Except as provided in Subsections (2) and (3), a captive insurance company may not directly insure a risk other than the risk of the captive insurance company‘s parent or affiliated company.
Terms Used In Utah Code 31A-37-202
Affiliate: means a person who controls, is controlled by, or is under common control with, another person. See Utah Code 31A-1-301
Affiliated company: means a business entity that because of common ownership, control, operation, or management is in the same corporate or limited liability company system as:
Association: means a legal association of two or more persons that meets the following requirements:
(a)
the persons are exposed to similar or related liability because of related, similar, or common business trade, products, services, premises, or operations; and
(b)
(i)
the association or the association's member organizations:
(A)
own, control, or hold with power to vote all of the outstanding voting securities of an association captive insurance company incorporated as a stock insurer;
(B)
have complete voting control over an association captive insurance company incorporated as a mutual insurer; or
(C)
have complete voting control over an association captive insurance company formed as a limited liability company; or
(ii)
the association's member organizations collectively constitute all of the subscribers of an association captive insurance company formed as a reciprocal insurer. See Utah Code 31A-37-102
Association captive insurance company: means a business entity that insures risks of:
(a)
a member organization of the association;
(b)
an affiliate of a member organization of the association; and
Captive insurance company: includes any of the following formed or holding a certificate of authority under this chapter:
(i)
a branch captive insurance company;
(ii)
a pure captive insurance company;
(iii)
an association captive insurance company;
(iv)
a sponsored captive insurance company;
(v)
an industrial insured captive insurance company, including an industrial insured captive insurance company formed as a risk retention group captive in this state pursuant to the provisions of the Federal Liability Risk Retention Act of 1986;
Commissioner: means Utah's Insurance Commissioner or the commissioner's designee. See Utah Code 31A-37-102
Controlled unaffiliated business: means a business entity:
(a)
(i)
in the case of a pure captive insurance company, that is not in the corporate or limited liability company system of a parent or the parent's affiliate; or
(ii)
in the case of an industrial insured captive insurance company, that is not in the corporate or limited liability company system of an industrial insured or an affiliated company of the industrial insured;
(b)
(i)
in the case of a pure captive insurance company, that has a contractual relationship with a parent or affiliate; or
(ii)
in the case of an industrial insured captive insurance company, that has a contractual relationship with an industrial insured or an affiliated company of the industrial insured; and
(c)
whose risks that are or will be insured by a pure captive insurance company, an industrial insured captive insurance company, or both, are managed in accordance with Subsection 31A-37-106(1)(j) by:
(i)
(A)
a pure captive insurance company; or
(B)
an industrial insured captive insurance company; or
Criminal act: means an act for which a person receives a verdict or finding of guilt after a criminal trial or a plea of guilty or nolo contendere to a criminal charge. See Utah Code 31A-37-102
Damages: Money paid by defendants to successful plaintiffs in civil cases to compensate the plaintiffs for their injuries.
Insurance: includes :
(i)
a risk distributing arrangement providing for compensation or replacement for damages or loss through the provision of a service or a benefit in kind;
(ii)
a contract of guaranty or suretyship entered into by the guarantor or surety as a business and not as merely incidental to a business transaction; and
(iii)
a plan in which the risk does not rest upon the person who makes an arrangement, but with a class of persons who have agreed to share the risk. See Utah Code 31A-1-301
insurance company: means a person doing an insurance business as a principal including:
(i)
a fraternal benefit society;
(ii)
an issuer of a gift annuity other than an annuity specified in Subsections 31A-22-1305(2) and (3);
(iii)
a motor club;
(iv)
an employee welfare plan;
(v)
a person purporting or intending to do an insurance business as a principal on that person's own account; and
Member: means a person having membership rights in an insurance corporation. See Utah Code 31A-1-301
Member organization: means a person that belongs to an association. See Utah Code 31A-37-102
Parent: means a person that directly or indirectly owns, controls, or holds with power to vote more than 50% of the outstanding securities of an organization. See Utah Code 31A-37-102
Protected cell: means a separate account established and maintained by a sponsored captive insurance company for one participant. See Utah Code 31A-37-102
Pure captive insurance company: means a business entity that insures risks of a parent or affiliate of the business entity. See Utah Code 31A-37-102
Sponsored captive insurance company: means a captive insurance company:
(a)
in which the minimum capital and surplus required by applicable law is provided by one or more sponsors;
(b)
that is formed or holding a certificate of authority under this chapter;
(c)
that insures the risks of a separate participant through the contract; and
(d)
that segregates each participant's liability through one or more protected cells. See Utah Code 31A-37-102
(2)
In addition to the risks described in Subsection (1), an association captive insurance company may insure the risk of:
(a)
a member organization of the association captive insurance company‘s association; or
(b)
an affiliate of a member organization of the association captive insurance company’s association.
(3)
The following may insure a risk of a controlled unaffiliated business:
(a)
an industrial insured captive insurance company;
(b)
a protected cell;
(c)
a pure captive insurance company; or
(d)
a sponsored captive insurance company.
(4)
To the extent allowed by a captive insurance company’s organizational charter, a captive insurance company may provide any type of insurance described in this title, except:
(a)
workers’ compensation insurance;
(b)
personal motor vehicle insurance;
(c)
homeowners’ insurance; and
(d)
any component of the types of insurance described in Subsections (4)(a) through (c).
(5)
A captive insurance company may not provide coverage for:
(a)
a wager or gaming risk;
(b)
loss of an election; or
(c)
the penal consequences of a crime.
(6)
Unless the punitive damages award arises out of a criminal act of an insured, a captive insurance company may provide coverage for punitive damages awarded, including through adjudication or compromise, against the captive insurance company’s:
(a)
parent; or
(b)
affiliated company.
(7)
Notwithstanding Subsection (4), if approved by the commissioner, a captive insurance company may insure as a reimbursement a limited layer or deductible of workers’ compensation coverage.
