31A-37-402. Sponsored captive insurance companies — Certificate of authority mandatory.
(1)
A sponsor of a sponsored captive insurance company shall be:
Terms Used In Utah Code 31A-37-402
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
Contract: A legal written agreement that becomes binding when signed.
Federal Reserve System: The central bank of the United States. The Fed, as it is commonly called, regulates the U.S. monetary and financial system. The Federal Reserve System is composed of a central governmental agency in Washington, D.C. (the Board of Governors) and twelve regional Federal Reserve Banks in major cities throughout the United States. Source: OCC
Form: means one of the following prepared for general use:
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
Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
Liabilities: The aggregate of all debts and other legal obligations of a particular person or legal entity.
Member: means a person having membership rights in an insurance corporation. See Utah Code 31A-1-301
Participant: means an entity that is insured by a sponsored captive insurance company:
(a)
if the losses of the participant are limited through a participant contract to the assets of a protected cell; and
(b)
(i)
the entity is permitted to be a participant under Section 31A-37-403; or
(ii)
the entity is an affiliate of an entity permitted to be a participant under Section 31A-37-403. See Utah Code 31A-37-102
Person: includes :
(a)
an individual;
(b)
a partnership;
(c)
a corporation;
(d)
an incorporated or unincorporated association;
(e)
a joint stock company;
(f)
a trust;
(g)
a limited liability company;
(h)
a reciprocal;
(i)
a syndicate; or
(j)
another similar entity or combination of entities acting in concert. See Utah Code 31A-1-301
Protected cell: means a separate account established and maintained by a sponsored captive insurance company for one participant. See Utah Code 31A-37-102
Reinsurer: means a person licensed in this state as an insurer with the authority to assume reinsurance. See Utah Code 31A-1-301
Security: means a:
(i)
note;
(ii)
stock;
(iii)
bond;
(iv)
debenture;
(v)
evidence of indebtedness;
(vi)
certificate of interest or participation in a profit-sharing agreement;
(vii)
collateral-trust certificate;
(viii)
preorganization certificate or subscription;
(ix)
transferable share;
(x)
investment contract;
(xi)
voting trust certificate;
(xii)
certificate of deposit for a security;
(xiii)
certificate of interest of participation in an oil, gas, or mining title or lease or in payments out of production under such a title or lease;
(xiv)
commodity contract or commodity option;
(xv)
certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the items listed in Subsections (171)(a)(i) through (xiv); or
(xvi)
another interest or instrument commonly known as a security. See Utah Code 31A-1-301
provide all or part of the capital and surplus required by applicable law in an amount of not less than $350,000, which amount the commissioner may increase by order if the commissioner considers it necessary; and
(ii)
organize and operate a sponsored captive insurance company. 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
State: when applied to the different parts of the United States, includes a state, district, or territory of the United States. See Utah Code 68-3-12.5
United States: includes each state, district, and territory of the United States of America. See Utah Code 68-3-12.5
(a)
an insurer authorized or approved under the laws of a state;
(b)
a reinsurer authorized or approved under the laws of a state;
(c)
a captive insurance company holding a certificate of authority under this chapter;
(d)
an insurance holding company that:
(i)
controls an insurer licensed pursuant to the laws of a state; and
(ii)
is subject to registration pursuant to the holding company system of laws of the state of domicile of the insurer described in Subsection (1)(d)(i);
(e)
an approved captive management firm in Utah or its affiliates; or
(f)
another person approved by the commissioner after finding that the approval of the person as a sponsor is not inconsistent with the purposes of this chapter.
(2)
(a)
The business written by a sponsored captive insurance company with respect to a protected cell shall be fronted by the sponsor insurance company through a controlled unaffiliated contract or an insurer that is:
(i)
authorized or approved:
(A)
under the laws of a state; or
(B)
under any jurisdiction if the insurance company is a wholly owned subsidiary of an insurance company licensed pursuant to the laws of a state;
(ii)
reinsured by a reinsurer authorized or approved by this state; or
(iii)
subject to Subsection (2)(b), secured by a trust fund:
(A)
in the United States;
(B)
for the benefit of policyholders and claimants;
(C)
funded by an irrevocable letter of credit or other asset acceptable to the commissioner; and
(D)
held by the sponsor as provided in Subsection 31A-17-404(1).
(b)
(i)
The amount of security provided by the trust fund described in Subsection (2)(a)(iii) may not be less than the reserves associated with the liabilities of the trust fund, including:
(A)
reserves for losses;
(B)
allocated loss adjustment expenses;
(C)
incurred but unreported losses; and
(D)
unearned premiums for business written through the participant‘s protected cell.
(ii)
The commissioner may require the sponsored captive insurance company to increase the funding of a trust established pursuant to this Subsection (2).
(iii)
If the form of security in the trust described in Subsection (2)(a)(iii) is a letter of credit, the letter of credit shall be established, issued, or confirmed by a bank that is:
(A)
chartered in this state;
(B)
a member of the federal reserve system; or
(C)
chartered by another state if that state-chartered bank is acceptable to the commissioner.
(iv)
A trust and trust instrument maintained pursuant to this Subsection (2) shall be in a form and upon terms approved by the commissioner.
(3)
A risk retention group may not be either a sponsor or a participant of a sponsored captive insurance company.
