Kentucky Administrative Regulations › Title 806 - PUBLIC PROTECTION CABINET - DEPARTMENT OF INSURANCE › Chapter 49 - Captive Insurers › Section 806 KAR 49:040 - Captive insurer parents and affiliates

Current through Register Vol. 51, No. 1, July 1, 2024
RELATES TO: KRS 304.49
NECESSITY, FUNCTION, AND CONFORMITY:
				KRS
				304.2-110 provides that the Commissioner of
				Insurance may promulgate administrative regulations necessary for or as an aid
				to the effectuation of any provisions of the Kentucky Insurance Code.
				KRS
				304.49-140 authorizes the Commissioner of
				Insurance to establish and amend administrative regulations related to captive
				insurance companies as necessary to effectuate the provisions of KRS 304.49.
				KRS
				304.49-170 requires the Commissioner of
				Insurance to promulgate administrative regulations concerning the control of
				risk management functions of a parent or affiliated company by a pure captive
				insurer. This administrative regulation establishes the requirements regarding
				captive insurer parents and affiliates.
Section
			 1. Definition. "Company" means captive insurer.
Section 2. A pure captive insurer shall
			 participate in the risk management function of any controlled unaffiliated
			 business to be insured by the company and shall establish procedures for
			 effective control of risk management activities regarding the controlled
			 unaffiliated business. The commissioner or his designee may request evidence of
			 a pure captive insurer's participation in the risk management functions of
			 controlled unaffiliated business as a portion of a market conduct or financial
			 examination authorized under KRS 304.2 or at any other time the commissioner
			 deems necessary.
Section 3. Each
			 company shall report to the executive director within thirty (30) days after
			 any change in its executive officers or directors, including in its report a
			 statement of the business and professional affiliations of any new commissioner
			 or director. A director, officer, or employee of a company shall not, except on
			 behalf of the company, accept, or be the beneficiary of, any fee, brokerage,
			 gift, or other emolument because of any investment, loan, deposit, purchase,
			 sale, payment or exchange made by or for the company. That person may receive
			 reasonable compensation for necessary services rendered to the company in his
			 or her usual private, professional or business capacity. Any profit or gain
			 received by or on behalf of any person in violation of this section shall inure
			 to and be recoverable by the company.
Section
			 4. In addition to the investment of funds in Section 3 of this
			 administrative regulation, each company chartered in this state is required to
			 adopt a conflict of interest statement for officers, directors and key
			 employees. The statement shall disclose that the individual has no outside
			 commitments, personal or otherwise, that would divert him from his duty to
			 further the interests of the company he represents. This shall not preclude
			 that person from being a director or officer in more than one (1) insurance
			 company. Each officer, director, and key employee shall file a disclosure with
			 the insurer's board of directors yearly.
Section
			 5.
(1) A person, other than the
			 issuer, shall not acquire or attempt to acquire any voting security of a
			 domestic captive insurer without the prior written approval of the
			 commissioner, if, after the consummation thereof, that person would directly or
			 indirectly be in control or have exercisable control of that company. For
			 purposes of this administrative regulation, "acquire or attempt to acquire"
			 includes making a tender offer or other request for voting securities, making
			 any invitation for tenders of voting securities, entering into any agreement to
			 exchange securities for voting securities, or otherwise seeking to acquire or
			 acquiring voting securities in the open public market or private
			 market.
(2) A person shall not
			 enter into an agreement to merge with or otherwise to acquire control of a
			 domestic company without the prior written approval of the
			 commissioner.
(3) In considering
			 any application for acquisition of control or merger with a domestic company,
			 the executive director shall consider all of the facts and circumstances
			 surrounding the application as well as the criteria for establishment of a
			 company pursuant to KRS 304.49.