Download as PDF
304.49-228 Establishment of protected cells by sponsored captive insurer -Conditions.
A sponsored captive insurer may establish and maintain one (1) or more protected
cells to insure risks of one (1) or more participants, subject to the following
conditions:
(1) The owners of a sponsored captive insurer shall be limited to its participants
and sponsors, provided that a sponsored captive insurer may issue nonvoting
securities or interests to other persons on terms approved by the
commissioner;
(2) The assets of each protected cell shall be held and accounted for separately
on the books and records of the sponsored captive insurer to reflect the
financial condition and results of operations of the protected cell, net income or
loss of the protected cell, dividends or other distributions to participants of the
protected cell, and other factors regarding the protected cell as may be
provided in the applicable participant contract or required by the commissioner;
(3) The assets of a protected cell shall not be chargeable with liabilities of any
other protected cell or, unless otherwise agreed in the applicable participant
contract, of the sponsored captive insurer generally;
(4) No sale or transfer of assets, or dividend or other distribution, may be made
with respect to a protected cell by such sponsored captive insurer without the
consent of the participants of each affected protected cell;
(5) No sale, exchange, or transfer of assets, or dividend or other distribution, other
than a payment to a sponsor in accordance with the applicable participant
contract, may be made with respect to a protected cell to a sponsor or a
participant without the commissioner's approval;
(6) Each sponsored captive insurer shall annually file with the commissioner
financial reports as the commissioner shall require, which shall include, without
limitation, accounting statements detailing the financial experience of each
protected cell;
(7) Each sponsored captive insurer shall notify the commissioner, in writing, within
ten (10) business days of any protected cell that has become insolvent or is
otherwise unable to meet its claim or expense obligations;
(8) No participant contract shall take effect without the commissioner's prior written
approval. The addition of each new protected cell and withdrawal of any
participant or termination of any existing protected cell shall constitute a
change in the plan of operation of the sponsored captive insurer requiring the
commissioner's prior written approval; and
(9) (a) The business written by a sponsored captive insurer, with respect to each
protected cell, shall be:
1.
Fronted by an insurance company licensed under the laws of this
state or any other state;
2.
Reinsured by a reinsurer authorized or approved by this state;
3.
Secured by a trust fund in this state for the benefit of policyholders
and claimants; or
4.
Funded by an irrevocable letter of credit or other arrangement that is
(b)
(c)
(d)
(e)
approved in writing by the commissioner.
The amount of security provided shall be no less than the reserves
associated with those liabilities which are neither fronted nor reinsured,
including reserves for losses, allocated loss adjustment expenses,
incurred but not reported losses, and unearned premiums for business
written through the protected cell.
The commissioner may, for any reason, require the sponsored captive
insurance company to increase the funding of any security arrangement
established under this subsection in order to protect claimants or potential
claimants.
If the form of security is a letter of credit, the letter of credit shall be
established, issued, or confirmed by a financial institution chartered by or
licensed or otherwise authorized to do banking business in this state, or
by any other financial institution approved by the commissioner.
A trust maintained pursuant to this subsection shall be established in a
form and upon such terms as approved by the commissioner.
Effective:July 15, 2010
History: Amended 2010 Ky. Acts ch. 24, sec. 1622, effective July 15, 2010. -Created 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 4, effective April 25, 2006.
Disclaimer: These codes may not be the most recent version. Kentucky may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.