A sponsored captive insurance company may establish and maintain 1 or more protected cells to insure risks of 1 or more participants, subject to the following conditions:

(1) The owners of a sponsored captive insurance company shall be limited to its participants and sponsors, provided that a sponsored captive insurance company 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 insurance company to reflect the financial condition and results of operations of such protected cell, net income or loss of such protected cell, dividends or other distributions to participants of such protected cell, and such other factors regarding such 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 insurance company generally;

(4) No sale, exchange, or transfer of assets, or dividend or other distribution, may be made with respect to a protected cell by such sponsored captive insurance company 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 insurance company shall annually file with the Commissioner such 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 insurance company shall notify the Commissioner in writing promptly and in any event within 10 business days of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations;

(8) No participant contract shall take effect without the Commissioner’s prior written approval, and 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 insurance company requiring the Commissioner’s prior written approval; and

(9) The business written by a sponsored captive insurance company, with respect to each protected cell, shall be:

a. Fronted by an insurance company licensed under the laws of this State or any other state;

b. Reinsured by a reinsurer authorized or approved by this State; or

c. Secured by a trust fund in this State for the benefit of policyholders and claimants or funded by an irrevocable letter of credit or other arrangement that is acceptable to 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 such protected cell. The Commissioner may require the sponsored captive insurance company to increase the funding of any security arrangement established under this paragraph (9). If the form of security is a letter of credit, the letter of credit must 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 paragraph (9) shall be established in a form and upon such terms approved by the Commissioner.

75 Del. Laws, c. 150, § ?1;