2023 Connecticut General Statutes › Title 38a - Insurance › Chapter 698 - Insurers › Section 38a-91ss. - 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 (19) 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; P.A. 18-151, S. 5; P.A. 22-118, S. 447.)
History: Oct. Sp. Sess. P.A. 11-1 effective July 1, 2012; P.A. 18-151 amended Subsec. (g)(2)(A) by replacing reference to Sec. 38a-91aa(17) with reference to Sec. 38a-91aa(18), effective July 1, 2018; P.A. 22-118 amended Subsec. (g)(2)(A) by replacing reference to Sec. 38a-91aa(18) with reference to Sec. 38a-91aa(19), effective July 1, 2022.