2023 Connecticut General Statutes › Title 38a - Insurance › Chapter 698 - Insurers › Section 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 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 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 personal risk insurance, as defined in section 38a-663, for private passenger motor vehicle or homeowners 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) The captive insurance company first obtains from the commissioner a license authorizing the captive insurance company to do insurance business in this state;
(2) The captive insurance company's 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) The captive insurance company maintains its principal place of business in this state; and
(4) The captive insurance company 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 commissioner shall be an agent of the 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 such applicant 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; and
(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 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 or foreign captive insurance company grants the commissioner authority to examine the alien captive insurance company or foreign captive insurance company in the jurisdiction in which the alien captive insurance company or foreign captive insurance company is formed, operates or maintains books and records.
(P.A. 08-127, S. 2; Oct. Sp. Sess. P.A. 11-1, S. 57; P.A. 12-145, S. 2; P.A. 14-6, S. 1; P.A. 22-118, S. 439.)
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; P.A. 12-145 made a technical change in Subsec. (a)(5), effective June 15, 2012; P.A. 14-6 amended Subsec. (a)(5) to add “personal risk insurance, as defined in section 38a-663, for”; P.A. 22-118 amended Subsec. (a) by deleting “is not” re disapproval by commissioner, amended Subsec. (e)(3) by adding references to foreign captive insurance company and “, operates or maintains books and records”, and made technical changes in Subsecs. (a), (b), (c)(3)(A), (c)(4)(B) and (c)(6), effective July 1, 2022.