tax to be paid by a sponsored captive insurance company shall be seven thousand five hundred dollars and shall apply to such company as a whole and not to each
protected cell. The annual maximum tax to be paid by a sponsored captive insurance
company shall be the aggregate tax liability, calculated under subsection (a) of this
section, of each protected cell.
(d) The provisions of sections 12-204, 12-204d, 12-204g and 12-205 to 12-208,
inclusive, shall apply to the provisions of sections 38a-91aa to 38a-91tt, inclusive, in
the same manner and with the same force and effect as if the language of said sections
12-204, 12-204d, 12-204g and 12-205 to 12-208, inclusive, had been incorporated in
full into this section and had expressly referred to the tax due under this section, except
to the extent that any such language is inconsistent with a provision of said sections
38a-91aa to 38a-91tt, inclusive.
(e) (1) Except as specified in subsection (c) of this section and subdivision (2) of
this subsection, two or more captive insurance companies under common ownership
and control shall be taxed as though they were a single captive insurance company.
(2) Special purpose financial captive insurance companies shall not be consolidated
with other captive insurance companies that are not special purpose financial captive
insurance companies for purposes of calculating the tax due under this section.
(f) For the purposes of this section, (1) "common ownership and control" means
ownership and control of two or more captive insurance companies by the same person
or group of persons, and (2) "ownership and control" means:
(A) In the case of stock insurers, the direct or indirect ownership of eighty per cent
or more of the outstanding voting stock of the insurer;
(B) In the case of mutual or nonprofit corporations, the direct or indirect ownership
of eighty per cent or more of the surplus and the voting power of the corporation;
(C) In the case of limited liability companies, the direct or indirect ownership of
eighty per cent or more of the membership interests in the company; and
(D) In the case of sponsored captive insurance companies, a protected cell shall be
treated as a separate captive insurance company owned and controlled by the protected
cell's participants.
(g) (1) The tax provided for in this section shall constitute all taxes collectible under
the laws of this state from any captive insurance company, and no other occupation tax
or other taxes shall be levied or collected from any captive insurance company by the
state or any county, city or municipality within this state, except sales and use taxes and
ad valorem taxes on real and personal property used in the production of income.
(2) The tax provided for in this section shall be calculated on an annual basis, notwithstanding policies or contracts of insurance or contracts of reinsurance issued on a
multiyear basis. In the case of multiyear policies or contracts, the premium shall be
prorated for purposes of determining the tax under this section.
(3) A captive insurance company may claim a nonrefundable tax credit of seven
thousand five hundred dollars against the aggregate tax imposed under this section for
the first calendar year on or after January 1, 2012, in which the company has liability
under this section. The Commissioner of Revenue Services shall prescribe the form and
manner in which such tax credit may be claimed.
(h) (1) There is established an account to be known as the "captive insurance regulatory and supervision account" which shall be a separate, nonlapsing account within the
Insurance Fund established under section 38a-52a. The account shall contain any moneys required by law to be deposited in the account. Moneys in the account shall be
expended by the commissioner for the purposes of funding staff positions and other
reasonable expenses related to the regulation of captive insurance companies.
(2) (A) All fees and assessments relating to captive insurance companies received
by the Insurance Department shall be deposited in the account.
(B) The Comptroller shall transfer annually to the account eleven per cent of the
tax collected pursuant to this section.
(3) The Comptroller may transfer from the account, with the approval of the Secretary of the Office of Policy and Management, an amount equivalent to not more than
two per cent of the tax collected pursuant to this section, to the Department of Economic
and Community Development for reasonable expenses incurred to promote the captive
insurance industry in this state. The Department of Economic and Community Development may also utilize the transferred moneys to collaborate with other entities to promote
the captive insurance industry in this state.
(4) No payment for the maintenance of staff or associated expenses, including contractual services as necessary, shall be disbursed until the commissioner receives proper
documentation regarding services rendered and expenses incurred. The commissioner
shall establish the form and manner of such documentation.
(5) Any balance remaining in the account at the end of any fiscal year shall be
carried forward in the account for the fiscal year next succeeding."
(P.A. 08-127, S. 14; P.A. 09-74, S. 13; Oct. Sp. Sess. P.A. 11-1, S. 66.)
History: P.A. 08-127 effective January 1, 2009; P.A. 09-74 made technical changes in Subsecs. (a) and (b), effective
May 27, 2009; Oct. Sp. Sess. P.A. 11-1 amended Subsec. (a) to change date of payment of direct premium receipts tax
from the month of February to on or before March first, added new Subsec. (b) re assumed reinsurance premium receipts
tax, redesignated existing Subsec. (b) as Subsec. (c)(1), added provision therein re applicability of annual aggregate tax
to a branch captive insurance company, added Subsec. (c)(2) re applicability of annual aggregate tax to a sponsored captive
insurance company, deleted former Subsec. (c) re penalty for failure to file return or pay tax, added new Subsec. (d) re
applicability of tax statutes, redesignated existing Subsec. (d) as Subsec. (e)(1), added Subsec. (e)(2) re consolidation of
special purpose financial captive insurance companies, redesignated existing Subsec. (e) as Subsec. (f) and amended same
to redefine "common ownership and control" and define "ownership and control", redesignated existing Subsecs. (f) and
(g) as Subsec. (g)(1) and (2), amended Subsec. (g)(1) to replace "taxes on real and personal property" with "sales and use
taxes and ad valorem taxes on real and personal property", added Subsec. (g)(3) re tax credit, added Subsec. (h) re establishment of captive insurance regulatory and supervision account, and made conforming and technical changes, effective July
1, 2012, and applicable to calendar years commencing on or after January 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91oo. *(See end of section for amended version and effective date.)
Applicability of insurance statutes. Unless otherwise provided in sections 38a-91aa to
38a-91qq, inclusive, no provision of this title shall apply to captive insurance companies,
unless expressly included therein, except for the following: Sections 38a-16, 38a-17,
38a-54 to 38a-57, inclusive, 38a-59, 38a-69a, 38a-250 to 38a-266, inclusive, 38a-903
to 38a-961, inclusive, and 38a-962 to 38a-962j, inclusive.
(P.A. 08-127, S. 15.)
*Note: On and after July 1, 2012, this section, as amended by section 67 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91oo. Applicability of insurance statutes. Unless otherwise provided
in sections 38a-91aa to 38a-91tt, inclusive, no provision of this title shall apply to captive
insurance companies, unless expressly included therein, except for the following: Sections 38a-8, 38a-16, 38a-17, 38a-54 to 38a-57, inclusive, 38a-59, 38a-69a, 38a-73, 38a-129 to 38a-140, inclusive, and 38a-250 to 38a-266, inclusive, and chapter 704c."
(P.A. 08-127, S. 15; Oct. Sp. Sess. P.A. 11-1, S. 67.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 added Secs. 38a-8, 38a-73 and 38a-129 to
38a-140 as applicable to captive insurance companies and changed "38a-903 to 38a-961, inclusive, and 38a-962 to 38a-962j, inclusive" to "chapter 704c", effective July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91pp. *(See end of section for amended version and effective date.)
Conversions and mergers. Approval by commissioner. (a) An association captive
insurance company, risk retention group or industrial insured captive insurance company formed as a stock or mutual corporation may be converted to or merged with and
into a reciprocal insurer in accordance with a plan for such conversion or merger and
the provisions of this section.
(b) Any plan for such conversion or merger shall provide a fair and equitable plan
for purchasing, retiring or otherwise extinguishing the interests of the stockholders and
policyholders of a stock insurer, and the members and policyholders of a mutual insurer,
including a fair and equitable provision for the rights and remedies of dissenting stockholders, members or policyholders.
(c) In the case of a conversion authorized under subsection (a) of this section:
(1) Such conversion shall be accomplished under such reasonable plan and procedure as may be approved by the commissioner, except that the Insurance Commissioner
shall not approve any such plan of conversion unless such plan:
(A) Satisfies the provisions of subsection (b) of this section;
(B) Provides for a hearing, of which notice is given or to be given to the captive
insurance company, its directors, officers and policyholders, and in the case of a stock
insurer, its stockholders, and in the case of a mutual insurer, its members, all of which
persons shall be entitled to attend and appear at such hearing, except that if notice of a
hearing is given and no director, officer, policyholder, member or stockholder requests
a hearing, the commissioner may cancel such hearing;
(C) Provides a fair and equitable plan for the conversion of stockholder, member
or policyholder interests into subscriber interests in the resulting reciprocal insurer,
substantially proportionate to the corresponding interests in the stock or mutual insurer,
except that such plan shall not preclude the resulting reciprocal insurer from applying
underwriting criteria that could affect ongoing ownership interests; and
(D) Is approved:
(i) In the case of a stock insurer, by a majority of the shares entitled to vote represented in person or by proxy at a duly called regular or special meeting at which a
quorum is present; and
(ii) In the case of a mutual insurer, by a majority of the voting interests of policyholders represented in person or by proxy at a duly called regular or special meeting thereof
at which a quorum is present;
(2) The commissioner shall approve such plan of conversion if the commissioner
finds that the conversion will promote the general good of the state in conformity with
those standards set forth in subdivision (2) of subsection (d) of section 38a-91ff;
(3) If the commissioner approves the plan, the commissioner shall amend the converting insurer's certificate of authority to reflect conversion to a reciprocal insurer and
issue such amended certificate of authority to the company's attorney-in-fact;
(4) The conversion shall be effective upon the issuance of an amended certificate
of authority of a reciprocal insurer by the commissioner; and
(5) Upon the effective date of such conversion the corporate existence of the converting insurer shall cease and the resulting reciprocal insurer shall notify the Secretary
of the State of such conversion.
(d) A merger authorized under subsection (a) of this section shall be accomplished
substantially in accordance with the procedures set forth in this chapter, except that,
solely for purposes of such merger:
(1) The plan of merger shall satisfy the provisions of subsection (b) of this section;
(2) The subscribers' advisory committee of a reciprocal insurer shall be equivalent
to the board of directors of a stock or mutual insurance company;
(3) The subscribers of a reciprocal insurer shall be the equivalent of the policyholders of a mutual insurance company;
(4) If a subscribers' advisory committee does not have a president or secretary, the
officers of such committee having substantially equivalent duties shall be deemed the
president or secretary of such committee;
(5) The commissioner shall approve the articles of merger if the commissioner finds
that the merger will promote the general good of the state in conformity with those
standards set forth in subdivision (2) of subsection (d) of section 38a-91ff. If the commissioner approves the articles of merger, the commissioner shall endorse the commissioner's approval thereon and the surviving insurer shall present the articles of merger to
the Secretary of the State at the Secretary of the State's office;
(6) Notwithstanding section 38a-91dd, the commissioner may permit the formation,
without surplus, of a captive insurance company organized as a reciprocal insurer, into
which an existing captive insurance company may be merged for the purpose of facilitating a transaction under this section, except that there shall be no more than one authorized
insurance company surviving such merger; and
(7) An alien insurer may be a party to a merger authorized under subsection (a) of
this section, except that the requirements for a merger between a domestic and a foreign
insurer under this chapter shall apply to a merger between a domestic and an alien insurer
under this subsection. Such alien insurer shall be treated as a foreign insurer under this
chapter and such other jurisdictions shall be the equivalent of a state for purposes of
this chapter.
(e) A conversion or merger under this section shall have the effects of conversion
or merger set forth in this chapter to the extent such effects are not inconsistent with the
provisions of sections 38a-91aa to 38a-91qq, inclusive.
(P.A. 08-127, S. 16.)
*Note: On and after July 1, 2012, this section, as amended by section 68 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91pp. Conversions and mergers. Approval by commissioner. (a) An
association captive insurance company, risk retention group or industrial insured captive
insurance company formed as a stock insurer or mutual corporation may be converted
to or merged with and into a reciprocal insurer in accordance with a plan for such conversion or merger and the provisions of this section.
(b) Any plan for such conversion or merger shall provide a fair and equitable plan
for purchasing, retiring or otherwise extinguishing the interests of the stockholders and
policyholders of a stock insurer, and the members and policyholders of a mutual corporation, including a fair and equitable provision for the rights and remedies of dissenting
stockholders, members or policyholders.
(c) In the case of a conversion authorized under subsection (a) of this section:
(1) Such conversion shall be accomplished under such reasonable plan and procedure as may be approved by the commissioner, except that the Insurance Commissioner
shall not approve any such plan of conversion unless such plan:
(A) Satisfies the provisions of subsection (b) of this section;
(B) Provides for a hearing, of which notice is given or to be given to the captive
insurance company, its directors, officers and policyholders, and in the case of a stock
insurer, its stockholders, and in the case of a mutual corporation, its members, all of
which persons shall be entitled to attend and appear at such hearing, except that if notice
of a hearing is given and no director, officer, policyholder, member or stockholder
requests a hearing, the commissioner may cancel such hearing;
(C) Provides a fair and equitable plan for the conversion of stockholder, member
or policyholder interests into subscriber interests in the resulting reciprocal insurer,
substantially proportionate to the corresponding interests in the stock insurer or mutual
corporation, except that such plan shall not preclude the resulting reciprocal insurer
from applying underwriting criteria that could affect ongoing ownership interests; and
(D) Is approved:
(i) In the case of a stock insurer, by a majority of the shares entitled to vote represented in person or by proxy at a duly called regular or special meeting at which a
quorum is present; and
(ii) In the case of a mutual corporation, by a majority of the voting interests of
policyholders represented in person or by proxy at a duly called regular or special meeting thereof at which a quorum is present;
(2) The commissioner shall approve such plan of conversion if the commissioner
finds that the conversion will promote the general good of the state in conformity with
those standards set forth in subdivision (2) of subsection (g) of section 38a-91ff;
(3) If the commissioner approves the plan, the commissioner shall amend the converting insurer's certificate of authority to reflect conversion to a reciprocal insurer and
issue such amended certificate of authority to the company's attorney-in-fact;
(4) The conversion shall be effective upon the issuance of an amended certificate
of authority of a reciprocal insurer by the commissioner; and
(5) Upon the effective date of such conversion the corporate existence of the converting insurer shall cease and the resulting reciprocal insurer shall notify the Secretary
of the State of such conversion.
(d) A merger authorized under subsection (a) of this section shall be accomplished
substantially in accordance with the procedures set forth in this chapter, except that,
solely for purposes of such merger:
(1) The plan of merger shall satisfy the provisions of subsection (b) of this section;
(2) The subscribers' advisory committee of a reciprocal insurer shall be equivalent
to the board of directors of a stock insurer or mutual corporation;
(3) The subscribers of a reciprocal insurer shall be the equivalent of the policyholders of a mutual corporation;
(4) If a subscribers' advisory committee does not have a president or secretary, the
officers of such committee having substantially equivalent duties shall be deemed the
president or secretary of such committee;
(5) The commissioner shall approve the articles of merger if the commissioner finds
that the merger will promote the general good of the state in conformity with those
standards set forth in subdivision (2) of subsection (g) of section 38a-91ff. If the commissioner approves the articles of merger, the commissioner shall endorse the commissioner's approval thereon and the surviving insurer shall present the articles of merger to
the Secretary of the State at the Secretary of the State's office;
(6) Notwithstanding section 38a-91dd, the commissioner may permit the formation,
without surplus, of a captive insurance company organized as a reciprocal insurer, into
which an existing captive insurance company may be merged for the purpose of facilitating a transaction under this section, except that there shall be no more than one authorized
insurance company surviving such merger; and
(7) An alien insurer may be a party to a merger authorized under subsection (a) of
this section, except that the requirements for a merger between a domestic and a foreign
insurer under this chapter shall apply to a merger between a domestic and an alien insurer
under this subsection. Such alien insurer shall be treated as a foreign insurer under this
chapter and such other jurisdictions shall be the equivalent of a state for purposes of
this chapter.
(e) The commissioner may permit the formation of a captive insurance company
that is established for the sole purpose of merging or consolidating with, or assuming
existing insurance or reinsurance business from, an existing captive insurance company
or, subject to such conditions as the commissioner may impose that are not inconsistent
with this chapter, any existing captive insurance company organized in any other jurisdiction. Upon request of such newly formed captive insurance company, the commissioner may waive or modify the requirements of subparagraph (B) of subdivision (1)
of subsection (c) of section 38a-91bb, and subdivision (2) of subsection (c) of section
38a-91bb.
(f) A conversion or merger under this section shall have the effects of conversion
or merger set forth in this chapter to the extent such effects are not inconsistent with the
provisions of sections 38a-91aa to 38a-91tt, inclusive."
(P.A. 08-127, S. 16; Oct. Sp. Sess. P.A. 11-1, S. 68.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 made technical changes in Subsecs. (a) to (d),
added new Subsec. (e) re formation of a captive insurance company established for sole purpose of merging with or
assuming existing insurance business from an existing captive insurance company, and redesignated existing Subsec. (e)
as Subsec. (f) and made a technical change therein, effective July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91qq. *(See end of section for amended version and effective date.)
Regulations. The Insurance Commissioner may adopt regulations, in accordance with
chapter 54, to establish standards to ensure that a parent or affiliated company is able
to exercise control of the risk management function of any controlled unaffiliated business to be insured by the pure captive insurance company, except that until such regulations are approved, the commissioner may approve the coverage of such risks by a pure
captive insurance company.
(P.A. 08-127, S. 17.)
*Note: On and after July 1, 2012, this section, as amended by section 69 of public
act 11-1 of the October special session, is to read as follows:
"Sec. 38a-91qq. Regulations. The Insurance Commissioner may adopt regulations, in accordance with chapter 54, as are necessary to carry out the provisions of
sections 38a-91aa to 38a-91tt, inclusive, and to establish standards to ensure that a parent
or affiliated company is able to exercise control of the risk management function of any
controlled unaffiliated business to be insured by a pure captive insurance company,
except that until such regulations are approved, the commissioner may approve the
coverage of such risks by a pure captive insurance company."
(P.A. 08-127, S. 17; Oct. Sp. Sess. P.A. 11-1, S. 69.)
History: P.A. 08-127 effective January 1, 2009; Oct. Sp. Sess. P.A. 11-1 added authority for commissioner to adopt
regulations to carry out the provisions of Secs. 38a-91aa to 38a-91tt and made a technical change, effective July 1, 2012.
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91rr. (Note: This section is effective July 1, 2012.) Establishment of
protected cells and incorporated protected cells by a sponsored captive insurance
company. (a) Each sponsored captive insurance company may establish and maintain
one or more protected cells, subject to the following conditions:
(1) The stockholders of a sponsored captive insurance company shall be limited to
its participants and sponsors, except that a sponsored captive insurance company may
issue nonvoting securities to other persons on terms approved by the commissioner;
(2) Each sponsored captive insurance company shall account separately on the
books and records of such company for each protected cell 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;
(3) No liabilities arising out of any other insurance business the sponsored captive
insurance company may conduct shall be chargeable against the assets of a protected cell;
(4) No sponsored captive insurance company shall make any sale, exchange or other
transfer of assets, dividend or distribution between or among any of its protected cells
without the consent of such protected cells;
(5) No protected cell shall make any sale, exchange or other transfer of assets,
dividend or distribution to a sponsor or participant without the commissioner's approval.
The commissioner shall not approve such sale, exchange or other transfer if it would
result in insolvency or impairment with respect to a protected cell;
(6) (A) Except as otherwise specified, each sponsored captive insurance company
shall attribute assets and liabilities to the protected cells and the general account in
accordance with the plan of operation approved by the commissioner, and shall not
attribute any other assets or liabilities between its general account and any protected
cell or between any protected cells. For purposes of this subdivision, "general account"
means all assets and liabilities of a sponsored captive insurance company that are not
attributable to a protected cell.
(B) Each sponsored captive insurance company shall attribute all insurance obligations, assets and liabilities relating to a reinsurance contract entered 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 sponsored captive insurance company is a party, including any
payments made by or due to be made to the sponsored captive insurance company
pursuant to the terms of such agreement, shall reflect such obligations, assets and liabilities relating to such reinsurance contract;
(7) In connection with the conservation, rehabilitation or liquidation of a sponsored
captive insurance company, such company shall, to the extent the commissioner determines they are separable, keep the assets and liabilities of a protected cell separate at
all times from, and shall not commingle with, those of other protected cells and of the
sponsored captive insurance company;
(8) Each sponsored captive insurance company shall file annually with the commissioner such financial reports as the commissioner shall require, including, but not limited
to, accounting statements detailing the financial experience of each protected cell;
(9) Each sponsored captive insurance company shall notify the commissioner in
writing not later than ten business days after any protected cell becomes insolvent or
otherwise unable to meet its claim or expense obligations;
(10) No participant contract shall take effect without the commissioner's prior written approval. The addition of each new protected cell or the withdrawal of any participant
or termination of any existing protected cell shall constitute a change in the sponsored
captive insurance company's plan of operation and shall require the commissioner's
prior written approval;
(11) If required by the commissioner, the business written by a sponsored captive
insurance company with respect to each protected cell shall be (A) fronted by an insurance company licensed under the laws of any state, (B) reinsured by a reinsurer authorized or approved by this state, or (C) 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 commissioner may require the
sponsored captive insurance company to increase the funding of any security arrangement established under this subdivision. If the form of security is a letter of credit, the
letter of credit shall be issued or confirmed by a bank approved by the commissioner.
A trust maintained pursuant to this subdivision shall be established in a form and upon
such terms approved by the commissioner.
(b) Each sponsored captive insurance company may combine the assets of two or
more protected cells for purposes of investment and such combination shall not be
construed as defeating the segregation of such assets for accounting or other purposes.
Each sponsored captive insurance company shall comply with all applicable investment
requirements under this chapter, except that the commissioner shall waive compliance
with such requirements for sponsored captive insurance companies to the extent that
credit for reinsurance ceded to reinsurers is allowed pursuant to section 38a-91kk. The
commissioner may approve the use of alternative reliable methods of valuation and
rating for purposes of this subsection.
(c) Each sponsored captive insurance company, including a sponsored captive insurance company licensed as a special purpose financial captive insurance company,
may establish and maintain one or more protected cells as a separate corporation formed
under chapter 601 or a limited liability company formed under chapter 613. This section
shall not be construed to limit any rights or protections applicable to protected cells not
established as corporations or limited liability companies.
(d) (1) Each sponsored captive insurance company may establish and maintain a
protected cell as an incorporated protected cell.
(2) The articles of incorporation or articles of organization of an incorporated protected cell shall refer to the sponsored captive insurance company for which it is a
protected cell and shall state that the protected cell is incorporated or organized for the
limited purposes authorized by the sponsored captive insurance company's license. Such
company shall attach to and file with the articles of incorporation or articles of organization a copy of the commissioner's prior written approval, as required by subdivision
(10) of subsection (a) of this section, to add the incorporated protected cell.
(e) Notwithstanding the provisions of chapter 704c:
(1) If the commissioner determines in the event of an insolvency of a sponsored
captive insurance company that one or more protected cells remain solvent, the commissioner may separate such cells from such company and may, on application of a sponsor,
allow for the conversion of such cells into one or more new or existing sponsored captive
insurance companies with a sponsor or sponsors, or one or more other captive insurance
companies, pursuant to such plan or plans of operation as the commissioner deems
acceptable;
(2) Upon the issuance by a court of any order of supervision, rehabilitation or liquidation of a sponsored captive insurance company, the receiver shall manage the assets
and liabilities of such company in accordance with the provisions of this section;
(3) The assets of a protected cell shall not be used to pay any expenses or claims
other than those attributable to such protected cell; and
(4) A sponsored captive insurance company's capital and surplus shall be available
at all times to pay any expenses of or claims against such company.
(Oct. Sp. Sess. P.A. 11-1, S. 70.)
History: Oct. Sp. Sess. P.A. 11-1 effective July 1, 2012 (Revisor's note: In Subsec. (a)(11), a reference to "sponsored
captive" was changed editorially by the Revisors to "sponsored captive insurance company" for accuracy).
| (Return to Chapter Table of Contents) | (Return to List of Chapters) | (Return to List of Titles) |
Sec. 38a-91ss. (Note: This section is effective July 1, 2012.) Additional requirements for a special purpose financial captive insurance company. (a) Not later than
thirty days after the closing on the transactions for an insurance securitization, a special
purpose financial captive insurance company shall submit to the commissioner a copy
of a complete set of executed documentation of such securitization. Any documentation
submitted pursuant to this subsection shall be kept confidential in accordance with the
provisions of subdivision (6) of subsection (c) of section 38a-91bb.
(b) Any change in the special purpose financial captive insurance company's plan
of operation shall require prior approval from the commissioner.
(c) Any transaction or series of transactions shall require prior approval from the
commissioner if such transaction or series of transactions (1) are undertaken to dissolve
a special purpose financial captive insurance company, or (2) result in the termination
of all or any part of a special purpose financial captive insurance company's business,
except that no prior approval from the commissioner shall be required for any such
transaction or series of transactions if such transaction or series of transactions are done
in accordance with a document or agreement described in the special purpose financial
captive insurance company's plan of operation and if the commissioner is notified in
advance of such transaction or series of transactions.
(d) A special purpose financial captive insurance company shall notify the commissioner in advance of any change in the legal ownership of any special purpose financial
captive insurance company security.
(e) A special purpose financial captive insurance company may:
(1) With the prior approval of the commissioner, account for the proceeds of a
surplus note issued by such company as surplus; and
(2) Submit for the prior approval of the commissioner periodic written requests for
authorization to make payments of interest on and repayments of principal of surplus
notes and other debt obligations issued by such company. The commissioner shall not
approve such payment if the commissioner determines that such payment would jeopardize the ability of the special purpose financial captive insurance company or any other
person to fulfill their respective obligations pursuant to the special purpose financial
captive insurance company securitization agreements, the reinsurance contract or any
related transaction. In lieu of approval of such periodic written requests, the commissioner may approve a formula or plan, which shall be included in the special purpose
financial captive insurance company's plan of operation, for payment of interest, principal or both with respect to such surplus notes and debt obligations.
(f) No special purpose financial captive insurance company security shall be subject
to regulation as an insurance or reinsurance contract. No investor in such a security or
a holder of such a security shall be considered to be transacting the business of insurance
in this state solely by reason of having an interest in the security. No underwriter's
placement or selling agents and their partners, commissioners, officers, members, managers, employees, agents, representatives and advisors involved in an insurance securitization by a special purpose financial captive insurance company shall be considered
to be insurance producers or brokers or to be conducting business as an insurance or
reinsurance company or as an insurance agency, brokerage, intermediary, advisory or
consulting business solely by virtue of their underwriting activities in connection with
such securitization.
(g) (1) A special purpose financial captive insurance company shall reinsure only
the risks of a ceding insurer, pursuant to a reinsurance contract. A special purpose financial captive insurance company shall not issue a contract of insurance or a contract for
assumption of risk or indemnification of loss other than such reinsurance contract.
(2) Unless approved otherwise in advance by the commissioner, a special purpose
financial captive insurance company shall not assume or retain exposure to insurance
or reinsurance losses for its own account that are not funded by:
(A) Proceeds from a special purpose financial captive insurance company securitization or letters of credit or other assets described in subdivision (17) of section 38a-91aa;
(B) Premium and other amounts payable by the ceding insurer to the special purpose
financial captive insurance company pursuant to the reinsurance contract; and
(C) Any return on investment of the items under subparagraphs (A) and (B) of this
subdivision.
(3) The reinsurance contract shall contain all provisions reasonably required or approved by the commissioner, which requirements shall take into account the laws applicable to the ceding insurer regarding the ceding insurer taking credit for the reinsurance
provided under such reinsurance contract.
(4) A special purpose financial captive insurance company may, with the prior approval of the commissioner, cede risks assumed through a reinsurance contract to one
or more reinsurers through the purchase of reinsurance.
(5) A special purpose financial captive insurance company may enter into contracts
and conduct other commercial activities related or incidental to and necessary to fulfill
the purposes of the reinsurance contract, the insurance securitization, this section and
section 38a-91tt, provided such contracts and activities are included in the special purpose financial captive insurance company's plan of operation or are approved in advance
by the commissioner. Such contracts and activities may include, but are not limited to:
(A) Entering into reinsurance contracts; (B) issuing special purpose financial captive
insurance company securities; (C) complying with the terms of such contracts or securities; (D) entering into trust, guaranteed investment contract, swap or other derivative,
tax, administration, reimbursement, or fiscal agent transactions; (E) complying with
trust indenture, reinsurance or retrocession; and (F) other agreements necessary or incidental to effect an insurance securitization.
(6) Unless approved otherwise in advance by the commissioner, a reinsurance contract shall not contain any provision for payment by the special purpose financial captive
insurance company in discharge of its obligations under the reinsurance contract to any
person other than the ceding insurer or any receiver of the ceding insurer.
(7) A special purpose financial captive insurance company shall notify the commissioner immediately of any action by a ceding insurer or any other person to foreclose
on or otherwise take possession of collateral provided by the special purpose financial
captive insurance company to secure any obligation of the special purpose financial
captive insurance company.
(h) The assets of a special purpose financial captive insurance company shall be
preserved and administered by or on behalf of the special purpose financial captive
insurance company to satisfy the liabilities and obligations of the special purpose financial captive insurance company incident to the reinsurance contract, the insurance securitization and other related agreements.
(i) In the special purpose financial captive insurance company securitization, the
security offering memorandum or other document issued to prospective investors regarding the offer and sale of a surplus note or other security shall include a disclosure
that all or part of the proceeds of such insurance securitization will be used to fund the
special purpose financial captive insurance company's obligations to the ceding insurer.
(j) A special purpose financial captive insurance company shall not be subject to
any restriction on investments other than the following:
(1) A special purpose financial captive insurance company shall not make a loan
to any person other than as permitted under its plan of operation or as otherwise approved
in advance by the commissioner; and
(2) The commissioner may prohibit or limit any investment that threatens the solvency or liquidity of the special purpose financial captive insurance company unless
the investment is otherwise approved in its plan of operation or in an order issued to the
special purpose financial captive insurance company pursuant to subparagraph (B) of
subdivision (2) of subsection (e) of section 38a-91bb.
(k) (1) Unless approved otherwise in advance by the commissioner, a special purpose financial captive insurance company shall (A) maintain its books, records, documents, accounts, vouchers and agreements in this state, and (B) preserve and keep available in this state such books, records, documents, accounts, vouchers and agreements
for examination and inspection until such time as the commissioner approves the destruction or other disposition of such books, records, documents, accounts, vouchers
and agreements. If the commissioner approves the keeping of the items listed in this
subdivision outside this state, the special purpose financial captive insurance company
shall maintain in this state a complete and true copy of each such original. Such copies
may be photographs, reproductions on file or electronically stored and reproduced.
(2) A special purpose financial captive insurance company shall make its books,
records, documents, accounts, vouchers and agreements available for inspection by the
commissioner at any time. A special purpose financial captive insurance company shall
keep its books and records in such manner that its financial condition, affairs and operations can be readily ascertained and so that the commissioner may readily verify its
financial statements and determine its compliance with sections 38a-91aa to 38a-91tt,
inclusive.
(l) Upon the issuance by a court of any order of conservation, rehabilitation or
liquidation of a special purpose financial captive insurance company or one or more of
the special purpose financial captive insurance company's protected cells, the receiver
shall manage the assets and liabilities of the special purpose financial captive insurance
company pursuant to the provisions of this section and section 38a-91tt.
(m) Notwithstanding any provision in the contracts or other documentation governing the special purpose financial captive insurance company securitization, amounts
recoverable by the receiver of a special purpose financial captive insurance company
under a reinsurance contract shall not be reduced or diminished as a result of the entry
of an order of conservation, rehabilitation or liquidation with respect to a ceding insurer.
(n) Notwithstanding the provisions of chapter 704c:
(1) An application, a petition, a temporary restraining order or an injunction issued
pursuant to chapter 704c with respect to a ceding insurer shall not prohibit (A) a special
purpose financial captive insurance company from transacting business with the ceding
insurer, including making any payment with respect to a special purpose financial captive insurance company security, or (B) any action or proceeding against a special purpose financial captive insurance company or its assets;
(2) The commencement of a summary proceeding or the issuance of any order by
the court with respect to a special purpose financial captive insurance company shall
not prohibit such company from making payments or taking any action required to make
such payments, provided such payments (A) are made pursuant to a special purpose
financial captive insurance company security or reinsurance contract, and (B) are consistent with the special purpose financial captive insurance company's plan of operation
and any order issued to the special purpose financial captive insurance company pursuant
to subparagraph (B) of subdivision (2) of subsection (e) of section 38a-91bb;
(3) A receiver of a ceding insurer shall not void a nonfraudulent transfer by a ceding
insurer to a special purpose financial captive insurance company of money or other
property made pursuant to a reinsurance contract; and
(4) A receiver of a special purpose financial captive insurance company shall not
void a nonfraudulent transfer by the special purpose financial captive insurance company of money or other property:
(A) Made to a ceding insurer pursuant to a reinsurance contract or made to or for
the benefit of any holder of a special purpose financial captive insurance company security with respect to the special purpose financial captive insurance company security; and
(B) Made consistent with the special purpose financial captive insurance company's
plan of operation and any order issued to the special purpose financial captive insurance
company pursuant to subparagraph (B) of subdivision (2) of subsection (e) of section
38a-91bb.
(o) Except for the fulfillment of the obligations under a reinsurance contract, the
assets of a special purpose financial captive insurance company, including assets held
in trust, on a funds-withheld basis or in any other arrangement to secure the special
purpose financial captive insurance company's obligations under a reinsurance contract,
shall not be consolidated with or included in the estate of a ceding insurer in any delinquency proceeding against the ceding insurer for any purpose.
(Oct. Sp. Sess. P.A. 11-1, S. 71.)
History: Oct. Sp. Sess. P.A. 11-1 effective July 1, 2012.
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Sec. 38a-91tt. (Note: This section is effective July 1, 2012.) Additional requirements for a sponsored captive insurance company licensed as a special purpose
financial captive insurance company. (a) The provisions of this section shall apply
to a sponsored captive insurance company licensed as a special purpose financial captive
insurance company. For purposes of this section, (1) "general account" means all assets
and liabilities of a sponsored captive insurance company licensed as a special purpose
financial captive insurance company not attributable to a protected cell, and (2) "special
purpose financial captive insurance company" means a sponsored captive insurance
company licensed as a special purpose financial captive insurance company.
(b) Unless approved otherwise in advance by the commissioner, a participant in a
special purpose financial captive insurance company shall be a ceding insurer. Any
change in a participant shall require the commissioner's prior approval.
(c) (1) A special purpose financial captive insurance company, on behalf of a protected cell, shall be entitled to assert the same claims and defenses in actions in law or
equity as if the protected cell were a corporation established under chapter 601, including, but not limited to, claims and defenses in actions at law or equity alleging alter ego,
corporate veil piercing, offset, substantive consolidation, equitable subordination or
recoupment.
(2) In connection with the conservation, rehabilitation or liquidation of a special
purpose financial captive insurance company or one or more of its protected cells, such
company shall keep the assets and liabilities of a protected cell separate at all times
from, and shall not commingle with, those of other protected cells and of the special
purpose financial captive insurance company. The assets of one protected cell shall not
be used to satisfy the obligations or liabilities of another protected cell or of the special
purpose financial captive insurance company based on legal or equitable claims or defenses, including, but not limited to, alter ego, piercing the corporate veil, offset, substantive consolidation, equitable subordination or recoupment, unless such claims or defenses would apply to such protected cell if it were a special purpose financial captive
insurance company without separate cells.
(d) (1) Notwithstanding subdivision (1) of subsection (a) of section 38a-91rr, a
special purpose financial captive insurance company may issue securities of any person
approved in advance by the commissioner.
(2) (A) Any security issued by a special purpose financial captive insurance company with respect to a protected cell and any other contract or obligation of the special
purpose financial captive insurance company with respect to a protected cell shall include the designation of such protected cell and shall include the following statement,
or such other statement as may be required by the commissioner:
(i) In the case of a security: "The holder of this security shall have no right or
recourse against the special purpose financial captive insurance company and its assets
other than against assets properly attributable to the designated protected cell and the
special purpose financial captive insurance company's general account, to the extent
permitted by Connecticut law."; or
(ii) In the case of a contract or obligation: "The counter party to this contract or
obligation shall have no right or recourse against the special purpose financial captive
insurance company and its assets other than against assets properly attributable to the
designated protected cell and the special purpose financial captive insurance company's
general account, to the extent permitted by Connecticut law.".
(B) The failure to include such disclosure, in whole or part, in such security, contract
or obligation with respect to a protected cell shall not serve as the sole basis for a creditor,
ceding insurer or any other person to have recourse against the general account of the
special purpose financial captive insurance company in excess of the limitations provided under subsection (i) of this section, or against the assets of any other protected cell.
(e) In addition to the provisions of subsections (c) and (d) of section 38a-91rr, a
special purpose financial captive insurance company shall be subject to the following
with respect to its protected cells:
(1) A special purpose financial captive insurance company shall establish a protected cell only for the purpose of insuring or reinsuring risks of one or more reinsurance
contracts with a ceding insurer or two or more affiliated ceding insurers, with the intent
of facilitating an insurance securitization. A separate protected cell shall be established
with respect to each separate securitization transaction; and
(2) No special purpose financial captive insurance company shall make a sale, an
exchange or another transfer of assets between or among any of its protected cells without
the prior approval of the commissioner.
(f) (1) Each special purpose financial captive insurance company shall attribute
assets and liabilities to the protected cells and the general account in accordance with
the plan of operation approved by the commissioner, and shall not attribute any other
assets or liabilities between its general account and any protected cell or between any
protected cells.
(2) Each special purpose financial captive insurance company shall attribute all
insurance obligations, assets and liabilities relating to a reinsurance contract entered
into with respect to a protected cell and the related insurance securitization transaction,
including any securities issued by such company as part of the insurance securitization,
to such protected cell. The rights, benefits, obligations and liabilities of any securities
attributable to such protected cell and the performance under such reinsurance contract
and the related securitization transaction, and any tax benefits, losses, refunds or credits
allocated pursuant to a tax allocation agreement to which the special purpose financial
captive insurance company is a party, including any payments made by or due to be
made to the special purpose financial captive insurance company pursuant to the terms
of such agreement, shall reflect such obligations, assets and liabilities relating to such
reinsurance contract and the insurance securitization transaction that are attributed to
such protected cell.
(g) (1) Except as otherwise specified in this section, the terms and conditions set
forth in chapter 704c pertaining to administrative supervision of insurers and the conservation, rehabilitation, receiverships and liquidation of insurers shall apply to a special
purpose financial captive insurance company or any of such company's protected cells
independently and shall not cause or otherwise effect a conservation, rehabilitation,
receivership or liquidation of the special purpose financial captive insurance company
or another protected cell that is not otherwise insolvent.
(2) For purposes of applying the provisions of chapter 704c to a special purpose
financial captive insurance company, "insolvency" or "insolvent" means the special
purpose financial captive insurance company (A) is unable to pay its obligations when
they are due, unless those obligations are the subject of a bona fide dispute, or (B) has
failed to meet all criteria and conditions for solvency of the special purpose financial
captive insurance company established by the commissioner. In the case of a sponsored
captive insurance company licensed as a special purpose financial captive insurance
company, the definition of "insolvency" and "insolvent" shall be applied separately to
each protected cell and to the special purpose financial captive insurance company's
general account.
(h) (1) The commissioner may file in the Superior Court of this state, without causing or otherwise effecting the conservation or rehabilitation of an otherwise solvent
protected cell of a special purpose financial captive insurance company and subject to
the provisions of subparagraph (E) of subdivision (1) of subsection (k) of this section,
a petition to authorize the commissioner to conserve, rehabilitate or liquidate a special
purpose financial captive insurance company on one or more of the following grounds:
(A) Embezzlement, wrongful sequestration, dissipation or diversion of the special
purpose financial captive insurance company's assets intended to be used to pay amounts
owed to the ceding insurer or the holders of special purpose financial captive insurance
company securities;
(B) The special purpose financial captive insurance company is insolvent; or
(C) The holders of a majority in outstanding principal amount of each class of special
purpose financial captive insurance company securities attributable to each particular
protected cell request or consent to conservation, rehabilitation or liquidation.
(2) The commissioner may file in the Superior Court of this state, without causing
or otherwise effecting a conservation, rehabilitation, receivership or liquidation of the
special purpose financial captive insurance company generally or another of its protected
cells, a petition to authorize the commissioner to conserve, rehabilitate or liquidate one
or more of a special purpose financial captive insurance company's protected cells,
independently, on one or more of the following grounds:
(A) Embezzlement, wrongful sequestration, dissipation or diversion of the special
purpose financial captive insurance company's assets attributable to the affected protected cell or cells intended to be used to pay amounts owed to the ceding insurer or the
holders of special purpose financial captive insurance company securities of the affected
protected cell or cells;
(B) The affected protected cell is insolvent; or
(C) The holders of a majority in outstanding principal amount of each class of special
purpose financial captive insurance company securities attributable to that particular
protected cell request or consent to conservation, rehabilitation or liquidation.
(3) Except where consent is given as described in subparagraph (C) of subdivision
(1) of this subsection and subparagraph (C) of subdivision (2) of this subsection, the
court may not grant relief as provided under subdivision (1) or (2) of this subsection
unless, after notice and a hearing, the commissioner, who shall have the burden of proof,
establishes by clear and convincing evidence that relief must be granted. The court's
order may be made in respect of one or more protected cells by name, rather than the
special purpose financial captive insurance company generally.
(i) (1) Upon the issuance by a court of any order of conservation, rehabilitation, or
liquidation of a special purpose financial captive insurance company or one or more of
the special purpose financial captive insurance company's protected cells, the receiver
shall manage the assets and liabilities of the special purpose financial captive insurance
company or the applicable protected cell in accordance with the provisions of this section
and section 38a-91ss.
(2) The assets attributable to one protected cell shall not be applied to the liabilities
attributable to another protected cell unless an asset or liability is attributable to more
than one protected cell, in which case the receiver shall deal with the asset or liability
in accordance with the terms of any relevant governing instrument or contract. Recourse
to the special purpose financial captive insurance company's general account in connection with the conservation, rehabilitation or liquidation of a protected cell shall be limited
to the greater of the amount of assets in the general account as of the date such proceeding
is commenced or the required minimum capital for the general account as of the date
such proceeding is commenced. The assets attributable to one protected cell shall not
be set off against the liabilities attributable to another protected cell, and assets attributable to the special purpose financial captive insurance company's general account shall
not be set off against the liabilities attributable to any protected cell except to the extent
provided in this subdivision.
(3) Relief shall not be granted nor shall any order be issued based on equitable
theories of recovery, including substantive consolidation, equitable subordination or
recoupment, to attach or seize the assets of any solvent protected cell for the benefit of
another protected cell or special purpose financial captive insurance company or to
pierce the corporate veil of any protected cell, in connection with the conservation,
rehabilitation or liquidation of a special purpose financial captive insurance company
or one or more protected cells, unless such equitable theories, attachment, seizure or
corporate veil piercing would apply to such cell if it were a special purpose financial
captive insurance company without separate cells.
(j) Notwithstanding any provision in the contracts or other documentation governing the special purpose financial captive insurance company insurance securitization,
amounts recoverable by the receiver of a special purpose financial captive insurance
company shall not be reduced or diminished as a result of the entry of an order of
conservation, rehabilitation or liquidation with respect to the ceding insurer.
(k) (1) Notwithstanding the provisions of chapter 704c:
(A) An application, a petition, a temporary restraining order or an injunction issued
pursuant to the provisions of chapter 704c with respect to a ceding insurer shall not
prohibit (i) a special purpose financial captive insurance company from transacting
business with the ceding insurer, including making any payment pursuant to a special
purpose financial captive insurance company security with respect to a protected cell,
or (ii) any action or proceeding against a special purpose financial captive insurance
company or its assets;
(B) The commencement of a summary proceeding or other interim proceeding commenced before a formal delinquency proceeding or the issuance of any order by the
court with respect to a special purpose financial captive insurance company shall not
prohibit such company from making payments or taking any action required to make
such payments pursuant to a special purpose financial captive insurance company security with respect to a protected cell or a special purpose financial captive insurance
company contract;
(C) A receiver of a ceding insurer shall not void a nonfraudulent transfer by a ceding
insurer to a special purpose financial captive insurance company of money or other
property made pursuant to a reinsurance contract;
(D) A receiver of a special purpose financial captive insurance company shall not
void (i) a nonfraudulent transfer by the special purpose financial captive insurance company of money or other property made to a ceding insurer pursuant to a reinsurance
contract or made to or for the benefit of any holder of a special purpose financial captive
insurance company security with respect to a protected cell, or (ii) a special purpose
financial captive insurance company security;
(E) (i) In the event of an insolvency of a special purpose financial captive insurance
company where one or more protected cells remain solvent, the commissioner shall
separate such cells from such company and shall, on application of a sponsor, allow for
the conversion of such cells into one or more special purpose financial captive insurance
companies. The commissioner shall issue such orders as the commissioner deems necessary to protect the solvency of the remaining solvent protected cells.
(ii) In the event of an insolvency of a protected cell, the special purpose financial
captive insurance company's assets shall be accounted for and managed in accordance
with subsection (i) of this section and other applicable laws of this state.
(2) The provisions of subdivision (1) of this subsection shall not prohibit the commissioner from taking any action permitted under chapter 704c with respect only to the
conservation or rehabilitation of a special purpose financial captive insurance company
with protected cell or cells, provided the commissioner has sufficient grounds to seek
to declare such company insolvent. In such case, with respect to the solvent protected
cell or cells, the commissioner shall not prohibit such company from making payments
or taking any action required to make such payments pursuant to a special purpose
financial captive insurance company security, reinsurance contract or insurance securitization transaction that are attributable to such cell or cells.
(l) Except for the fulfillment of the obligations under a special purpose financial
captive insurance company contract, the assets of a special purpose financial captive
insurance company, including assets held in trust, shall not be consolidated with or
included in the estate of a ceding insurer in any delinquency proceeding against the
ceding insurer for any purpose.
(Oct. Sp. Sess. P.A. 11-1, S. 72.)
History: Oct. Sp. Sess. P.A. 11-1 effective July 1, 2012.
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Sec. 38a-155. (Formerly Sec. 38-42b). Conversion of hospital service corporation and medical service corporation to mutual insurance company. Procedure.
Authorized agents to sell products. (a) Any consolidated hospital service corporation
and medical service corporation organized and formed pursuant to sections 38a-199 to
38a-209, inclusive, or sections 38a-214 to 38a-225, inclusive, in existence on July 1,
1982, and possessing contingency reserves in an amount of fifty million dollars or more
may, at its option and without reincorporation, convert to a domestic mutual insurance
company under the laws of this state (1) by amending and restating its certificate of
incorporation to grant it such powers consistent with the provisions of this section,
provided the amended and restated certificate of incorporation shall not state that said
domestic mutual insurance company is a nonprofit corporation or that it is created under
the Nonstock Corporation Act, and (2) by obtaining a license pursuant to section 38a-41 to operate as a domestic mutual insurance company.
(b) The board of directors of any such corporation electing to convert to a domestic
mutual insurance company shall adopt a resolution prior to October 1, 1984, declaring
the election of the corporation to make such conversion and to become subject to all of
the laws of the state governing such companies, except as limited by the terms of this
section. After the adoption of such resolution, the board of directors of such corporation
shall adopt such amendments to its certificate of incorporation as are consistent with
the provisions of this section and as are necessary for it to convert to a domestic mutual
insurance company and file such amended and restated certificate of incorporation with
the Secretary of the State. Such amendment shall designate the members of the company.
Any subsequent amendment to the certificate of incorporation shall be consistent with
the terms of this section.
(c) No such amended and restated certificate of incorporation shall be effective
unless and until it is filed with the Secretary of the State. Prior to the filing of such
certificate, the corporation shall apply to the Insurance Commissioner for a license pursuant to section 38a-41, provided such license, if issued, shall only become effective
upon the filing of the certificate. Upon the filing of such amended and restated certificate
of incorporation, the corporation shall be a domestic mutual insurance company and
shall not be a consolidated hospital and medical service corporation. Upon such filing
the company shall no longer be subject to the provisions of section 12-212a, sections
38a-199 to 38a-209, inclusive, or sections 38a-214 to 38a-225, inclusive.
(d) From the date of filing of such amended and restated certificate of incorporation,
such company shall be authorized to do a life, accident and health insurance business,
including any business or type of business which any other corporation now or hereafter
chartered by or incorporated in Connecticut and empowered to do a life, accident and
health insurance business may now or hereafter lawfully do; and the company is specifically empowered to accept and to cede reinsurance of any and all insurance risks or
hazards.
(e) No consolidated hospital service corporation and medical service corporation
that converts to a domestic mutual insurance company under this section shall thereafter
avail itself of the provisions of either sections 38a-199 to 38a-209, inclusive, or sections
38a-214 to 38a-225, inclusive. Such company shall not organize or participate in the
organization of, revert or convert to the status of, own or organize a subsidiary that is,
have common management or directors with, or in any other way be affiliated with, a
corporation or other legal entity organized, formed or acting pursuant to said sections.
Until the filing with the Secretary of the State of the amended and restated certificate
of incorporation as provided herein, the permission currently granted to any such corporation by the Insurance Commissioner shall continue in full force and effect, and such
corporation shall continue to provide comprehensive health care and related services to
its present or future subscribers and covered persons by health care contracts and may
make provision for the payment for such health care services. Upon converting to a
domestic mutual insurance company, the company shall be subject to all of the laws
of the state governing domestic mutual insurance companies and, except as otherwise
provided in this section, shall have all of the powers of any other domestic mutual
insurance company now or hereafter chartered or incorporated by this state and empowered to do an insurance business including, but not limited to, the power to establish,
maintain, own and operate health care centers as a line of business.
(f) Upon the filing of the amended and restated certificate of incorporation with the
Secretary of the State, as provided by this section, the company shall be liable for taxes
under chapters 207 and 208 and for any other tax for which any other domestic mutual
insurance company is liable to the state or any political subdivision thereof.
(g) All insurance products sold through the insurance companies authorized by this
section and the insurance company authorized by section 4 of public act 84-323* shall
be available to be sold by any licensed independent agent, as provided in sections 38a-702j, 38a-703 to 38a-718, inclusive, 38a-731 to 38a-735, inclusive, 38a-741 to 38a-745, inclusive, 38a-769 to 38a-777, inclusive, 38a-786, 38a-790, 38a-792 and 38a-794
and so authorized by such insurance company.
(P.A. 84-323, S. 1, 3, 5, 6; P.A. 91-29, S. 2, 8; P.A. 93-229, S. 6, 21; P.A. 95-207, S. 8, 9; P.A. 01-113, S. 24, 42; P.A.
11-19, S. 2, 3.)
*Note: Section 4 of public act 84-323 is special in nature and therefore has not been codified but remains in full force
and effect according to its terms.
History: Sec. 38-42b transferred to Sec. 38a-155 in 1991; P.A. 91-29 made technical changes in Subsec. (h) deleting
references to sections repealed by the same act; (Revisor's note: In 1993 references to Secs. 38a-94 to 38a-101, inclusive,
and 38a-966 to 38a-970, inclusive, repealed by P.A. 92-60, were deleted editorially by the Revisors); P.A. 93-229 deleted
former Subdiv. (1) containing obsolete provision re discount under Subsec. (h) of Sec. 19a-166, renumbering as necessary,
effective June 4, 1993; P.A. 95-207 made technical corrections to Subsecs. (c) and (g), in Subsec. (d) made an allowance
for an insurance company to transact life, accident and health insurance business and to accept and cede reinsurance in
lieu of writing accident and health insurance only, deleted former Subsec. (f) which provided a prohibition against any
corporation which converts to a domestic mutual insurance company, relettered the previous Subsecs. (g) and (h) as (f)
and (g) and deleted Subsec. (i), effective June 28, 1995; P.A. 01-113 amended Subsec. (g) to delete references to Secs.
38a-702 and 38a-795, and to substitute "section 38a-702j" for "section 38a-783", effective September 1, 2002; P.A. 11-19 made technical changes in Subsecs. (a) and (e).
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