(A) This section and § 38-90-485 provide a basis for the creation and use of protected cells by a SPFC as a means of accessing alternative sources of capital, lowering formation and administrative expenses, and generally making insurance securitizations more efficient. If a conflict occurs between a provision of Chapter 10 of Title 38 or Article 1, Chapter 90 of Title 38 and either this section or § 38-90-485, this section and § 38-90-485 control.

(B) A SPFC may establish and maintain one or more protected cells with prior written approval of the director and subject to compliance with the applicable provisions of this article and the following conditions:

(1) a protected cell must be established only for the purpose of insuring or reinsuring risks of one or more SPFC contracts with a counterparty with the intent of facilitating an insurance securitization;

(2) each protected cell must be accounted for separately on the books and records of the SPFC to reflect the financial condition and results of operations of the protected cell, net income or loss, dividends, or other distributions to the counterparty for the SPFC contract with each cell, and other factors as may be provided in the SPFC contract, insurance securitization transaction documents, plan of operation, or business plan, or as required by the director;

(3) amounts attributed to a protected cell under this chapter, including assets transferred to a protected cell account, are owned by the SPFC, and the SPFC may not be, or may not hold itself out to be, a trustee with respect to those protected cell assets of that protected cell account;

(4) all attributions of assets and liabilities between a protected cell and the general account must be in accordance with the plan of operation approved by the director. No other attribution of assets or liabilities may be made by a SPFC between the SPFC’s general account and its protected cell or cells. The SPFC shall attribute all insurance obligations, assets, and liabilities relating to a SPFC contract and the related insurance securitization transaction, including any securities issued by the SPFC as part of the insurance securitization, to a particular protected cell. The rights, benefits, obligations, and liabilities of any securities attributable to that protected cell and the performance under a SPFC contract and the related securitization transaction and any tax benefits, losses, refunds, or credits allocated, or any of them, at any point in time pursuant to a tax allocation agreement between the SPFC and the SPFC’s counterparty, parent, or company or group company, or any of them, in common control with them, as the case may be, including any payments made by or due to be made to the SPFC pursuant to the terms of the agreement, must reflect the insurance obligations, assets, and liabilities relating to the SPFC contract and the insurance securitization transaction that are attributed to a particular protected cell;

(5) the assets of a protected cell must not be chargeable with liabilities arising out of a SPFC contract related to or associated with another protected cell. However, one or more SPFC contracts may be attributed to a protected cell so long as those SPFC contracts are intended to be, and ultimately are, part of a single securitization transaction;

(6) a sale, an exchange, or another transfer of assets may not be made by the SPFC between or among any of its protected cells without the consent of the director, counterparty, and each protected cell;

(7) except as otherwise contemplated in the SPFC contract or related insurance securitization transaction documents, or both, a sale, an exchange, a transfer of assets, a dividend, or a distribution may not be made from a protected cell to a counterparty or parent without the director’s approval and may not be approved if the sale, exchange, transfer, dividend, or distribution would result in insolvency or impairment with respect to a protected cell; and

(8) a SPFC may pay interest or repay principal, or both, and make distributions or repayments in respect of any securities attributed to a particular protected cell from assets or cash flows relating to or emerging from the SPFC contract and the insurance securitization transactions that are attributable to that particular protected cell in accordance with the provisions of this article or as otherwise approved by the director.

(C) A SPFC contract with or attributable to a protected cell does not take effect without the director’s prior written approval, and the addition of each new protected cell constitutes a change in the business plan requiring the director’s prior written approval. The director may retain legal, financial, and examination services from outside the department to examine and investigate the application for a protected cell, the reasonable cost of which may be charged against the applicant, or the director may use internal resources to examine and investigate the application the reasonable cost of which may be charged against the applicant up to a maximum of twelve thousand dollars, or both.

(D) A SPFC utilizing protected cells initially shall possess minimum capitalization separate and apart from the capitalization of its protected cell or cells in an amount determined by the director after giving due consideration of the SPFC’s business plan, feasibility study, and pro formas, including the nature of the risks to be insured or reinsured. For purposes of determining the capitalization of each protected cell, a SPFC initially shall capitalize and after that time maintain capitalization in each protected cell in the amount and manner required for a SPFC in § 38-90-460.

(E) The establishment of one or more protected cells alone does not constitute, and may not be deemed to be, a fraudulent conveyance, an intent by the SPFC to defraud creditors, or the carrying out of business by the SPFC for any other fraudulent purpose.