33-28-301. Protected cell captive insurance company. (1) One or more sponsors may form a protected cell captive insurance company.
     (2) A protected cell captive insurance company formed or licensed under the provisions of this chapter may establish and maintain one or more protected cells to insure risks of one or more participants, subject to the following conditions:
     (a) The shareholders of the protected cell captive insurance company must be limited to its participants and sponsors.
     (b) Each protected cell must be accounted for separately on the books and records of the protected cell captive insurance company to reflect the financial condition and result of operations of the protected cell, including but not limited to the net income or loss, dividends or other distributions to participants, and any other factor provided in the participant contract or required by the commissioner.
     (c) The assets of a protected cell may not be chargeable with liabilities arising from any other insurance business of the protected cell captive insurance company.
     (d) A sale, exchange, or other transfer of assets may not be made by a protected cell captive insurance company among any of its protected cells without the consent of the participants of each affected protected cell.
     (e) A sale, exchange, transfer of assets, dividend, or distribution may not be made from a protected cell to a sponsor or a participant without the commissioner's prior written approval, which may not be given if the sale, exchange, transfer, dividend, or distribution would result in insolvency or impairment with respect to the protected cell.
     (f) Each protected cell captive insurance company shall file annually with the commissioner any financial reports required by the commissioner and shall include, without limitation, accounting statements detailing the financial experience of each protected cell.
     (g) Each protected cell captive insurance company shall notify the commissioner in writing within 20 business days from the time that a protected cell has become impaired or insolvent or is otherwise unable to meets its claim or expense obligations.
     (h) A participant contract may not take effect without the commissioner's prior written approval.
     (i) An addition of each new protected cell or the withdrawal of any participant of an existing protected cell constitutes a change in the business plan of the protected cell captive insurance company and may not be effective without the commissioner's prior written approval.
     (j) The business written by a protected cell captive insurance company, with respect to each cell, must be:
     (i) fronted by an insurance company licensed under the laws of any state;
     (ii) reinsured by a reinsurer authorized or approved by the commissioner; or
     (iii) secured by a trust fund in the United States for the benefit of policyholders and claimants, which must be funded by an irrevocable letter of credit or other asset that is acceptable to the commissioner, and with the following requirements:
     (A) the amount of the security provided by the trust fund may not be less than the reserves associated with the liabilities that are not fronted or reinsured, including but not limited to reserves for losses that are allocated for loss adjustment expenses, incurred but not reported losses, and unearned premiums for business written through the participant's protected cell;
     (B) the commissioner may require the protected cell captive insurance company to increase the funding of any trust;
     (C) if the form of security in the trust is a letter of credit, the letter of credit must be established, issued, or confirmed by a bank chartered in this state, a member of the federal reserve system, or a bank chartered by another state if that state-chartered bank is acceptable to the commissioner; and
     (D) the trust and trust instrument must be in a form and with terms approved by the commissioner.

     History: En. Sec. 1, Ch. 383, L. 2003; amd. Sec. 15, Ch. 518, L. 2007.