(a) A pure captive insurance company shall be incorporated as a stock insurer with its capital divided into shares and held by the stockholders.

(b) A group captive insurance company or an industrial insured captive insurance company may be incorporated:

(1) as a stock insurer with its capital divided into shares and held by the stockholders; or

(2) as a mutual insurer without capital stock, the governing body of which is elected by the member organizations of its group.

(c) A captive insurance company shall have not less than three (3)
incorporators of whom not less than one (1) shall be a resident of Guam.

(d) Before the Articles of Incorporation are transmitted to the Director, the incorporators shall petition the Commissioner to issue a certificate setting forth his findings that the establishment and maintenance of the

COL120106
22 Guam Code Ann. BUSINESS REGULATIONS
CH. 23 CAPTIVE INSURANCE COMPANIES

proposed corporation will promote the general good of Guam In arriving at such finding, the Commissioner shall consider:

(1) the character, reputation, financial standing and purpose of the incorporators or attorney-in-fact;

(2) the character, reputation, financial responsibility, insurance experience and business qualifications of the officers and directors;

(3) the amount and liquidity of its assets relative to the risks to be assumed;

(4) the adequacy of the expertise, experience and character of the persons who will manage the captive insurer;

(5) the overall soundness of its plan of operation;

(6) the adequacy of the loss prevention programs of its parent or member organizations;

(7) the establishment of business relationships with banks and services including, but not limited to, accountants, attorneys, investment advisers, broker-dealers and other professionals that are licensed to transact business in Guam; and
(8) such other aspects as the Commissioner shall deem advisable. (e) The Articles of Incorporation, such certificate, and the organization
fee shall be transmitted to the Director, who shall thereupon record both the
Articles of Incorporation and the certificate.

(f) The capital stock of a captive insurance company incorporated as a stock insurer shall be issued at not less than Ten Dollars ($10.00) par value.

(g) At least one (1) of the members of the Board of Directors of a captive insurance company incorporated on Guam shall be a resident of Guam.

(h) Captive insurance companies formed under the provisions of this Chapter shall have the privileges and be subject to the provisions of the General Corporation Law, as well as the applicable provisions contained in this Chapter. In the event of conflict between the provisions of said General Corporation Law and the provisions of this Chapter, the latter shall control.

(i) The Articles of Incorporation or bylaws of a captive insurance company may authorize a quorum of a board of directors to consist of no

COL120106
22 Guam Code Ann. BUSINESS REGULATIONS
CH. 23 CAPTIVE INSURANCE COMPANIES

fewer than the required majority of the board members as specified in the
Articles of Incorporation.

(j) Establishment of Protected Cells.

(1) A protected cell company may establish one (1) or more protected cells with the prior written approval of the Commissioner of a plan of operation or amendments thereto submitted by the protected cell company with respect to each protected cell in connection with an insurance securitization. Upon the written approval of the Commissioner of the plan of operation, which shall include, but not be limited to, the specific business objectives and investment guidelines of the protected cell, the protected cell may, in accordance with the approved plan of operation, attribute to the protected cell insurance obligations with respect to its insurance business and obligations relating to the insurance securitization and assets to fund the obligations. A protected cell shall have its own distinct name or
designation, which shall include the words >protected cell=. The
protected cell company shall transfer all assets attributable to a protected cell to one (1) or more separately established and identified protected cell accounts bearing the name or designation of that protected cell. Protected cell assets shall be held in the protected cell accounts for the purpose of satisfying the obligations of that protected cell.

(2) All attributions of assets and liabilities between a protected cell and the general account shall be in accordance with the plan of operation approved by the Commissioner. No other attribution of assets or liabilities may be made by a protected cell company between
the protected cell company=s general account and its protected cells.
Any attribution of assets and liabilities between the general account and a protected cell, or from investors in the form of principal on a debt instrument issued by a protected cell company in connection with a protected cell company securitization shall be in cash or in readily marketable securities with established market values.

(3) The creation of a protected cell does not create, in respect of that protected cell, a legal person separate from the protected cell company. Amounts attributed to a protected cell under this Chapter, including assets transferred to a protected cell account, are owned by the protected cell company and the protected cell company may not be,

COL120106
22 Guam Code Ann. BUSINESS REGULATIONS
CH. 23 CAPTIVE INSURANCE COMPANIES

nor hold itself out to be, a trustee with respect to those protected cell assets of that protected cell account. Notwithstanding the foregoing, the protected cell company may allow for a security interest to attach to protected cell assets or a protected cell account when in favor of a creditor of the protected cell and otherwise allowed under applicable law.

(4) This Chapter shall not be construed to prohibit the protected cell company from contracting with or arranging for an investment advisor, commodity trading advisor, or other third party to manage the protected cell assets of a protected cell, provided that all remuneration, expenses and other compensation of the third party advisor or manager are payable from the protected cell assets of that protected cell and not from the protected cell assets of other protected cells or the assets of
the protected cell company=s general account.

(5) (i) A protected cell company shall establish administrative and accounting procedures necessary to properly identify the one (1) or more protected cells of the protected cell company and the protected cell assets and protected cell liabilities attributable to the protected cells. It shall be the duty of the directors of a protected cell company to:

(A) keep protected cell assets and protected cell liabilities separate and separately identifiable from the assets and liabilities
of the protected cell company=s general account; and

(B) keep protected cell assets and protected cell liabilities attributable to one (1) protected cell separate and separately identifiable from protected cell assets and protected cell liabilities attributable to other protected cells.

(ii) Notwithstanding the foregoing, if this Section is violated, the remedy of tracing shall be applicable to protected cell assets when commingled with protected cell assets of other protected cells or the
assets of the protected cell company=s general account. The remedy of
tracing shall not be construed as an exclusive remedy.

(6) The protected cell company shall, when establishing a protected cell, attribute to the protected cell assets with a value at least equal to the reserves and other insurance liabilities attributed to that protected cell.

COL120106
22 Guam Code Ann. BUSINESS REGULATIONS
CH. 23 CAPTIVE INSURANCE COMPANIES

(k) Use and operation of protected cells.

(1) The protected cell assets of a protected cell may not be charged with liabilities arising out of any other business the protected cell company may conduct. All contracts or other documentation reflecting protected cell liabilities shall clearly indicate that only the protected cell assets are available for the satisfaction of those protected cell liabilities.

(2) The income, gains and losses, realized or unrealized, from protected cell assets and protected cell liabilities shall be credited to or charged against the protected cell without regard to other income, gains or losses of the protected cell company, including income, gains or losses of other protected cells. Amounts attributed to any protected cell and accumulations on the attributed amounts may be invested and reinvested and the investments in a protected cell or cells shall not be taken into account in applying the investment limitations otherwise applicable to the investments of the protected cell company.

(3) Assets attributed to a protected cell shall be valued at their fair value on the date of valuation.

(4) A protected cell company shall, in respect of any of its protected cells, engage in fully funded indemnity triggered insurance securitization to support in full the protected cell exposures attributable to that protected cell. A protected cell company insurance securitization that is non-indemnity triggered shall qualify as an insurance securitization under the terms of this Chapter only after the Commissioner, in accordance with the authority granted under Section
23114 of this Chapter, adopts regulations addressing the methods of funding of the portion of the risk that is not indemnity based, account, disclosure, risk based capital treatment, and assessing risks associated with such securitizations. A protected cell company insurance securitization that is not fully funded, whether indemnity triggered or non-indemnity triggered, is prohibited. Protected cell assets may be used to pay interest or other consideration on any outstanding debt or other obligation attributable to that protected cell, and nothing in this Subsection shall be construed or interpreted to prevent a protected cell company from entering into a swap agreement or other transaction for the account of the protected cell that has the effect of guaranteeing interest or other consideration. In all protected cell company

COL120106
22 Guam Code Ann. BUSINESS REGULATIONS
CH. 23 CAPTIVE INSURANCE COMPANIES

insurance securitizations, the contracts or other documentation effecting the transaction shall contain provisions identifying the protected cell to which the transaction will be attributed. In addition, the contracts or other documentation shall clearly disclose that the assets of that protected cell, and only those assets, are available to pay the obligations of that protected cell. Notwithstanding the foregoing, and subject to the provisions of this Chapter and any other applicable law or regulation, the failure to include the language in the contracts or other documentation shall not be used as the sole basis by creditors, reinsurers or other claimants to circumvent the provisions of this Chapter.

(5) A protected cell company shall only be authorized to attribute to a protected cell account the insurance obligations relating to the
protected cell company=s general account. Under no circumstances
shall a protected cell be authorized to issue insurance or reinsurance contracts directly to policyholders or reinsureds or have any obligation
to the policyholders or reinsureds of the protected cell company=s
general account.

(6) At the cessation of business of a protected cell in accordance with the plan approved by the Commissioner, the protected cell company shall voluntarily close out the protected cell account.

(l) Reach of creditors and other claimants.

(1)(i) Protected cell assets shall only be available to the creditors of the protected cell company that are creditors in respect to that protected cell and shall thereby be entitled, in conformity with the provisions of this Chapter, to have recourse to the protected cell assets attributable to that protected cell, and shall be absolutely protected from the creditors of the protected cell company that are creditors in respect of that protected cell and who, accordingly, shall not be entitled to have recourse to the protected cell assets attributable to that protected cell. Creditors, with respect to a protected cell, shall not be entitled to have recourse against the protected cell assets of other protected cells or the assets
of the protected cell company=s general account.

(ii) Protected cell assets shall only be available to creditors of a protected cell company after all protected cell

COL120106
22 Guam Code Ann. BUSINESS REGULATIONS
CH. 23 CAPTIVE INSURANCE COMPANIES

liabilities have been extinguished or otherwise provided for in accordance with the plan of operation relating to that protected cell.

(2) When an obligation of a protected cell company to a person arises from a transaction, or is otherwise imposed, in respect of a protected cell:

(i) that obligation of the protected cell company shall extend only to the protected cell assets attributable to that protected cell, and the person shall, with respect to that obligation, be entitled to have recourse only to the protected cell assets attributable to that protected cell; and

(ii) that obligation of the protected cell company shall not extend to the protected cell assets of any other protected cell or
the assets of the protected cell company=s general account, and
that person shall not, with respect to that obligation, be entitled to have recourse to the protected cell assets of any other protected
cell or the assets of the protected cell company=s general account.

(3) When an obligation of a protected cell company relates solely to the general account, the obligation of the protected cell company shall extend only to, and that creditor shall, with respect to that obligation, be entitled to have recourse only to, the assets of that
protected cell company=s general account.

(4) The activities, assets, and obligation relating to a protected cell are not subject to the provisions of any guaranty fund, and neither a protected cell nor a protected cell company shall be assessed by or otherwise be required to contribute to any guaranty fund or guaranty association in Guam with respect to the activities, assets, or obligations of a protected cell. Nothing in this Subsection shall affect the activities
or obligations of an insurer=s general account.

(5) In no event shall the establishment of one (1) or more protected cells alone constitute or be deemed to be a fraudulent conveyance, an intent by the protected cell company to defraud creditors, or the carrying out of business by the protected cell company for any other fraudulent purpose.

(m) Conservation, rehabilitation or liquidation of protected cell companies.

COL120106
22 Guam Code Ann. BUSINESS REGULATIONS
CH. 23 CAPTIVE INSURANCE COMPANIES

(1) Notwithstanding any contrary provision in the insurance code of Guam, the regulations promulgated under the insurance code of Guam, or any other applicable law or regulation, upon any order of conservation, rehabilitation or liquidation of a protected cell company,
the receiver shall be bound to deal with the protected cell company=s
assets and liabilities, including protected cell assets and protected cell liabilities, in accordance with the requirements set forth in this Chapter.

(2) With respect to amounts recoverable under a protected cell company insurance securitization, the amount recoverable by the receiver shall not be reduced or diminished as a result of the entry of an order of conservation, rehabilitation or liquidation with respect to the protected cell company notwithstanding any provisions to the contrary in the contracts or other documentation governing the
protected cell company insurance securitization.@

SOURCE: GC § 43706; added by P.L. 17-85:1. Amended by P.L. 24-104:5. Amended by P.L. 27-54:6.