304.49-040 Financial security requirements.
(1)
(2)
(3)
(4)
(5)
No captive insurer shall be issued a certificate of authority unless it shall possess
and thereafter maintain unimpaired paid-in capital and surplus of:
(a) In the case of a pure captive insurer, not less than two hundred fifty thousand
dollars (0,000);
(b) In the case of a consortium, sponsored, agency, or an industrial insured
captive insurer, not less than five hundred thousand dollars (0,000); and
(c) In the case of a special purpose captive insurer, not less than two hundred fifty
thousand dollars (0,000), or another amount determined by the
commissioner.
Notwithstanding the requirements of subsection (1) of this section, no captive
insurer organized as a reciprocal insurer under KRS 304.49-010 to 304.49-230 shall
be issued a certificate of authority unless it shall possess and thereafter maintain
free surplus of not less than five hundred thousand dollars (0,000).
The commissioner may prescribe additional capital and surplus based upon the type,
volume, and nature of insurance business transacted.
Capital and surplus shall be in the form of cash, an irrevocable letter of credit issued
by a bank approved by the commissioner and chartered by the Commonwealth of
Kentucky or a member bank of the Federal Reserve System, a surplus note
approved by the commissioner, or other assets as may be approved by the
commissioner. A surplus note shall not be used for the initial minimum capital and
surplus of a non-mutual captive insurer.
In the case of a branch captive insurer, as security for the payment of liabilities
attributable to the branch operations, the commissioner shall require that a separate
trust fund, funded by an irrevocable letter of credit or other acceptable asset, be
established and maintained in the United States for the benefit of United States
policyholders and United States ceding insurers under insurance policies issued or
reinsurance contracts issued or assumed, by the branch captive insurer through its
branch operations. The amount of this security may be no less than the capital and
surplus required in this section and the reserves on the insurance policies or the
reinsurance contracts, 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; provided, however, the
commissioner may permit a branch captive insurer that is required to post security
for loss reserves on branch business by its reinsurer to reduce the funds in the trust
account required by this section by the same amount so long as the security remains
posted with the reinsurer. If the form of security selected is a letter of credit, the
letter of credit must be established by, or issued or confirmed by, a bank chartered
in Kentucky or a member bank of the Federal Reserve System.
Effective: July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1608, effective July 15, 2010; and ch. 91,
sec. 2, effective July 15, 2010. -- Amended 2006 Ky. Acts ch. 252, Pt. XXXIV,
sec. 7, effective April 25, 2006. -- Created 2000 Ky. Acts ch. 434, sec. 4, effective
July 14, 2000.
Legislative Research Commission Note (7/15/2010). A reference to the "executive
director" of insurance in subsection (4) of this section, as amended by 2010 Ky. Acts
ch. 91, sec. 2, has been changed in codification to the "commissioner" of insurance to
reflect the reorganization of certain parts of the Executive Branch, as set forth in
Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts
ch. 24. This change was made by the Reviser of Statutes pursuant to 2010 Ky. Acts
ch. 23, sec. 1938.
Legislative Research Commission Note (7/15/2010). This section was amended by
2010 Ky. Acts chs. 24 and 91, which do not appear to be in conflict and have been
codified together.
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