House
File
2766
-
Introduced
HOUSE
FILE
2766
BY
COMMITTEE
ON
WAYS
AND
MEANS
(SUCCESSOR
TO
HSB
756)
A
BILL
FOR
An
Act
relating
to
captive
insurance
companies
and
life
captive
1
reinsurance
companies,
and
including
civil
penalties.
2
BE
IT
ENACTED
BY
THE
GENERAL
ASSEMBLY
OF
THE
STATE
OF
IOWA:
3
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Section
1.
Section
432.1,
Code
2026,
is
amended
by
adding
1
the
following
new
subsection:
2
NEW
SUBSECTION
.
7.
a.
A
tax
return
filed
under
this
3
section
shall
not
be
subject
to
inspection
under
chapter
22.
4
It
shall
be
unlawful
for
any
present
or
former
officer
or
5
employee
of
the
state
to
willfully
or
recklessly
publish
any
6
tax
return
filed
under
this
section.
A
person
who
violates
7
this
paragraph
shall
be
guilty
of
a
serious
misdemeanor
and,
in
8
addition
to
any
other
penalty,
shall
be
dismissed
from
state
9
office
or
discharged
from
state
employment.
10
b.
This
section
shall
not
be
construed
to
prohibit
the
11
department
of
revenue
from
turning
over
information
and
tax
12
returns
in
the
department
of
revenue’s
possession
pursuant
13
to
this
subsection
to
duly
authorized
officers
of
the
United
14
States,
or
tax
officials
of
other
states,
pursuant
to
an
15
agreement
between
the
commissioner
of
insurance
and
any
of
the
16
following:
17
(1)
The
secretary
of
the
treasury
of
the
United
States,
or
18
the
secretary’s
delegate.
19
(2)
The
commissioner
of
insurance
of
another
state.
20
Sec.
2.
Section
432.1A,
Code
2026,
is
amended
by
adding
the
21
following
new
subsection:
22
NEW
SUBSECTION
.
9.
a.
A
tax
return
filed
under
this
23
section
shall
not
be
subject
to
inspection
under
chapter
22.
24
It
shall
be
unlawful
for
any
present
or
former
officer
or
25
employee
of
the
state
to
willfully
or
recklessly
publish
any
26
tax
return
filed
under
this
section.
A
person
who
violates
27
this
paragraph
shall
be
guilty
of
a
serious
misdemeanor
and,
in
28
addition
to
any
other
penalty,
shall
be
dismissed
from
state
29
office
or
discharged
from
state
employment.
30
b.
This
section
shall
not
be
construed
to
prohibit
the
31
department
of
revenue
from
turning
over
information
and
32
tax
returns
in
the
department’s
possession
pursuant
to
this
33
subsection
to
duly
authorized
officers
of
the
United
States,
or
34
tax
officials
of
other
states,
pursuant
to
an
agreement
between
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the
commissioner
of
insurance
and
any
of
the
following:
1
(1)
The
secretary
of
the
treasury
of
the
United
States,
or
2
the
secretary’s
delegate.
3
(2)
The
commissioner
of
insurance
of
another
state.
4
Sec.
3.
Section
490.905,
subsection
1,
Code
2026,
is
amended
5
to
read
as
follows:
6
1.
The
secretary
of
state,
upon
a
corporation
complying
with
7
this
section
and
upon
the
filing
of
articles
of
incorporation
8
and
upon
receipt
of
the
fees
as
provided
in
this
chapter
,
9
shall
issue
an
acknowledgment
of
receipt
of
document
as
10
of
the
date
of
the
filing
of
the
articles
of
incorporation
11
with
the
secretary
of
state.
The
acknowledgment
of
receipt
12
of
document
shall
state
on
its
face
that
it
is
issued
in
13
accordance
with
this
section
.
The
secretary
of
state
shall
14
then
notify
the
appropriate
officer
of
the
state
or
country
of
15
the
corporation’s
last
domicile
that
the
corporation
is
now
a
16
domestic
corporation
domiciled
in
this
state.
This
section
17
applies
to
life
insurance
companies,
and
to
insurance
companies
18
doing
business
under
chapter
515
,
and
to
captive
companies
19
doing
business
under
chapter
521J
.
20
Sec.
4.
Section
521J.1,
unnumbered
paragraph
1,
Code
2026,
21
is
amended
to
read
as
follows:
22
As
used
in
this
chapter
subchapter
,
unless
the
context
23
otherwise
requires:
24
Sec.
5.
Section
521J.1,
subsections
2,
6,
7,
8,
and
9,
Code
25
2026,
are
amended
to
read
as
follows:
26
2.
“Alien
captive
company”
means
a
captive
company
formed
27
under
the
laws
of
an
alien
jurisdiction
any
country
except
the
28
United
States
that
imposes
statutory
or
regulatory
standards
in
29
a
form
acceptable
to
the
commissioner
on
companies
transacting
30
the
business
of
insurance
in
such
jurisdiction.
31
6.
“Business
entity”
means
a
corporation,
a
limited
32
liability
company,
or
other
legal
entity
formed
by
an
33
organizational
document
legal
entity
permitted
under
Iowa
law
.
34
“Business
entity”
does
not
include
a
sole
proprietorship.
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7.
“Captive
company”
means
any
pure
captive
company,
1
protected
cell
captive
company,
special
purpose
captive
2
company,
or
industrial
insured
captive
company
formed
or
3
authorized
under
this
chapter
subchapter
.
“Captive
company”
4
does
not
include
a
life
captive
reinsurance
company
as
defined
5
under
section
521J.101.
6
8.
“Captive
reinsurance
company”
means
a
captive
insurance
7
company
in
this
state,
as
authorized
by
the
commissioner
by
8
rule
under
this
subchapter
,
that
reinsures
the
risk
ceded
by
9
any
other
insurer.
“Captive
reinsurance
company”
does
not
10
include
a
life
captive
reinsurance
company
as
defined
under
11
section
521J.101.
12
9.
“Captive
risk
retention
group”
means
a
captive
insurance
13
risk
retention
group
formed
under
this
chapter
subchapter
and
14
that
is
subject
to
chapter
515E
.
15
Sec.
6.
Section
521J.1,
Code
2026,
is
amended
by
adding
the
16
following
new
subsection:
17
NEW
SUBSECTION
.
13A.
“Foreign
captive
company”
means
a
18
captive
company
formed
and
licensed
under
the
laws
of
any
19
jurisdiction
within
the
United
States
except
this
state.
20
Sec.
7.
Section
521J.1,
subsection
22,
Code
2026,
is
amended
21
to
read
as
follows:
22
22.
“Protected
cell”
means
a
separate
account
established
23
by
a
protected
cell
captive
company
formed
or
authorized
under
24
this
chapter
subchapter
in
which
an
identified
pool
of
assets
25
and
liabilities
are
segregated
and
insulated,
as
provided
in
26
section
521J.17
,
from
the
remainder
of
the
protected
cell
27
captive
company’s
assets
and
liabilities
in
accordance
with
28
the
terms
of
one
or
more
participant
contracts
to
fund
the
29
liability
of
the
protected
cell
captive
company
with
respect
to
30
the
participants.
31
Sec.
8.
Section
521J.1,
subsection
24,
paragraph
b,
Code
32
2026,
is
amended
to
read
as
follows:
33
b.
The
company
is
formed
or
authorized
under
this
chapter
34
subchapter
.
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Sec.
9.
Section
521J.1,
subsection
31,
Code
2026,
is
amended
1
to
read
as
follows:
2
31.
“Special
purpose
captive
company”
means
a
captive
3
company
that
is
formed
or
authorized
under
this
chapter
4
subchapter
that
does
not
meet
the
definition
of
any
other
type
5
of
captive
company
as
defined
in
this
section
subchapter
,
6
or
that
is
formed
by,
on
behalf
of,
or
for
the
benefit
of
a
7
political
subdivision
of
this
state
.
“Special
purpose
captive
8
company”
may
include
a
reciprocal
insurer.
“Special
purpose
9
captive
company”
does
not
include
a
life
captive
reinsurance
10
company
as
defined
under
section
521J.101.
11
Sec.
10.
Section
521J.2,
subsection
1,
unnumbered
paragraph
12
1,
Code
2026,
is
amended
to
read
as
follows:
13
If
permitted
by
its
organizational
document,
a
captive
14
company
may
apply
to
the
commissioner
for
a
certificate
of
15
authority
to
provide
property
insurance,
casualty
insurance,
16
life
insurance,
disability
income
insurance,
surety
insurance,
17
marine
insurance,
health
insurance,
or
a
group
health
plan,
or
18
the
ability
to
accept
or
transfer
risk
by
means
of
a
parametric
19
contract,
with
the
following
exceptions:
20
Sec.
11.
Section
521J.2,
subsection
2,
Code
2026,
is
amended
21
by
adding
the
following
new
paragraph:
22
NEW
PARAGRAPH
.
e.
The
captive
company’s
organizational
23
documents,
and
any
subsequent
amendments,
have
been
filed
and
24
approved
by
the
commissioner
prior
to
being
filed
with
the
25
secretary
of
state.
26
Sec.
12.
Section
521J.2,
subsections
3,
4,
and
5,
Code
2026,
27
are
amended
to
read
as
follows:
28
3.
a.
Prior
to
receiving
a
certificate
of
authority,
a
29
captive
company
applicant
shall
do
all
of
the
following:
30
(1)
File
with
the
commissioner
all
of
the
following:
31
(a)
A
certified
copy
of
the
business
entity’s
32
organizational
document.
33
(b)
A
statement
under
oath
of
an
officer
of
the
business
34
entity
showing
the
business
entity’s
financial
condition.
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(c)
Any
other
statement
or
document
required
by
the
1
commissioner
as
established
by
rule
.
2
(2)
Submit
a
description
of
coverages,
deductibles,
3
coverage
limits,
rates,
and
any
additional
information
4
requested
by
the
commissioner
to
the
commissioner
for
approval.
5
(3)
Provide
a
statement
to
the
commissioner
that
describes
6
all
of
the
following:
7
(a)
The
character,
reputation,
and
financial
standing
of
8
the
organizers
of
the
business
entity.
9
(b)
The
character,
reputation,
financial
responsibility,
10
insurance
experience,
and
business
qualifications
of
all
11
officers,
directors,
and
managing
members
of
the
business
12
entity.
13
(4)
Provide
any
other
information
required
by
the
14
commissioner
as
established
by
rule
.
15
b.
If
there
is
a
subsequent
material
change
in
the
16
information
provided
to
the
commissioner
under
paragraph
17
“a”
,
the
captive
company
shall
submit
appropriate
supporting
18
documentation
to
the
commissioner
for
approval.
The
captive
19
company
shall
not
offer
any
additional
lines
of
insurance
until
20
on
or
after
the
date
on
which
the
commissioner
approves
the
21
supporting
documentation.
The
captive
company
shall
inform
the
22
commissioner
of
any
change
in
rates
within
thirty
calendar
days
23
of
the
captive
company’s
adoption
of
a
change
in
rate.
24
c.
In
addition
to
the
information
required
under
paragraphs
25
“a”
and
“b”
,
each
applicant
captive
company
shall
file
with
the
26
commissioner
evidence
of
all
of
the
following:
27
(1)
The
amount
and
liquidity
of
the
captive
company’s
assets
28
relative
to
the
risks
to
be
assumed
by
the
captive
company.
29
(2)
The
adequacy
of
the
expertise,
experience,
and
30
character
of
the
persons
who
will
manage
the
captive
company.
31
(3)
The
overall
soundness
of
the
captive
company’s
plan
of
32
operation.
33
(4)
The
adequacy
of
the
loss
prevention
program
of
the
34
captive
company’s
parent,
members,
or
industrial
insureds,
as
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applicable.
1
(5)
Any
other
factors
deemed
relevant
by
the
commissioner
to
2
ascertain
if
the
proposed
captive
company
will
be
able
to
meet
3
the
company’s
policy
obligations.
4
d.
In
addition
to
the
information
required
under
paragraph
5
“a”
,
each
applicant
that
is
a
protected
cell
captive
company
6
shall
file
with
the
commissioner
all
of
the
following:
7
(1)
A
business
plan
that
demonstrates,
at
a
level
of
detail
8
deemed
sufficient
by
the
commissioner,
how
the
applicant
will
9
account
for
the
loss
and
expense
experience
of
each
protected
10
cell,
and
how
the
applicant
will
report
the
loss
and
expense
11
experience
of
each
protected
cell
to
the
commissioner.
12
(2)
A
statement
that
acknowledges
that
all
financial
13
records
of
the
protected
cell
captive
company,
including
14
records
pertaining
to
any
protected
cells,
shall
be
made
15
available
upon
request
for
inspection
or
examination
by
the
16
commissioner
or
the
commissioner’s
designated
agent.
17
(3)
A
copy
of
each
participant
contract.
18
(4)
Evidence
that
expenses
will
be
allocated
to
each
19
protected
cell
in
a
fair
and
equitable
manner.
20
e.
In
addition
to
the
requirements
of
paragraph
“a”
,
a
21
captive
company
formed
as
a
reciprocal
insurer
shall
file
with
22
the
commissioner
a
certified
copy
of
the
power
of
attorney
of
23
the
reciprocal
insurer’s
attorney-in-fact,
a
certified
copy
of
24
the
reciprocal
insurer’s
subscribers’
agreement,
a
statement
25
under
oath
of
the
reciprocal
insurer’s
attorney-in-fact
that
26
shows
the
reciprocal
insurer’s
financial
condition,
and
any
27
other
statements
or
documents
required
by
the
commissioner
as
28
established
by
rule
.
29
f.
4.
All
documents
,
reports,
and
information
submitted
30
pursuant
to
this
subsection
subchapter
shall
be
confidential
31
and
shall
not
be
made
public
without
the
advance
written
32
consent
of
the
submitting
company,
with
the
following
33
exceptions:
34
(1)
a.
The
documents
and
information
shall
be
discoverable
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by
a
party
in
a
civil
action
or
in
a
contested
case
to
which
1
the
captive
company
that
submitted
the
information
is
a
party
2
upon
a
showing
by
the
party
seeking
to
discover
the
information
3
that
the
information
sought
is
relevant
to,
and
necessary
for,
4
the
furtherance
of
the
action
or
case;
the
information
sought
5
is
unavailable
from
other
nonconfidential
sources;
and
that
a
6
subpoena
issued
by
a
judicial
or
an
administrative
officer
has
7
been
submitted
to
the
commissioner.
8
(2)
b.
The
commissioner
may,
in
the
commissioner’s
9
discretion,
disclose
the
documents
and
information
to
a
public
10
official
having
jurisdiction
over
the
regulation
of
insurance
11
in
another
state,
or
to
a
public
official
of
the
federal
12
government,
provided
that
the
public
official
agrees
in
writing
13
to
maintain
the
confidentiality
of
the
information,
and
that
14
the
laws
of
the
state
in
which
the
public
official
serves
15
require
that
the
information
remain
confidential.
16
4.
5.
a.
Each
captive
company,
each
individual
series
17
of
members
of
a
limited
liability
company,
and
each
protected
18
cell
shall
pay
a
nonrefundable
fee
to
the
commissioner
of
19
two
hundred
dollars
for
the
examination,
investigation,
and
20
processing
of
its
application
for
a
certificate
of
authority.
21
The
commissioner
shall
be
authorized
to
retain
legal,
22
financial,
and
examination
services
from
outside
experts
as
23
necessary
for
review
of
the
application,
the
reasonable
cost
of
24
which
may
be
charged
to
the
applicant.
25
b.
Each
captive
insurance
company,
each
individual
series
of
26
members
of
a
limited
liability
company,
and
each
protected
cell
27
shall
pay
an
initial
registration
fee,
and
an
annual
renewal
28
registration
fee
,
of
three
hundred
dollars.
29
5.
6.
If
the
commissioner
is
satisfied
with
the
documents
30
and
statements
that
an
applicant
captive
company
has
filed
in
31
compliance
with
this
chapter
subchapter
,
and
the
applicable
32
provisions
of
Title
XIII,
subtitle
1
,
the
commissioner
may
33
grant
a
certificate
of
authority
to
the
captive
company
that
34
permits
the
company
to
do
the
business
of
insurance
in
this
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state.
The
certificate
of
authority
must
be
renewed
annually
1
and
may
be
renewed
if
the
applicant
is
in
compliance
with
this
2
chapter
subchapter
.
3
Sec.
13.
Section
521J.4,
subsection
1,
paragraphs
d
and
e,
4
Code
2026,
are
amended
to
read
as
follows:
5
d.
Is
not
less
than
five
one
hundred
thousand
dollars
for
6
a
protected
cell
captive
company.
If,
however,
the
protected
7
cell
captive
company
does
not
assume
any
risks,
the
risks
8
insured
by
the
protected
cells
are
homogenous,
and
there
are
9
not
more
than
ten
cells,
the
commissioner
may
reduce
the
amount
10
to
an
amount
not
less
than
two
hundred
fifty
thousand
dollars.
11
e.
Is
not
less
than
the
applicable
amount
of
capital
and
12
surplus
required
in
paragraphs
“a”
through
“d”
,
as
determined
13
based
upon
the
organizational
form
of
the
alien
captive
14
company,
for
a
branch
captive
company.
The
minimum
capital
15
and
surplus
shall
be
jointly
held
by
the
commissioner
and
the
16
branch
captive
company
in
a
bank
of
the
federal
reserve
system
17
as
approved
by
the
commissioner
by
rule
.
18
Sec.
14.
Section
521J.4,
subsection
3,
Code
2026,
is
amended
19
to
read
as
follows:
20
3.
a.
The
capital
and
surplus
required
under
subsection
21
1
and
subsection
2
,
if
applicable,
shall
be
in
the
form
of
22
cash,
cash
equivalent,
marketable
securities
as
approved
by
23
the
commissioner,
or
an
irrevocable
letter
of
credit
on
a
form
24
as
prescribed
by
the
commissioner
by
rule
and
as
issued
by
25
a
bank
chartered
by
the
state
of
Iowa,
a
member
bank
of
the
26
federal
reserve
system,
or
a
bank
chartered
by
another
state
if
27
approved
by
the
commissioner.
28
b.
If
a
captive
company
elects
to
satisfy
any
portion
of
the
29
captive
company’s
minimum
capital
and
surplus
requirements
with
30
marketable
securities,
the
commissioner
may
require
the
captive
31
company
to
file
financial
statements
or
other
reports
on
a
more
32
frequent
basis
than
otherwise
required
under
this
subchapter.
33
The
increased
reporting
frequency
may
be
imposed
to
ensure
the
34
commissioner
can
adequately
monitor
the
liquidity,
valuation,
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and
market
risk
associated
with
the
marketable
securities.
1
Sec.
15.
Section
521J.5,
subsection
1,
Code
2026,
is
amended
2
to
read
as
follows:
3
1.
A
Subject
to
the
commissioner’s
approval,
a
captive
4
company
must
may
be
formed
or
organized
as
a
business
entity
5
as
provided
under
this
chapter
subchapter,
or
as
a
reciprocal
6
insurer
as
provided
under
chapter
520
.
7
Sec.
16.
Section
521J.5,
subsection
2,
paragraph
c,
Code
8
2026,
is
amended
to
read
as
follows:
9
c.
Organized
as
a
reciprocal
insurer
as
permitted
by
the
10
commissioner
by
rule
.
11
Sec.
17.
Section
521J.5,
subsection
5,
paragraph
c,
Code
12
2026,
is
amended
to
read
as
follows:
13
c.
A
reciprocal
insurer
shall
have
at
least
one
member
14
of
the
subscribers’
advisory
committee
who
is
a
resident
15
of
this
state.
A
captive
risk
retention
group
formed
as
a
16
reciprocal
insurer
shall
have
a
minimum
of
five
members
of
17
the
subscribers’
advisory
committee
who
are
residents
of
this
18
state.
19
Sec.
18.
Section
521J.5,
subsections
6
and
7,
Code
2026,
are
20
amended
to
read
as
follows:
21
6.
a.
A
captive
company
formed
as
a
corporation
or
another
22
business
entity
shall
have
the
privileges
of,
and
shall
be
23
subject
to,
state
laws
governing
corporations
or
other
business
24
entities,
and
the
applicable
provisions
of
this
chapter
25
subchapter
.
26
b.
In
the
event
of
a
conflict
between
a
state
law
governing
27
corporations
or
other
business
entities
and
this
chapter
28
subchapter
,
this
chapter
subchapter
shall
take
precedence.
29
7.
a.
A
subscribers’
agreement,
or
other
organizational
30
document
of
a
captive
company
formed
as
a
reciprocal
insurer,
31
shall
authorize
a
quorum
of
a
subscribers’
advisory
committee
32
to
consist
of
at
least
one-third
of
the
number
of
members
on
33
the
advisory
committee.
In
addition
to
this
subchapter,
a
34
captive
company
formed
as
a
reciprocal
insurer
shall
be
subject
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to
chapter
520,
unless
exempt
by
approval
of
the
commissioner
1
in
the
captive
company’s
plan
of
operations.
In
the
event
2
of
a
conflict
between
chapter
520
and
this
subchapter,
this
3
subchapter
shall
take
precedence.
4
b.
In
addition
to
this
chapter
subchapter
,
a
captive
risk
5
retention
group
shall
be
subject
to
chapter
515E
.
In
the
event
6
of
a
conflict
between
chapter
515E
and
this
chapter
subchapter
,
7
this
chapter
subchapter
shall
take
precedence.
8
Sec.
19.
Section
521J.5,
subsection
8,
Code
2026,
is
amended
9
by
striking
the
subsection.
10
Sec.
20.
Section
521J.5,
subsection
9,
paragraph
b,
Code
11
2026,
is
amended
to
read
as
follows:
12
b.
A
branch
captive
company
established
under
this
13
chapter
subchapter
to
write,
in
this
state,
only
insurance
or
14
reinsurance
of
the
employee
benefit
business
of
the
branch
15
captive
company’s
parent
and
affiliated
companies
shall
be
16
subject
to
the
federal
Employee
Retirement
Income
Security
Act
17
of
1974,
29
U.S.C.
§1001,
et
seq.
18
Sec.
21.
Section
521J.6,
subsection
2,
Code
2026,
is
amended
19
to
read
as
follows:
20
2.
The
commissioner’s
approval
of
an
ongoing
plan
for
21
the
payment
of
dividends
or
other
distributions
shall
be
22
conditioned
upon
retention,
at
the
time
of
each
payment,
of
23
capital
and
surplus
in
excess
of
the
amounts
specified
by,
24
or
determined
in
accordance
with,
a
formula
approved
by
the
25
commissioner
by
rule
.
26
Sec.
22.
Section
521J.7,
Code
2026,
is
amended
to
read
as
27
follows:
28
521J.7
Reports.
29
1.
A
Unless
otherwise
directed
by
the
commissioner
in
30
the
first
year
of
a
captive
company’s
licensure
under
this
31
subchapter,
the
captive
company
shall
be
required
to
file
an
32
annual
report
with
the
commissioner
that
meets
the
following
33
requirements:
34
a.
1.
Except
as
provided
in
paragraph
“b”
subsection
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2
,
on
or
before
April
1
of
each
year,
each
captive
company
1
and
each
captive
risk
retention
group
shall
submit
to
the
2
commissioner
a
report
on
the
company’s
financial
condition
as
3
of
December
31
of
the
preceding
year,
as
verified
by
oath
of
4
two
of
the
company’s
or
group’s
executive
officers.
The
report
5
shall
be
submitted
in
a
form
and
manner
as
prescribed
by
the
6
commissioner
by
rule.
7
b.
2.
A
captive
company,
other
than
a
captive
risk
8
retention
group,
may
apply
to
the
commissioner
to
file
the
9
report
required
under
paragraph
“a”
subsection
1
on
a
fiscal
10
year-end
basis.
If
the
commissioner
approves
reporting
on
a
11
fiscal
year-end
basis,
the
captive
company
shall
comply
with
12
all
of
the
following
requirements:
13
(1)
a.
Subject
to
subparagraph
(2)
paragraph
“b”
,
the
14
captive
company’s
report
shall
be
filed
no
later
than
ninety
15
calendar
days
after
the
close
of
the
company’s
fiscal
year.
16
(2)
b.
Prior
to
April
1,
the
captive
company
shall
file
a
17
report
covering
the
immediately
preceding
calendar
year
with
18
the
commissioner
to
provide
sufficient
information
to
support
19
the
captive
company’s
premium
tax
return
under
section
432.1A
.
20
c.
3.
Each
captive
company
shall
use
generally
accepted
21
accounting
principles
as
used
in
the
United
States
,
unless
22
the
commissioner
requires,
approves,
or
accepts
the
use
23
of
United
States
statutory
accounting
principles
or
any
24
other
comprehensive
accounting
principles
for
the
company’s
25
report.
The
commissioner
may
require,
approve,
or
accept
26
any
appropriate
or
necessary
modifications
of
United
States
27
statutory
accounting
principles
or
other
comprehensive
28
accounting
principles
based
on
the
type
of
insurance
and
kinds
29
of
insurers
that
are
included
in
a
captive
company’s
report.
30
The
report
may
include
letters
of
credit
that
are
established,
31
issued,
or
confirmed
by
any
of
the
following:
32
(1)
a.
A
bank
chartered
in
this
state.
33
(2)
b.
A
member
of
the
federal
reserve
system.
34
(3)
c.
A
bank
chartered
by
another
state,
if
approved
by
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the
commissioner.
1
d.
4.
An
actuarial
opinion
from
a
qualified
actuary
2
regarding
the
adequacy
of
the
company’s
required
reserves
to
3
make
full
provision
for
the
company’s
liabilities,
insured
or
4
reinsured,
shall
be
included
in
the
report.
The
qualified
5
actuary
shall
submit
a
memorandum
to
the
commissioner
that
6
details
the
qualified
actuary’s
support
for
the
actuarial
7
opinion.
The
commissioner
may
require
that
additional
8
information
be
submitted
to
supplement
the
actuarial
opinion.
9
e.
5.
All
captive
companies
shall
be
audited
annually
by
an
10
independent
certified
public
accountant
and
shall
annually
file
11
the
audited
financial
report
with
the
commissioner
on
or
before
12
June
1,
as
a
supplement
to
the
annual
report
required
under
13
section
521J.7,
subsection
1
this
section
.
14
f.
6.
A
captive
company
may
request
an
extension
to
file
15
a
report
required
by
this
section
.
A
written
request
for
an
16
extension
must
be
received
by
the
commissioner
not
less
than
17
ten
days
before
the
filing
due
date,
and
the
request
must
18
contain
sufficient
details
to
enable
the
commissioner
to
make
19
an
informed
decision
regarding
the
request.
The
commissioner
20
may
grant
a
thirty-day
extension
upon
a
determination
by
the
21
commissioner
that
a
captive
company
has
good
cause
for
the
22
extension.
23
g.
7.
A
captive
company
may
be
required
to
file
a
report
24
on
the
captive
company’s
financial
condition
on
a
semiannual,
25
quarterly,
monthly,
or
other
basis
as
determined
by
the
26
commissioner.
27
h.
8.
Captive
companies
shall
file
all
reports
required
28
under
this
section
in
the
form
and
manner
prescribed
by
the
29
commissioner
by
rule.
30
2.
All
reports
filed
pursuant
to
this
section
shall
be
31
considered
confidential
and
shall
not
be
a
public
record.
32
Sec.
23.
Section
521J.8,
subsection
1,
paragraph
a,
Code
33
2026,
is
amended
to
read
as
follows:
34
a.
Except
for
captive
risk
retention
groups
as
provided
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under
paragraph
“c”
,
the
commissioner
may
examine
each
captive
1
company’s
compliance
with
this
chapter
subchapter
,
and
may
2
examine
the
affairs,
transactions,
accounts,
records,
and
3
assets
of
each
captive
company
as
the
commissioner
deems
4
necessary.
5
Sec.
24.
Section
521J.8,
subsection
5,
Code
2026,
is
amended
6
to
read
as
follows:
7
5.
The
applicable
provisions
of
chapter
507
shall
apply
to
8
examinations
conducted
under
this
chapter
subchapter
.
9
Sec.
25.
Section
521J.9,
subsection
1,
paragraphs
h
and
i,
10
Code
2026,
are
amended
to
read
as
follows:
11
h.
Failure
to
submit
or
pay
any
fee
under
this
chapter
12
subchapter
.
13
i.
Failure
to
submit
to
or
pay
the
cost
of
any
examination
14
under
this
chapter
subchapter
.
15
Sec.
26.
Section
521J.11,
subsection
1,
Code
2026,
is
16
amended
to
read
as
follows:
17
1.
A
merger
between
captive
stock
insurers,
or
a
merger
18
between
captive
mutual
insurers,
shall
meet
the
requirements
19
of
chapter
521
and
section
521J.5
,
as
applicable.
The
20
commissioner
may,
at
the
commissioner’s
discretion,
provide
21
notice
to
the
public
of
a
proposed
merger
prior
to
the
22
commissioner’s
approval
or
disapproval
of
a
merger.
Except
23
as
provided
in
this
section,
applicable
provisions
of
chapter
24
508B
shall
apply
to
a
merger,
consolidation,
conversion,
25
mutualization,
or
voluntary
dissolution
by
a
captive
company.
26
Sec.
27.
Section
521J.13,
subsection
1,
Code
2026,
is
27
amended
to
read
as
follows:
28
1.
a.
Industrial
insured
captive
companies
and
captive
29
risk
retention
groups
shall
comply
with
investment
requirements
30
as
established
approved
by
the
commissioner
by
rule
.
The
31
commissioner
may
approve
the
use
of
alternative
reliable
32
methods
of
valuation
and
rating.
33
b.
If
a
captive
company’s
admitted
annual
report
filed
34
pursuant
to
section
521J.7
states
total
assets
total
of
less
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than
five
million
dollars,
the
commissioner
may
approve
an
1
investment
of
up
to
twenty
percent
of
the
captive
company’s
2
admitted
assets
in
rated
credit
instruments
in
any
one
3
investment
that
meets
the
requirements
established
by
the
4
commissioner
by
rule
.
For
purposes
of
this
subsection,
total
5
assets
shall
be
based
on
the
accounting
basis
approved
by
the
6
commissioner,
provided
that
all
assets
included
in
such
total
7
assets
must
be
reasonably
liquid,
realizable,
and
available
to
8
support
the
obligations
of
the
captive.
9
Sec.
28.
Section
521J.14,
subsection
3,
Code
2026,
is
10
amended
to
read
as
follows:
11
3.
Insurance
by
a
captive
company
of
any
workers’
12
compensation
qualified
self-insured
plan
of
the
captive
13
company’s
parent
and
affiliates
shall
be
deemed
to
be
14
reinsurance
under
this
chapter
subchapter
.
15
Sec.
29.
Section
521J.17,
subsection
2,
unnumbered
16
paragraph
1,
Code
2026,
is
amended
to
read
as
follows:
17
A
protected
cell
captive
company
formed
or
authorized
18
under
this
chapter
subchapter
shall
be
subject
to
all
of
the
19
following
requirements:
20
Sec.
30.
Section
521J.17,
subsection
2,
paragraph
a,
21
subparagraph
(4),
Code
2026,
is
amended
to
read
as
follows:
22
(4)
Each
protected
cell
shall
be
incorporated.
An
23
incorporated
protected
cell
may
be
organized
and
operated
24
in
any
form
of
business
organization
as
authorized
by
the
25
commissioner
by
rule
formed
as
a
business
entity,
provided
the
26
business
entity
is
separate
from
the
protected
cell
captive
27
company
of
which
the
business
entity
is
a
part
.
Each
protected
28
cell
of
a
protected
cell
captive
company
shall
be
treated
as
29
a
captive
insurance
company
under
this
chapter
subchapter
,
30
except
that
the
limit
on
maximum
yearly
aggregate
taxes
paid
31
under
section
432.1A,
subsection
4
,
shall
not
apply.
Unless
32
otherwise
permitted
by
the
organizational
document
of
a
33
protected
cell
captive
company,
each
protected
cell
of
the
34
protected
cell
captive
company
must
have
the
same
directors,
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secretary,
and
registered
office
as
the
protected
cell
captive
1
company.
2
Sec.
31.
Section
521J.17,
subsection
2,
paragraph
c,
Code
3
2026,
is
amended
to
read
as
follows:
4
c.
The
establishment
of
a
protected
cell
shall
create,
with
5
respect
to
the
protected
cell,
a
legal
person
business
entity
6
separate
from
the
protected
cell
captive
company.
Amounts
7
attributed
to
a
protected
cell
under
this
chapter
subchapter
,
8
including
assets
transferred
to
a
protected
cell
account,
shall
9
be
owned
by
the
protected
cell
and
the
protected
cell
captive
10
company
shall
not
be
a
trustee,
or
hold
itself
out
to
be
a
11
trustee,
with
respect
to
the
protected
cell
assets
of
that
12
protected
cell
account.
13
Sec.
32.
Section
521J.18,
Code
2026,
is
amended
to
read
as
14
follows:
15
521J.18
Sponsors
——
qualifications.
16
A
sponsor
of
a
protected
cell
captive
company
may
be
17
any
person
approved
by
the
commissioner,
based
on
the
18
commissioner’s
determination
that
the
approval
of
such
person
19
as
a
sponsor
is
consistent
with
the
purposes
of
this
chapter
20
subchapter
.
In
evaluating
the
qualifications
of
a
proposed
21
sponsor,
the
commissioner
shall
consider
the
type
and
structure
22
of
the
proposed
sponsor
entity,
the
sponsor’s
experience
in
23
financial
operations,
the
sponsor’s
financial
stability,
the
24
sponsor’s
business
reputation,
and
any
other
factors
deemed
25
relevant
by
the
commissioner.
A
risk
retention
group
shall
not
26
be
a
sponsor
of
a
protected
cell
captive
company.
27
Sec.
33.
Section
521J.22,
subsection
3,
paragraph
a,
28
subparagraph
(3),
Code
2026,
is
amended
to
read
as
follows:
29
(3)
The
dormant
captive
company
shall
pay
an
annual
one
30
thousand
dollar
dormancy
tax,
due
on
or
before
March
1,
if
31
for
any
portion
of
the
immediately
preceding
calendar
year
32
the
captive
company
held
a
certificate
of
dormancy.
Each
33
series
of
members
and
each
protected
cell
shall
be
considered
34
separate
for
purposes
of
paying
the
annual
dormancy
tax
under
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a
certificate
of
dormancy.
A
dormant
captive
company
is
not
1
otherwise
liable
for
any
annual
renewal
as
provided
in
section
2
521J.2,
subsection
4
subsection
5
,
paragraph
“b”
.
3
Sec.
34.
Section
521J.23,
Code
2026,
is
amended
to
read
as
4
follows:
5
521J.23
Workers’
compensation
——
compliance
with
state
and
6
federal
laws.
7
1.
This
chapter
subchapter
shall
not
be
construed
to
exempt
8
a
captive
company,
a
captive
company’s
parent,
or
a
captive
9
company’s
affiliated
companies
from
compliance
with
applicable
10
state
and
federal
laws
governing
workers’
compensation
11
insurance.
12
2.
This
chapter
subchapter
shall
not
be
construed
to
divest
13
the
division
of
workers’
compensation
of
any
jurisdiction,
as
14
authorized
by
law,
over
workers’
compensation
self-insurance
15
plans.
16
Sec.
35.
Section
521J.24,
subsection
1,
paragraph
b,
Code
17
2026,
is
amended
to
read
as
follows:
18
b.
All
books,
records,
documents,
accounts,
vouchers,
and
19
agreements
shall
be
kept
in
a
manner
that
the
commissioner
can
20
readily
ascertain
the
captive
company’s
financial
condition,
21
affairs,
and
operations;
can
readily
verify
the
captive
22
company’s
financial
statements;
and
can
confirm
the
captive
23
company’s
compliance
with
this
chapter
subchapter
.
24
Sec.
36.
Section
521J.26,
unnumbered
paragraph
1,
Code
25
2026,
is
amended
to
read
as
follows:
26
The
commissioner
shall
may
adopt
rules
pursuant
to
chapter
27
17A
to
implement
and
administer
this
chapter
subchapter
.
28
Sec.
37.
NEW
SECTION
.
521J.27
Redomestication
——
premium
29
tax
year
waiver.
30
1.
For
taxes
due
pursuant
to
section
432.1A,
a
foreign
or
31
alien
captive
company
organized
under
this
subchapter
that
32
redomesticates
into
the
state
shall
only
be
liable
for
taxes
on
33
premiums
paid
to
the
captive
company
after
redomestication.
34
2.
A
foreign
or
alien
captive
company
that
redomesticates
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under
this
subchapter
shall
report
to
the
commissioner
all
1
premium
taxes
annually
due
under
section
432.1A,
and
may
elect
2
to
forgo
payment
of
the
premium
taxes
in
either
the
calendar
3
year
in
which
the
foreign
or
alien
captive
company
first
4
domesticates
into
the
state,
or
the
immediately
succeeding
5
calendar
year.
A
foreign
or
alien
captive
company
that
makes
6
such
election
that
subsequently
surrenders
the
foreign
or
7
alien
captive
company’s
license
or
redomesticates
to
another
8
jurisdiction
within
five
years
from
the
date
of
redomestication
9
into
the
state
shall
immediately
pay
to
the
commissioner
a
tax
10
in
an
amount
equal
to
the
foregone
premium
tax
plus
ten
percent
11
per
annum
from
the
date
the
foregone
premium
tax
would
have
12
originally
been
due.
13
3.
This
section
shall
not
apply
to
tax
years
beginning
on
or
14
after
January
1,
2030.
15
Sec.
38.
NEW
SECTION
.
521J.101
Definitions.
16
As
used
in
this
subchapter,
unless
the
context
otherwise
17
requires:
18
1.
“Affiliated
company”
means
the
same
as
defined
in
section
19
521J.1.
20
2.
“Business
entity”
means
the
same
as
defined
in
section
21
521J.1.
22
3.
“Ceding
insurer”
means
an
affiliated
company
of
a
life
23
captive
reinsurance
company
that
cedes
risk
to
the
life
captive
24
reinsurance
company
pursuant
to
a
reinsurance
contract.
25
4.
“Commissioner”
means
the
commissioner
of
insurance.
26
5.
“Dormant
life
captive
reinsurance
company”
means
a
life
27
captive
reinsurance
company
that
has
ceased
transacting
the
28
business
of
insurance,
including
but
not
limited
to
ceasing
29
issuance
of
insurance
policies,
and
does
not
have
any
remaining
30
liabilities
associated
with
the
life
captive
reinsurance
31
company’s
insurance
business
transactions
or
insurance
policies
32
prior
to
the
filing
of
an
application
for
a
certificate
of
33
dormancy.
34
6.
a.
“Insurance
securitization”
or
“securitization”
means
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a
transaction
or
a
group
of
related
transactions,
including
1
but
not
limited
to
capital
market
offerings,
that
are
effected
2
through
related
risk
transfer
instruments
and
facilitation
3
of
administrative
agreements,
in
which
any
of
the
following
4
proceeds
from
the
transaction
or
group
of
related
transactions
5
are
used
to
fund
a
life
captive
reinsurance
company’s
6
obligations
under
a
reinsurance
contract
with
a
ceding
insurer:
7
(1)
Proceeds
obtained
by
a
life
captive
reinsurance
8
company,
directly
or
indirectly,
through
the
issuance
of
9
securities
by
the
life
captive
reinsurance
company
or
any
other
10
person.
11
(2)
Proceeds
provided
through
one
or
more
letter
of
credit
12
or
other
assets
for
the
benefit
of
the
life
captive
reinsurance
13
company,
and
which
the
commissioner
authorizes
the
life
captive
14
reinsurance
company
to
treat
as
admitted
assets
for
purposes
of
15
the
life
captive
reinsurance
company’s
annual
statement.
16
b.
“Insurance
securitization”
or
“securitization”
does
not
17
include
the
issuance
of
a
letter
of
credit
to
satisfy
all
or
18
part
of
the
life
captive
reinsurance
company’s
capital
and
19
surplus
requirements
under
this
subchapter.
20
7.
“Letter
of
credit”
means
a
clean,
irrevocable,
21
unconditional
letter
of
credit,
issued
or
confirmed
by
a
22
qualified
United
States
financial
institution,
as
defined
in
23
section
521B.104,
subsection
1.
24
8.
“Life
captive
reinsurance
company”
means
a
captive
25
insurance
company
in
this
state
that
is
authorized
under
and
26
meets
the
requirements
of
this
subchapter,
and
that
reinsures
27
the
risk
ceded
by
a
life
insurance
company.
28
9.
“NAIC”
means
the
national
association
of
insurance
29
commissioners.
30
10.
“Organizational
document”
means
the
same
as
defined
in
31
section
521J.1.
32
11.
“Organizing
company”
means
a
life
insurance
company
or
33
an
affiliated
company
that
organizes
a
life
captive
reinsurance
34
company.
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12.
“Parent”
means
a
person
that
owns
an
organizing
1
company,
either
directly
or
indirectly
through
one
or
more
2
intermediaries.
3
13.
“Person”
means
an
individual,
corporation,
limited
4
liability
company,
business
trust,
estate,
trust,
partnership
5
or
association,
joint
stock
company,
unincorporated
6
organization,
or
any
other
legal
entity,
or
combination
of
the
7
foregoing
acting
in
concert.
“Person”
does
not
include
a
joint
8
venture
partnership
exclusively
engaged
in
owning,
managing,
9
leasing,
or
developing
real
or
tangible
personal
property.
10
14.
“Qualified
actuary”
means
the
same
as
defined
in
section
11
521J.1.
12
15.
“Risk”
means
a
risk
associated
with
life
insurance
13
policies
and
contracts
written
by
a
ceding
life
insurance
14
company
or
assumed
by
a
ceding
life
insurance
company
from
15
an
affiliated
company,
which
were
written
by
the
affiliated
16
company
and
for
which
the
ceding
life
insurance
company
holds
17
direct
statutory
reserves
as
required
by
section
508.36.
18
16.
“Risk-based
capital
instructions”
means
instructions
19
included
in
a
risk-based
capital
report
as
adopted
and
amended
20
by
the
NAIC.
21
17.
“Security”
means
the
same
as
defined
in
section
502.102.
22
“Security”
also
includes
any
form
of
debt
obligation,
surplus
23
note,
derivative,
or
other
financial
instrument
that
the
24
commissioner
designates
as
a
“security”
for
purposes
of
this
25
subchapter.
26
18.
“Surplus
note”
means
an
unsecured
subordinate
debt
27
obligation
possessing
characteristics
consistent
with
the
NAIC
28
statutory
accounting
principles
pursuant
to
the
most
recently
29
published
NAIC
accounting
practices
and
procedures
manual.
30
Sec.
39.
NEW
SECTION
.
521J.102
Certificate
of
authority.
31
1.
A
life
captive
reinsurance
company
issued
a
certificate
32
of
authority
shall
only
reinsure
the
risks
of
a
ceding
insurer
33
and
shall
not
otherwise
engage
in
the
business
of
insurance.
A
34
life
captive
reinsurance
company
may
purchase
retrocession
to
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cede
the
risks
assumed
under
a
reinsurance
contract,
subject
to
1
prior
approval
of
the
commissioner.
2
2.
A
life
captive
reinsurance
company
shall
not
write
any
3
insurance
business
unless
the
life
captive
reinsurance
company
4
complies
with
all
of
the
following:
5
a.
The
life
captive
reinsurance
company
obtains
a
6
certificate
of
authority
from
the
commissioner.
7
b.
The
life
captive
reinsurance
company
maintains
its
8
principal
place
of
business
in
the
state.
9
c.
The
life
captive
reinsurance
company’s
board
of
directors
10
holds
at
least
one
annual
meeting
in
the
state.
11
d.
At
least
one
member
of
the
board
of
directors
of
the
life
12
captive
reinsurance
company
is
a
resident
of
the
state.
13
e.
The
life
captive
reinsurance
company
designates
a
14
registered
agent
to
accept
service
of
process,
files
the
name
15
and
contact
information
and
any
subsequent
changes
regarding
16
the
registered
agent
with
the
commissioner,
and
agrees
that
if
17
the
registered
agent
cannot
be
found
with
reasonable
diligence,
18
the
commissioner
may
act
as
an
agent
of
the
life
captive
19
reinsurance
company
with
respect
to
any
action
or
proceeding,
20
and
the
commissioner
may
be
served
pursuant
to
section
505.30.
21
f.
The
life
captive
reinsurance
company
has
filed
a
copy
22
of
the
life
captive
reinsurance
company’s
articles
and
bylaws,
23
including
any
subsequent
amendment
to
the
articles
or
bylaws,
24
with
the
commissioner
and
with
the
secretary
of
state,
and
the
25
articles
and
bylaws
have
been
approved
by
the
commissioner
and
26
the
secretary
of
state.
27
3.
a.
Prior
to
receiving
a
certificate
of
authority,
a
life
28
captive
reinsurance
company
shall
do
all
of
the
following:
29
(1)
File
with
the
commissioner
all
of
the
following:
30
(a)
A
copy
of
the
life
captive
reinsurance
company’s
plan
31
of
operation.
32
(b)
An
affidavit
from
the
life
captive
reinsurance
33
company’s
president,
vice
president,
treasurer,
or
chief
34
financial
officer
that
includes
all
of
the
following:
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(i)
A
statement
that
the
proposed
organization
and
1
operation
of
the
life
captive
reinsurance
company
complies
with
2
this
section.
3
(ii)
The
life
captive
reinsurance
company’s
investment
4
policy
reflects
and
accounts
for
the
liquidity
of
assets
and
5
the
reasonable
preservation,
administration,
and
management
6
of
assets
with
respect
to
the
risks
associated
with
the
7
reinsurance
contract
between
the
life
captive
reinsurance
8
company
and
the
parent
or
ceding
insurer.
9
(c)
A
statement
under
oath
by
an
officer
of
the
life
10
captive
reinsurance
company
that
attests
to
the
life
captive
11
reinsurance
company’s
financial
condition.
12
(d)
Documentation
that
provides
evidence
of
the
amount
13
and
liquidity
of
the
life
captive
reinsurance
company’s
14
assets
relative
to
the
risks
to
be
assumed
by
the
life
captive
15
reinsurance
company.
16
(e)
Documentation
that
provides
evidence
related
to
the
17
overall
soundness
of
the
life
captive
reinsurance
company’s
18
plan
of
operation.
19
(f)
A
certification
from
an
actuarial
officer
of
a
ceding
20
insurer
that
complies
with
section
521J.104.
21
(g)
A
description
of
coverages,
deductibles,
coverage
22
limits,
rates,
and
any
additional
information
requested
by
the
23
commissioner.
24
(h)
A
copy
of
each
reinsurance
contract
and
each
arrangement
25
that
secures
the
life
captive
reinsurance
company’s
obligations
26
under
the
reinsurance
contract
between
the
life
captive
27
reinsurance
company
and
the
parent
or
ceding
insurer,
including
28
but
not
limited
to
any
agreements
or
other
documentation
to
29
implement
such
reinsurance
contract
or
arrangement.
30
(i)
A
legal
opinion,
in
a
form
and
manner
approved
by
31
the
commissioner,
that
the
offer
and
sale
of
life
captive
32
reinsurance
company
securities
comply
with
all
applicable
33
registration
requirements
or
applicable
exemptions
or
34
exceptions
to
such
requirements
under
state
and
federal
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securities
laws.
The
legal
opinion
shall
not
be
required
1
as
part
of
the
life
captive
reinsurance
company’s
initial
2
application
for
a
certificate
of
authority
if
the
life
captive
3
reinsurance
company
includes
a
statement
in
the
company’s
4
plan
of
operation
that
the
legal
opinion
will
be
submitted
5
to
the
commissioner
prior
to
the
offer
or
sale
of
a
captive
6
reinsurance
security.
7
(j)
An
opinion
of
a
qualified
actuary,
approved
by
the
8
commissioner,
confirming
that
the
methodology
and
assumptions
9
to
set
and
discount
reserves
sufficiently
provide
for
the
risk
10
assumed
by
the
life
captive
reinsurance
company,
including
11
significant
stress
tests
on
key
assumptions.
12
(k)
A
biographical
affidavit
for
each
officer
and
each
13
director
of
the
life
captive
reinsurance
company
prepared
on
14
the
most
recent
template
for
biographical
affidavits
prescribed
15
by
the
NAIC.
16
(2)
Provide
the
commissioner
with
any
other
statement
or
17
document
requested
by
the
commissioner
to
evaluate
the
life
18
captive
reinsurance
company’s
application
for
a
certificate
of
19
authority.
20
(3)
Pay
a
nonrefundable
fee
of
two
thousand
five
hundred
21
dollars
to
the
commissioner
for
the
examination,
investigation,
22
and
processing
of
the
life
captive
reinsurance
company’s
23
application
for
a
certificate
of
authority.
24
b.
The
commissioner
shall
be
authorized
to
retain
legal,
25
financial,
and
examination
services
from
outside
experts
as
26
necessary
for
review
of
the
application,
the
reasonable
cost
of
27
which
may
be
charged
to
the
applicant.
28
c.
If
there
is
a
subsequent
material
change
in
the
29
information
provided
to
the
commissioner
under
paragraph
30
“a”
,
the
life
captive
reinsurance
company
shall
inform
the
31
commissioner
within
thirty
calendar
days
of
the
date
of
the
32
material
change
and
shall
submit
appropriate
documentation
as
33
requested
by
the
commissioner
for
approval.
The
life
captive
34
reinsurance
company
shall
not
write
any
insurance
business
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until
on
or
after
the
date
on
which
the
commissioner
approves
1
the
supporting
documentation.
2
4.
All
documents
and
information
submitted
pursuant
to
this
3
subchapter
shall
be
confidential
and
shall
not
be
made
public
4
without
the
advance
written
consent
of
the
submitting
life
5
captive
reinsurance
company,
with
the
following
exceptions:
6
a.
The
documents
and
information
shall
be
discoverable
by
7
a
party
in
a
civil
action
or
in
a
contested
case
to
which
the
8
life
captive
reinsurance
company
that
submitted
the
information
9
is
a
party
upon
a
showing
by
the
party
seeking
to
discover
10
the
information
that
the
information
sought
is
relevant
to,
11
and
necessary
for,
the
furtherance
of
the
action
or
case;
the
12
information
sought
is
unavailable
from
other
nonconfidential
13
sources;
and
that
a
subpoena
issued
by
a
judicial
or
an
14
administrative
officer
has
been
submitted
to
the
commissioner.
15
b.
The
commissioner
may,
in
the
commissioner’s
discretion,
16
disclose
the
documents
and
information
to
a
public
official
17
having
jurisdiction
over
the
regulation
of
insurance
in
another
18
state,
or
to
a
public
official
of
the
federal
government,
19
provided
that
the
public
official
agrees
in
writing
to
maintain
20
the
confidentiality
of
the
information,
and
that
the
laws
of
21
the
state
in
which
the
public
official
serves
require
that
the
22
information
remain
confidential.
23
5.
a.
If
an
application
filed
by
a
life
captive
reinsurance
24
company
is
complete,
the
commissioner
may
issue
to
the
life
25
captive
reinsurance
company
a
certificate
of
authority
upon
a
26
finding
of
all
of
the
following:
27
(1)
The
life
captive
reinsurance
company’s
proposed
plan
of
28
operation
provides
for
a
viable
operation
and
is
not
hazardous
29
to
any
ceding
insurer.
30
(2)
The
terms
of
any
reinsurance
contract
and
related
31
transactions
of
the
life
captive
reinsurance
company
comply
32
with
this
subchapter
and
the
insurance
laws
and
rules
of
this
33
state.
34
b.
In
conjunction
with
the
issuance
of
the
certificate
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of
authority
to
a
life
captive
reinsurance
company,
the
1
commissioner
may
issue
an
order
regarding
any
terms
and
2
conditions
relating
to
the
organization,
licensing,
and
3
operation
of
the
life
captive
reinsurance
company
that
the
4
commissioner
deems
appropriate
and
that
are
not
inconsistent
5
with
this
subchapter.
6
6.
A
certificate
of
authority
shall
be
valid
for
a
period
7
of
one
year
beginning
on
the
date
of
initial
issuance
and
8
the
certificate
must
be
renewed
annually.
A
certificate
of
9
authority
may
be
renewed
if
the
applicant
is
in
compliance
with
10
the
requirements
of
this
subchapter
and
has
paid
an
annual
11
renewal
registration
fee
at
the
time
of
renewal
in
the
amount
12
of
two
thousand
five
hundred
dollars.
13
Sec.
40.
NEW
SECTION
.
521J.103
Life
captive
reinsurance
14
companies
——
names.
15
A
life
captive
reinsurance
company
shall
not
adopt
a
name
16
that
is
the
same,
deceptively
similar,
or
likely
to
be
confused
17
with
or
mistaken
for
any
other
existing
business
name
already
18
registered
in
this
state.
19
Sec.
41.
NEW
SECTION
.
521J.104
Actuarial
officer
——
20
certification.
21
On
the
date
a
life
captive
reinsurance
company
files
an
22
application
for
a
certificate
of
authority
under
section
23
521J.102,
and
by
March
15
of
each
succeeding
year
that
a
life
24
captive
reinsurance
company
is
in
operation
and
is
ceded
new
25
business
from
a
ceding
insurer,
a
qualified
actuary
of
each
26
ceding
insurer
shall
file
with
the
commissioner
a
certification
27
that
the
ceding
insurer’s
transactions
with
the
life
captive
28
reinsurance
company
are
not
used
to
gain
an
unfair
advantage
29
if
pricing
of
policies
and
contracts
reinsured
by
the
life
30
captive
reinsurance
company
reflect,
at
the
time
the
policies
31
and
contracts
were
issued,
a
reasonable
long-term
estimate
of
32
the
cost
to
the
ceding
insurer
of
an
alternative
third-party
33
transaction
and
utilize
current
pricing
assumptions.
The
34
ceding
insurer
shall
have
an
ongoing
responsibility
to
maintain
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documentation
detailing
the
process
by
which
the
qualified
1
actuary
arrived
at
the
conclusions
in
the
certification
in
2
preparation
for
an
examination
conducted
pursuant
to
section
3
521J.110.
4
Sec.
42.
NEW
SECTION
.
521J.105
Minimum
capital
and
surplus
5
requirements.
6
1.
The
commissioner
shall
not
issue
a
certificate
of
7
authority
to
a
life
captive
reinsurance
company
unless
the
life
8
captive
reinsurance
company
possesses
and
maintains
unimpaired
9
paid-in
capital
and
surplus
that
is
not
less
than
five
million
10
dollars.
The
commissioner
may
require
additional
capital
11
and
surplus
based
upon
the
type,
volume,
and
nature
of
the
12
reinsurance
business
transacted
by
the
life
captive
reinsurance
13
company.
Minimum
capital
and
surplus
shall
be
in
the
form
of
14
cash
or
other
securities
that
are
investment-grade
at
the
time
15
of
acquisition
and
are
acceptable
to
the
commissioner.
16
2.
Except
as
otherwise
provided
in
this
section,
chapter
17
521E
shall
apply
to
a
life
captive
reinsurance
company.
18
Sec.
43.
NEW
SECTION
.
521J.106
Plan
of
operation.
19
A
life
captive
reinsurance
company
must
have
a
plan
of
20
operation
approved
by
the
life
captive
reinsurance
company’s
21
board
of
directors,
and,
prior
to
assuming
risks
under
a
22
reinsurance
contract,
shall
submit
the
plan
of
operation
to
the
23
commissioner
for
approval.
The
commissioner
may
approve
the
24
plan
of
operation
upon
finding
that
the
plan
of
operation
meets
25
the
requirements
of
this
section,
and
may
require
amendments
to
26
the
plan
of
operation
as
necessary
to
satisfy
the
requirements
27
of
this
section.
Any
change
in
the
life
captive
reinsurance
28
company’s
plan
of
operation
shall
require
prior
approval
of
29
the
commissioner.
The
plan
of
operation
must
include,
at
a
30
minimum,
all
of
the
following:
31
1.
A
complete
description
of
all
reinsurance
transactions,
32
reinsurance
security
arrangements,
securitizations,
and
any
33
other
material
transactions
or
arrangements
in
which
the
life
34
captive
reinsurance
company
engages.
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2.
The
source
and
form
of
the
life
captive
reinsurance
1
company’s
capital
and
surplus
minimums
as
required
under
2
521J.105.
3
3.
The
life
captive
reinsurance
company’s
policy
on
4
investments.
5
4.
Pro
forma
balance
sheets
and
income
statements
6
illustrating
one
or
more
adverse
case
scenarios,
as
determined
7
under
criteria
established
by
the
commissioner,
for
the
8
performance
of
the
life
captive
reinsurance
company
under
all
9
reinsurance
contracts.
10
5.
Risk-based
capital
requirements,
that,
at
a
minimum,
11
require
the
life
captive
reinsurance
company
to
maintain
12
risk-based
capital
equal
to
the
product
of
two
and
one-half
and
13
the
number
determined
under
the
life
risk-based
capital
formula
14
in
accordance
with
the
risk-based
capital
instructions.
15
6.
The
life
captive
reinsurance
company’s
procedures
for
16
notice
and
reporting
of
material
transactions.
17
7.
The
life
captive
reinsurance
company’s
policies
for
18
payments
of
dividends
and
other
distributions
to
the
organizing
19
company.
20
8.
Copies
of
all
contracts
between
the
life
captive
21
reinsurance
company
and
affiliated
companies.
22
Sec.
44.
NEW
SECTION
.
521J.107
Life
captive
reinsurance
23
companies
——
formation.
24
1.
A
life
insurance
company
or
an
affiliated
company
may
25
organize
a
life
captive
reinsurance
company
pursuant
to
this
26
subchapter.
A
life
captive
reinsurance
company
must
be
formed
27
as
a
corporation
and
may
only
reinsure
risks
of
the
organizing
28
company,
and
may
access
alternative
forms
of
financing.
29
2.
An
organizing
company
shall
maintain
a
minimum
of
ten
30
percent
voting
interest
and
ten
percent
equity
ownership
in
the
31
life
captive
reinsurance
company
unless
otherwise
approved
by
32
the
commissioner.
33
3.
A
life
captive
reinsurance
company’s
organizational
34
documents
must
limit
the
life
captive
reinsurance
company’s
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authority
to
transact
the
business
of
reinsurance
to
only
1
reinsure
the
risks
of
a
ceding
insurer.
2
4.
An
organizing
company
may
invest
funds
from
its
surplus
3
in
a
life
captive
reinsurance
company
organized
pursuant
to
4
this
subchapter.
5
5.
An
organizing
company’s
officers
and
directors
may
serve
6
as
officers
and
directors
of
a
life
captive
reinsurance
company
7
organized
pursuant
to
subsection
1.
8
6.
A
life
captive
reinsurance
company
organized
under
this
9
subchapter
shall
be
deemed
to
be
licensed
to
transact
the
10
business
of
reinsurance
for
the
purposes
of
section
521B.102,
11
subsection
1,
but
shall
only
reinsure
risks
of
the
organizing
12
company
and
affiliated
companies.
13
7.
A
life
captive
reinsurance
company
may,
upon
approval
of
14
the
commissioner,
purchase
reinsurance
to
cede
the
reinsurance
15
risks
assumed
by
the
life
captive
reinsurance
company.
16
8.
Admitted
assets
of
a
life
captive
reinsurance
company
17
shall
include
assets
approved
by
the
commissioner
which
shall
18
be
deemed
to
be,
and
reported
as,
admitted
assets
of
the
life
19
captive
reinsurance
company.
20
Sec.
45.
NEW
SECTION
.
521J.108
Dividends
and
distributions.
21
1.
A
life
captive
reinsurance
company
shall
not
pay
a
22
dividend
out
of,
or
other
distribution
with
respect
to,
the
23
minimum
capital
or
surplus
required
under
section
521J.105
24
without
the
prior
written
approval
of
the
commissioner.
25
2.
The
commissioner’s
approval
of
an
ongoing
plan
for
26
the
payment
of
dividends
or
other
distributions
shall
be
27
conditioned
upon
retention,
at
the
time
of
each
payment,
of
28
capital
and
surplus
in
excess
of
the
amounts
specified
by,
29
or
determined
in
accordance
with,
a
formula
approved
by
the
30
commissioner.
31
Sec.
46.
NEW
SECTION
.
521J.109
Reports
and
notifications.
32
1.
A
life
captive
reinsurance
company
shall
provide
the
33
commissioner
with
a
copy
of
documentation
of
an
insurance
34
securitization
no
later
than
forty-five
calendar
days
before
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the
closing
on
the
transaction
for
the
securitization.
1
2.
In
the
event
of
a
material
change
in
the
financial
2
condition
or
management
of
a
life
captive
reinsurance
company,
3
the
company
shall
notify
the
commissioner
in
writing
within
two
4
business
days
of
the
material
change.
5
3.
A
life
captive
reinsurance
company
shall
notify
the
6
commissioner
within
five
business
days
of
becoming
aware
of
a
7
material
event
affecting
the
life
captive
reinsurance
company’s
8
parent,
organizing
company,
or
controlling
entity
that
has
not
9
previously
been
disclosed
to
the
commissioner.
10
4.
If
a
life
captive
reinsurance
company’s
parent,
11
organizing
company,
or
controlling
entity
is
subject
to
group
12
supervision
in
another
jurisdiction,
the
commissioner
may
13
request
participation
in
supervisory
colleges
or
coordination
14
calls
with
the
lead
regulator
of
that
jurisdiction.
The
life
15
captive
reinsurance
company
shall
facilitate
the
commissioner’s
16
participation
to
the
extent
permitted
by
law.
17
5.
A
life
captive
reinsurance
company
shall
immediately
18
notify
the
commissioner
of
an
action
by
a
ceding
insurer
or
any
19
other
person
to
foreclose
on,
or
otherwise
take
possession
of,
20
collateral
provided
by
the
life
captive
reinsurance
company
to
21
secure
an
obligation
of
the
life
captive
reinsurance
company.
22
6.
A
life
captive
reinsurance
company
shall
not
be
required
23
to
file
any
report,
notice,
or
other
document
with
the
NAIC
24
unless
required
by
the
commissioner.
25
7.
At
the
commissioner’s
request,
a
life
captive
26
reinsurance
company
shall
provide
to
the
commissioner
a
copy
27
of
any
financial
or
risk-related
filings
submitted
by
the
28
company’s
parent,
affiliate,
organizing
company,
or
controlling
29
entity
to
the
life
captive
reinsurance
company’s
domiciliary
30
insurance
regulator.
Upon
request
by
the
commissioner,
such
31
filings
shall
be
provided
to
the
commissioner
within
ten
32
business
days
of
the
submission
to
the
organizing
company’s
33
domestic
regulator.
34
8.
A
life
captive
reinsurance
company
shall
file
with
the
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commissioner
all
of
the
following:
1
a.
On
or
before
March
1
of
each
year,
for
the
immediately
2
preceding
calendar
year,
all
of
the
following:
3
(1)
A
report
of
the
company’s
risk-based
capital
level
as
4
of
the
end
of
the
immediately
preceding
calendar
year
that
5
contains
the
information
required
by
the
risk-based
capital
6
instructions.
7
(2)
A
supplemental
compensation
exhibit
that
discloses
the
8
total
annual
compensation
of
the
company’s
officers,
directors,
9
and
key
employees.
The
supplemental
exhibit
must
follow
the
10
format
and
instructions
adopted
by
the
NAIC
for
life
insurance
11
company
filings.
12
b.
(1)
On
or
before
March
1
of
each
year,
for
the
13
immediately
preceding
calendar
year,
an
actuarial
opinion
from
14
the
company’s
actuary
on
reserves
for
all
risks
assumed
by
the
15
life
captive
reinsurance
company
pursuant
to
the
company’s
16
reinsurance
contracts
and
may
discount
the
life
captive
17
reinsurance
company’s
reserves
in
accordance
with
the
actuarial
18
opinion
subject
to
approval
by
the
commissioner.
The
company’s
19
actuary
shall
submit
a
memorandum
to
the
commissioner
that
20
details
the
actuary’s
support
for
the
actuarial
opinion.
The
21
commissioner
may
require
additional
information
to
be
submitted
22
to
supplement
the
actuarial
opinion.
23
(2)
Biennially
on
April
1,
for
the
immediately
preceding
24
calendar
year,
an
opinion
by
an
independent
qualified
actuary
25
concerning
the
methods
and
assumptions
used
to
set
reserves.
26
The
independent
qualified
actuary
must
be
deemed
acceptable
by
27
the
commissioner
prior
to
filing
the
opinion.
28
c.
Completed
quarterly
and
annual
financial
statement
blanks
29
as
are
required
by
the
NAIC
for
traditional
life
insurance
30
companies,
including
any
supplements
or
interrogatories
31
required
by
the
NAIC,
in
accordance
with
the
NAIC
statutory
32
accounting
principles.
The
commissioner
may
require,
approve,
33
or
accept
any
appropriate
or
necessary
modifications
of
the
34
NAIC
statutory
accounting
principles
based
on
the
type
of
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insurance
and
kind
of
insurers
included
in
the
life
captive
1
reinsurance
company’s
report.
The
quarterly
filings
shall
be
2
filed
with
the
commissioner
on
or
before
May
15
for
the
first
3
quarter,
August
15
for
the
second
quarter,
and
November
15
for
4
the
third
quarter
for
the
current
calendar
year.
The
annual
5
statement
shall
be
filed
with
the
commissioner
on
or
before
6
March
1
of
each
year
for
the
immediately
preceding
calendar
7
year.
8
d.
On
or
before
April
1
of
each
year,
all
of
the
following:
9
(1)
For
the
immediately
preceding
calendar
year,
a
written
10
management’s
discussion
and
analysis
of
the
company’s
financial
11
condition
and
results
of
operations.
12
(2)
For
the
immediately
preceding
tax
year,
a
report
13
providing
sufficient
information
to
support
the
company’s
14
premium
tax
return
submitted
pursuant
to
section
432.1A.
15
e.
On
or
before
June
1
of
each
year,
for
the
immediately
16
preceding
calendar
year,
a
report
of
the
company’s
financial
17
condition
audited
by
an
independent
certified
public
18
accountant.
The
report
shall
be
presented
in
accordance
with
19
the
NAIC
statutory
accounting
principles.
20
f.
On
or
before
August
1
of
each
year,
a
management
21
report
on
internal
control
over
financial
reporting
with
the
22
commissioner
that
describes
the
life
captive
reinsurance
23
company’s
internal
control
structure
over
financial
reporting
24
and
identifies
any
material
weaknesses
as
of
the
end
of
the
25
preceding
calendar
year.
26
9.
Not
less
than
ten
business
days
prior
to
a
filing
due
27
date,
a
life
captive
reinsurance
company
may
submit
a
written
28
request
for
an
extension
to
file
a
report
required
under
29
subsection
8.
The
request
must
contain
sufficient
details
to
30
enable
the
commissioner
to
make
an
informed
decision
about
31
the
request.
The
commissioner
may
grant
an
extension
upon
a
32
determination
that
the
life
captive
reinsurance
company
has
33
good
cause
for
the
extension.
34
Sec.
47.
NEW
SECTION
.
521J.110
Examinations.
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1.
a.
The
commissioner
may
examine
each
life
captive
1
reinsurance
company’s
compliance
with
this
subchapter,
and
2
may
examine
the
affairs,
transactions,
accounts,
records,
3
and
assets
of
each
life
captive
reinsurance
company
as
the
4
commissioner
deems
necessary,
but
not
less
frequently
than
5
every
five
calendar
years.
6
b.
The
commissioner
shall,
upon
the
completion
of
an
7
examination
under
paragraph
“a”
,
or
at
such
regular
intervals
8
prior
to
completion
of
an
examination
as
the
commissioner
9
determines,
prepare
an
account
of
the
costs
incurred
in
10
performing
and
preparing
the
report
of
the
examination
which
11
shall
be
charged
to
and
paid
by
the
life
captive
reinsurance
12
company
examined.
If
the
life
captive
reinsurance
company
13
fails
or
refuses
to
pay
the
charges,
the
charges
may
be
14
recovered
in
an
action
brought
in
the
name
of
the
state.
15
2.
This
section
shall
apply
to
all
business
written
by
a
16
life
captive
reinsurance
company.
17
3.
The
applicable
provisions
of
chapter
507
shall
apply
to
18
examinations
conducted
under
this
subchapter.
19
Sec.
48.
NEW
SECTION
.
521J.111
Suspension
or
revocation.
20
1.
A
life
captive
reinsurance
company’s
certificate
of
21
authority
to
conduct
the
business
of
insurance
in
this
state
22
may
be
suspended
or
revoked
by
the
commissioner
for
any
of
the
23
following
reasons:
24
a.
Insolvency
or
impairment
of
capital
or
surplus.
25
b.
Failure
to
meet
and
maintain
the
minimum
capital
and
26
surplus
requirements
under
section
521J.105.
27
c.
Refusal
or
failure
to
submit
an
annual
report
pursuant
to
28
section
521J.109,
or
to
submit
a
report
or
statement
required
29
by
law
or
by
lawful
order
of
the
commissioner.
30
d.
Failure
to
comply
with
the
life
captive
reinsurance
31
company’s
own
charter,
bylaws,
or
other
organizational
32
document.
33
e.
Failure
to
submit
to
an
examination
under
section
34
521J.110.
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f.
Use
of
methods
that
render
the
life
captive
reinsurance
1
company’s
operation
detrimental,
or
the
company’s
condition
2
unsound,
with
respect
to
the
company’s
policyholders
or
to
the
3
public.
4
g.
Failure
to
pay
tax
on
premiums
as
required
under
section
5
432.1A.
6
h.
Failure
to
submit
any
fee
required
under
this
subchapter.
7
i.
Failure
to
pay
the
cost
of
an
examination
under
section
8
521J.110.
9
j.
Failure
to
comply
with
the
laws
of
this
state.
10
2.
a.
If
the
commissioner
finds
upon
examination,
hearing,
11
or
other
review
that
a
life
captive
reinsurance
company
has
12
committed
an
act
specified
in
subsection
1,
the
commissioner
13
may
suspend
or
revoke
the
life
captive
reinsurance
company’s
14
certificate
of
authority.
15
b.
If
the
commissioner
does
not
revoke
a
life
captive
16
reinsurance
company’s
certificate
of
authority
during
a
17
suspension
imposed
under
paragraph
“a”
,
the
life
captive
18
reinsurance
company’s
certificate
of
authority
may
be
19
reinstated
if
the
commissioner
finds
that
the
cause
of
the
20
suspension
has
been
rectified.
21
Sec.
49.
NEW
SECTION
.
521J.112
Mergers.
22
1.
A
merger
between
life
captive
reinsurance
companies
must
23
meet
the
requirements
of
chapter
521
and
section
521J.107,
24
as
applicable.
The
commissioner
may,
at
the
commissioner’s
25
discretion,
provide
notice
to
the
public
of
a
proposed
merger
26
prior
to
the
commissioner’s
approval
or
disapproval
of
the
27
merger.
28
2.
A
plan
for
a
merger
must
be
fair
and
equitable
to
29
the
shareholders
of
the
life
captive
reinsurance
companies
30
and
shall
provide
for
the
purchase
of
the
shares
of
any
31
nonconsenting
shareholder
of
a
life
captive
reinsurance
32
company.
33
Sec.
50.
NEW
SECTION
.
521J.113
Investments.
34
1.
A
life
captive
reinsurance
company’s
investment
program
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shall
take
into
account
the
safety
of
the
company’s
assets,
1
investment
yield
and
return,
stability
in
the
value
of
the
2
investment,
and
liquidity
necessary
to
meet
the
company’s
3
expected
business
needs
and
investment
diversification.
4
The
assets
of
a
life
captive
reinsurance
company
shall
be
5
preserved
and
administered
by
or
on
behalf
of
the
life
captive
6
reinsurance
company
to
satisfy
the
liabilities
and
obligations
7
of
the
life
captive
reinsurance
company
incident
to
the
8
reinsurance
contract
between
the
life
captive
reinsurance
9
company
and
the
parent
or
ceding
insurer,
any
insurance
10
securitizations,
and
other
related
agreements.
For
the
11
purposes
of
this
section,
assets
do
not
include
letters
of
12
credit
and
guaranties
of
a
parent.
13
2.
At
the
discretion
of
the
commissioner,
a
life
captive
14
reinsurance
company
shall
either
comply
with
section
511.8
15
or
invest
the
life
captive
reinsurance
company’s
assets
in
16
cash
and
securities
that
are
investment-grade
at
the
time
of
17
acquisition,
provided
that
a
life
captive
reinsurance
company
18
may
invest
up
to
ten
percent
of
the
life
captive
reinsurance
19
company’s
assets
in
securities
or
other
investments
that
are
20
not
investment-grade
at
the
time
of
acquisition,
not
to
include
21
any
of
the
following:
22
a.
Securities
rated
5
or
higher
by
the
NAIC
securities
23
valuation
office
at
the
time
of
acquisition.
24
b.
Asset-based
or
mortgage-backed
securities
rated
3
or
25
higher
by
the
NAIC
securities
valuation
office
at
the
time
of
26
acquisition.
27
c.
Convertible
bonds.
28
d.
Preferred
or
common
stock.
29
e.
Private
equity
or
hedge
funds.
30
3.
a.
A
life
captive
reinsurance
company
securitization
31
shall
include
a
disclosure
that
all
or
part
of
the
proceeds
32
of
such
insurance
securitization
will
be
used
to
fund
the
33
life
captive
reinsurance
company’s
obligations
to
the
ceding
34
insurer.
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b.
For
purposes
of
this
subsection,
“life
captive
1
reinsurance
company
securitization”
means
the
security-offering
2
memorandum
or
other
document
issued
to
prospective
investors
3
regarding
the
offer
and
sale
of
a
surplus
note
or
other
4
security.
5
4.
A
life
captive
reinsurance
company’s
admitted
assets
6
must
include
proceeds
from
a
securitization,
premium
and
7
other
amounts
payable
by
a
ceding
insurer
to
the
life
captive
8
reinsurance
company,
letters
of
credit,
guaranties
of
a
parent,
9
and
any
other
assets
approved
by
the
commissioner,
which
10
shall
be
deemed
to
be,
and
reported
as,
admitted
assets
of
11
the
life
captive
reinsurance
company.
The
commissioner
may
12
reduce
the
amount
of
admitted
assets
previously
approved
by
13
the
commissioner,
other
than
assets
already
covered
by
the
14
most
recent
NAIC
accounting
practices
and
procedures
manual
15
of
the
NAIC,
if
the
commissioner
determines
that
the
value
of
16
those
assets
has
decreased.
A
minimum
of
thirty
calendar
days
17
prior
to
reducing
the
amount
of
admitted
assets
previously
18
approved,
the
commissioner
shall
notify
the
life
captive
19
reinsurance
company
of
the
reduction
and
provide
the
life
20
captive
reinsurance
company
an
opportunity
to
remedy
the
issues
21
identified
by
the
commissioner.
22
5.
A
life
captive
reinsurance
company
shall
not
make
a
loan
23
to
or
an
investment
in
any
person,
other
than
as
permitted
24
in
the
life
captive
reinsurance
company’s
plan
of
operation,
25
without
prior
written
approval
of
the
commissioner,
and
any
26
such
loan
or
investment
must
be
evidenced
by
documentation
27
approved
by
the
commissioner.
A
life
captive
reinsurance
28
company
shall
not
loan
minimum
capital
and
surplus
funds.
29
6.
An
organizing
company
shall
report
to
the
commissioner
30
the
company’s
ownership
in
the
life
captive
reinsurance
company
31
and
value
the
ownership
equal
to
the
audited
statutory
surplus
32
of
the
life
captive
reinsurance
company.
33
Sec.
51.
NEW
SECTION
.
521J.114
Permitted
reinsurance.
34
1.
A
life
captive
reinsurance
company
may
reinsure,
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pursuant
to
a
reinsurance
contract,
only
the
risks
of
a
ceding
1
insurer.
2
2.
Unless
otherwise
approved
in
advance
by
the
3
commissioner,
a
life
captive
reinsurance
company
shall
not
4
assume
or
retain
exposure
to
reinsurance
losses
for
the
life
5
captive
reinsurance
company’s
own
account
that
are
not
funded
6
by
any
of
the
following:
7
a.
Proceeds
from
a
securitization.
8
b.
Premium
and
other
amounts
payable
by
a
ceding
insurer
to
9
the
life
captive
reinsurance
company
pursuant
to
a
reinsurance
10
contract.
11
c.
Letters
of
credit.
12
d.
Guaranties
of
a
parent.
13
e.
A
return
on
investment
of
proceeds
from
either
a
14
securitization
or
a
premium,
and
other
amounts
payable
by
the
15
ceding
insurer
to
the
life
captive
reinsurance
company
pursuant
16
to
the
reinsurance
contract.
17
3.
A
life
captive
reinsurance
company
may
cede
risks
assumed
18
through
a
reinsurance
contract
to
one
or
more
reinsurers
19
through
the
purchase
of
retrocession,
subject
to
prior
approval
20
of
the
commissioner.
21
4.
A
life
captive
reinsurance
company
may
enter
into
22
contracts
and
conduct
other
commercial
activities
related
23
or
incidental
to
and
necessary
to
fulfill
the
purposes
of
24
a
reinsurance
contract,
an
insurance
securitization,
and
25
this
subchapter.
Such
contracts
and
commercial
activities
26
must
be
included
in
the
life
captive
reinsurance
company’s
27
plan
of
operation
or
otherwise
be
approved
in
advance
by
the
28
commissioner,
and
may
include
but
are
not
limited
to
any
of
the
29
following:
30
a.
Entering
into
reinsurance
contracts
or
issuing
life
31
captive
reinsurance
company
securities,
and
complying
with
the
32
terms
of
the
contracts
and
securities.
33
b.
Entering
into
guaranty
trust,
guaranteed
investment
34
contract,
swap,
or
other
derivative,
tax,
administration,
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services
reimbursement,
or
fiscal
agent
transactions.
1
c.
Complying
with
trust
indenture,
reinsurance,
or
2
retrocession.
3
5.
A
reinsurance
contract
shall
not
contain
a
provision
for
4
payment
by
the
life
captive
reinsurance
company
in
discharge
of
5
the
life
captive
reinsurance
company’s
obligations
to
a
person
6
other
than
the
ceding
insurer
or
a
receiver
of
the
ceding
7
insurer,
except
upon
prior
approval
of
the
commissioner.
8
Sec.
52.
NEW
SECTION
.
521J.115
Rating
organizations.
9
A
life
captive
reinsurance
company
shall
not
be
required
to
10
join
a
rating
organization.
11
Sec.
53.
NEW
SECTION
.
521J.116
Compulsory
organizations.
12
A
life
captive
reinsurance
company
shall
not
join
or
13
contribute
financially
to
a
plan,
pool,
association,
or
14
guaranty
or
insolvency
fund
in
this
state.
15
Sec.
54.
NEW
SECTION
.
521J.117
Dormant
life
captive
16
reinsurance
companies.
17
1.
A
life
captive
reinsurance
company
that
is
domiciled
18
in
this
state
and
complies
with
this
section
may
apply
to
the
19
commissioner
for
a
certificate
of
dormancy.
A
certificate
20
of
dormancy
shall
be
valid
for
five
years
from
the
date
of
21
issuance
and
may
not
be
renewed.
22
2.
a.
A
life
captive
reinsurance
company
that
has
been
23
issued
a
certificate
of
dormancy
shall
comply
with
all
of
the
24
following:
25
(1)
The
dormant
life
captive
reinsurance
company
shall
26
possess
and
maintain
unimpaired,
paid-in
capital
and
surplus
of
27
not
less
than
twenty-five
thousand
dollars.
28
(2)
A
dormant
life
captive
reinsurance
company
shall
29
annually
submit
to
the
commissioner,
within
ninety
calendar
30
days
of
the
end
of
the
dormant
life
captive
reinsurance
31
company’s
fiscal
year,
a
report
on
the
dormant
life
captive
32
reinsurance
company’s
financial
condition,
verified
under
33
oath
by
two
of
the
dormant
life
captive
reinsurance
company’s
34
executive
officers,
in
the
form
and
manner
established
by
the
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commissioner
by
rule.
1
(3)
If,
for
any
portion
of
the
immediately
preceding
2
calendar
year,
the
life
captive
reinsurance
company
held
a
3
certificate
of
dormancy,
the
dormant
life
captive
reinsurance
4
company
shall
pay
an
annual
one
thousand
dollar
dormancy
tax,
5
due
on
or
before
March
1.
6
b.
From
the
date
a
certificate
of
dormancy
is
issued
through
7
the
date
the
certificate
expires,
a
dormant
life
captive
8
reinsurance
company
that
has
been
issued
the
certificate
shall
9
not
be
subject
to
section
432.1A.
10
3.
At
the
discretion
of
the
commissioner,
a
dormant
life
11
captive
reinsurance
company
may
be
subject
to
an
annual
12
examination.
13
4.
Prior
to
a
dormant
life
captive
reinsurance
company
14
issuing
an
insurance
policy,
the
company
must
apply
to
15
the
commissioner
for
approval
to
surrender
the
company’s
16
certificate
of
dormancy
and
to
resume
conducting
the
business
17
of
insurance.
18
5.
The
commissioner
shall
revoke
a
dormant
life
captive
19
reinsurance
company’s
certificate
of
dormancy
if
the
company
20
violates
this
section.
21
Sec.
55.
NEW
SECTION
.
521J.118
Books
and
records.
22
1.
a.
Unless
otherwise
approved
by
the
commissioner,
a
23
life
captive
reinsurance
company
shall
maintain
the
company’s
24
original
books,
records,
documents,
accounts,
vouchers,
25
and
agreements
in
this
state
and
make
them
available
for
26
examination
and
inspection
by
the
commissioner
as
requested
by
27
the
commissioner.
The
life
captive
reinsurance
company
may
28
store
and
reproduce
the
books,
records,
documents,
accounts,
29
vouchers,
and
agreements
electronically.
30
b.
All
books,
records,
documents,
accounts,
vouchers,
and
31
agreements
shall
be
kept
in
a
manner
that
the
commissioner
32
can
readily
ascertain
the
life
captive
reinsurance
company’s
33
financial
condition,
affairs,
and
operations;
can
readily
34
verify
the
life
captive
reinsurance
company’s
financial
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statements;
and
can
confirm
the
life
captive
reinsurance
1
company’s
compliance
with
this
subchapter.
2
2.
Unless
otherwise
approved
by
the
commissioner,
all
3
books,
records,
documents,
accounts,
vouchers,
and
agreements
4
maintained
by
a
life
captive
reinsurance
company
under
5
subsection
1
shall
remain
available
in
the
state
until
the
6
commissioner
approves
destruction
or
other
disposition
of
the
7
books,
records,
documents,
accounts,
vouchers,
and
agreements.
8
Sec.
56.
NEW
SECTION
.
521J.119
Material
transactions.
9
1.
A
life
captive
reinsurance
company
shall
not
take
any
10
of
the
following
actions
unless
the
company
provides
the
11
commissioner
at
least
thirty
calendar
days’
prior
written
12
notice
and
the
commissioner
expressly
approves
the
action:
13
a.
Dissolve
the
life
captive
reinsurance
company.
14
b.
Sell,
exchange,
lease,
mortgage,
assign,
pledge,
or
15
otherwise
transfer
or
grant
a
security
interest
in
over
thirty
16
percent
of
the
assets
of
the
life
captive
reinsurance
company.
17
c.
Incur
material
indebtedness.
18
d.
Make
a
material
loan
or
other
material
extension
of
19
credit.
20
e.
Make
a
material
payment
out
of
capital
and
surplus
other
21
than
dividends
or
distributions
paid
in
accordance
with
this
22
subchapter.
23
f.
Conduct
a
merger
or
consolidation
to
which
the
life
24
captive
reinsurance
company
is
a
constituent
party.
25
g.
Transfer
to
or
redomesticate
in
a
different
jurisdiction.
26
h.
Terminate
all
or
a
part
of
the
life
captive
reinsurance
27
company’s
business.
28
2.
A
life
captive
reinsurance
company
shall
submit
to
the
29
commissioner
periodic
written
requests
for
authorization
prior
30
to
making
payments
of
interest
on,
and
repayments
of
principal
31
of,
surplus
notes
and
other
debt
obligations
issued
by
a
life
32
captive
reinsurance
company.
The
commissioner
shall
not
33
approve
a
payment
or
repayment
if
the
commissioner
determines
34
that
the
payment
or
repayment
would
jeopardize
the
ability
of
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the
life
captive
reinsurance
company
or
any
other
person
to
1
fulfill
the
company’s
or
person’s
obligations.
2
Sec.
57.
NEW
SECTION
.
521J.120
Securities.
3
A
life
captive
reinsurance
company
security
shall
not
4
be
subject
to
regulation
as
an
insurance
or
reinsurance
5
contract.
An
investor
in,
or
holder
of,
the
security
shall
6
not
be
considered
to
transact
in
the
business
of
insurance
7
in
the
state
solely
based
on
such
interest
in
the
security.
8
An
underwriter’s
placement
agents,
selling
agents,
partners,
9
commissioners,
officers,
members,
managers,
employees,
10
agents,
representatives,
and
advisors
involved
in
an
insurance
11
securitization
by
a
life
captive
reinsurance
company
shall
12
not
be
considered
insurance
producers
or
brokers,
or
to
be
13
conducting
business
as
an
insurance
company,
as
a
reinsurance
14
company,
or
as
an
insurance
agency,
brokerage,
intermediary,
15
advisory,
or
consulting
business,
solely
based
on
underwriting
16
activities
in
connection
with
securitization.
17
Sec.
58.
NEW
SECTION
.
521J.121
Rules.
18
The
commissioner
may
adopt
rules
pursuant
to
chapter
17A
to
19
implement
and
administer
this
subchapter.
20
Sec.
59.
CODE
EDITOR
DIRECTIVE.
The
Code
editor
is
21
directed
to
designate
sections
521J.1
through
521J.27,
as
22
enacted
and
amended
by
this
Act,
as
subchapter
I
of
chapter
23
521J
entitled
“Captive
Insurance
Companies”,
and
to
designate
24
sections
521J.101
through
521J.121,
as
enacted
by
this
Act,
25
as
subchapter
II
of
chapter
521J
entitled
“Life
Captive
26
Reinsurance
Companies”.
27
EXPLANATION
28
The
inclusion
of
this
explanation
does
not
constitute
agreement
with
29
the
explanation’s
substance
by
the
members
of
the
general
assembly.
30
This
bill
relates
to
captive
insurance
companies
(captive
31
companies)
and
life
captive
reinsurance
companies
(LCRCs).
32
Under
the
bill,
a
tax
return
on
gross
premiums
filed
by
an
33
insurance
company
or
a
captive
company
shall
not
be
subject
34
to
inspection
under
Code
chapter
22,
and
it
shall
be
unlawful
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for
any
present
or
former
officer
or
employee
of
the
state
to
1
willfully
or
recklessly
publish
such
tax
return.
A
person
who
2
violates
the
bill
shall
be
guilty
of
a
serious
misdemeanor
and,
3
in
addition
to
any
other
penalty,
shall
be
dismissed
from
state
4
office
or
discharged
from
state
employment.
The
bill
does
not
5
prohibit
the
department
of
revenue
(DOR)
from
turning
over
6
information
and
tax
returns
in
the
DOR’s
possession
to
duly
7
authorized
officers
of
the
United
States,
or
tax
officials
of
8
other
states,
pursuant
to
an
agreement
between
the
commissioner
9
of
insurance
(commissioner)
and
either
the
secretary
of
the
10
treasury
of
the
United
States
or
the
secretary’s
delegate,
or
11
the
commissioner
of
another
state.
12
Under
current
law,
Code
section
409.905
(foreign
insurance
13
companies
becoming
domestic)
applies
to
life
insurance
14
companies,
and
to
insurance
companies
doing
business
under
Code
15
chapter
515.
Under
the
bill,
Code
section
409.905
also
applies
16
to
captive
companies.
17
The
bill
amends
the
definitions
of
“alien
captive
company”,
18
“business
entity”,
“captive
company”,
“captive
reinsurance
19
company”,
“captive
risk
retention
group”,
and
“special
purpose
20
captive
company”
under
Code
chapter
521J
(captive
companies).
21
The
term
“foreign
captive
company”
is
defined
in
the
bill.
22
Under
current
law,
if
permitted
by
its
organizational
23
document,
a
captive
company
may
apply
to
the
commissioner
for
24
a
certificate
of
authority
to
provide
property
insurance,
25
casualty
insurance,
life
insurance,
disability
income
26
insurance,
surety
insurance,
marine
insurance,
health
27
insurance,
or
a
group
health
plan.
Under
the
bill,
a
captive
28
company
may
also
apply
for
a
certificate
of
authority
to
29
have
the
ability
to
accept
or
transfer
risks
by
means
of
a
30
parametric
contract.
31
A
captive
company
shall
not
write
any
insurance
business
32
unless
the
captive
company’s
organizational
documents,
and
any
33
subsequent
amendments,
have
been
filed
and
approved
by
the
34
commissioner
prior
to
being
filed
with
the
secretary
of
state.
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Prior
to
receiving
a
certificate
of
authority,
current
1
law
requires
a
captive
company
to
file
with
the
commissioner
2
a
certified
copy
of
the
business
entity’s
organizational
3
document.
The
bill
eliminates
the
requirement
that
the
copy
4
be
certified.
5
The
bill
eliminates
the
requirements
under
current
law
6
of
Code
sections
521J.2(3)(a)(1)(c),
521J.2(3)(a)(4),
7
521J.2(3)(e),
521J.4(1)(e),
521J.4(3),
521J.5(2)(c),
521J.6(2),
8
521J.13(1),
and
521J.13(1)(b)
that
requirements
of
the
9
commissioner
be
established
by
rule.
10
Under
current
law,
all
documents
and
information
submitted
11
by
a
captive
company
prior
to
receiving
a
certificate
of
12
authority
shall
be
confidential
and
shall
not
be
made
public
13
without
the
advance
written
consent
of
the
submitting
company.
14
The
bill
includes
reports
as
confidential
information.
15
Current
law
requires
that
each
captive
company,
individual
16
series
of
members
of
a
limited
liability
company,
and
protected
17
cell
pay
an
initial
registration
fee,
and
an
annual
renewal
18
registration
fee,
of
$300.
The
bill
requires
each
captive
19
company,
individual
series
of
members
of
a
limited
liability
20
company,
and
protected
cell
pay
an
annual
renewal
registration
21
fee
of
$300.
22
Under
current
law,
the
commissioner
shall
not
issue
a
23
certificate
of
authority
to
a
captive
company
unless
the
24
captive
company
possesses
and
maintains
unimpaired
paid-in
25
capital
and
surplus
of
no
less
than
$500,000
for
a
protected
26
cell
captive
company.
If,
however,
the
protected
cell
captive
27
company
does
not
assume
any
risks,
the
risks
insured
by
the
28
protected
cells
are
homogenous,
and
there
are
not
more
than
10
29
cells,
the
commissioner
may
reduce
the
amount
to
an
amount
not
30
less
than
$250.
Under
the
bill,
the
commissioner
shall
not
31
issue
a
certificate
of
authority
to
a
captive
company
unless
32
the
captive
company
possesses
and
maintains
unimpaired
paid-in
33
capital
and
surplus
of
no
less
than
$100,000
for
a
protected
34
cell
captive
company.
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Under
current
law,
the
minimum
capital
and
surplus
1
requirements
for
a
captive
company
shall
be
in
the
form
of
2
cash,
cash
equivalent,
or
an
irrevocable
letter
of
credit.
3
Under
the
bill,
the
minimum
capital
and
surplus
requirements
4
may
also
be
in
the
form
of
marketable
securities
approved
by
5
the
commissioner.
If
the
captive
company
elects
to
satisfy
6
the
minimum
requirements
with
marketable
securities,
the
7
commissioner
may
require
the
captive
company
to
file
financial
8
statements
or
other
reports
on
a
more
frequent
basis
than
9
otherwise
required.
The
increased
reporting
frequency
may
10
be
imposed
to
ensure
the
commissioner
can
adequately
monitor
11
the
liquidity,
valuation,
and
market
risk
associated
with
the
12
marketable
securities.
13
Current
law
requires
a
captive
company
be
formed
or
14
organized
as
a
business
entity
under
Code
chapter
521J.
Under
15
the
bill,
subject
to
the
commissioner’s
approval,
a
captive
16
company
may
also
be
formed
as
a
reciprocal
insurer
under
Code
17
chapter
520.
18
The
bill
eliminates
the
requirement
under
current
law
that
19
a
captive
risk
retention
group
formed
as
a
reciprocal
insurer
20
have
a
minimum
of
five
members
of
the
subscribers’
advisory
21
committee
who
are
residents
of
this
state.
Under
the
bill,
22
a
captive
company
formed
as
a
reciprocal
insurer
shall
be
23
subject
to
Code
chapter
520
(reciprocal
or
interinsurance
24
contracts),
unless
exempt
by
approval
of
the
commissioner
in
25
the
captive
company’s
plan
of
operation.
The
bill
eliminates
26
the
requirement
under
current
law
that
applicable
provisions
27
of
Code
chapter
508B
(conversion
from
mutual
company
to
28
stock
company)
apply
to
a
merger,
consolidation,
conversion,
29
mutualization,
or
voluntary
dissolution
by
a
captive
company.
30
Under
current
law,
a
captive
company
shall
file
an
annual
31
report
with
the
commissioner
that
meets
the
requirements
of
32
current
law.
Under
the
bill,
a
captive
company
does
not
have
33
to
file
the
annual
report
if
directed
by
the
commissioner
in
34
the
first
year
of
a
captive
company’s
licensure.
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The
bill
eliminates
the
requirement
under
current
law
that
1
all
reports
filed
pursuant
to
Code
section
521J.7
(reports)
be
2
considered
confidential
and
not
a
public
record.
3
Under
the
bill,
applicable
provisions
of
Code
chapter
508B
4
apply
to
a
merger,
consolidation,
conversion,
mutualization,
5
or
voluntary
dissolution
by
a
captive
company
unless
provided
6
otherwise.
7
Under
current
law,
if
a
captive
company’s
admitted
assets
8
total
less
than
$5
million,
the
commissioner
may
approve
9
an
investment
of
up
to
20
percent
of
the
captive
company’s
10
admitted
assets
in
rated
credit
instruments
in
any
investment.
11
Instead
of
admitted
assets,
the
bill
relies
on
the
total
assets
12
disclosed
in
a
captive
company’s
annual
report.
Total
assets
13
under
the
bill
shall
be
based
on
the
accounting
basis
approved
14
by
the
commissioner,
provided
that
all
assets
included
must
be
15
reasonably
liquid,
realizable,
and
available
to
support
the
16
obligations
of
the
captive
company.
17
Current
law
requires
that
each
protected
cell
captive
18
company
formed
or
authorized
by
Code
chapter
521J
be
19
incorporated,
and
an
incorporated
protected
cell
may
be
20
organized
and
operated
in
any
form
of
business
organization
as
21
authorized
by
the
commissioner
by
rule.
The
bill
requires
that
22
each
protected
cell
captive
company
be
formed
as
a
business
23
entity,
provided
the
business
entity
is
separate
from
the
24
protected
cell
captive
company
of
which
the
business
entity
is
25
a
part.
26
Under
current
law,
the
commissioner
shall
adopt
rules
to
27
implement
and
administer
Code
chapter
521J.
Under
the
bill,
28
the
commissioner
may
adopt
rules.
29
For
taxes
due
pursuant
to
Code
section
432.1A
(tax
on
30
premiums
——
captive
companies),
a
foreign
or
alien
captive
31
company
that
redomesticates
into
the
state
shall
only
be
32
liable
for
taxes
on
premiums
paid
to
the
captive
company
after
33
redomestication
and
shall
report
to
the
commissioner
all
34
premium
taxes
due.
In
either
the
captive
company’s
first
or
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second
year
of
operation
after
domesticating
into
the
state,
1
the
company
may
elect
to
forego
payment
of
the
premium
taxes.
2
If
the
company
that
makes
such
election
subsequently
surrenders
3
the
company’s
license
or
redomesticates
to
another
jurisdiction
4
within
five
years,
the
company
shall
immediately
pay
to
the
5
commissioner
a
tax
in
an
amount
equal
to
the
foregone
premium
6
tax
plus
10
percent
per
annum
from
the
date
the
foregone
7
premium
tax
would
have
been
originally
due.
8
The
bill
makes
conforming
changes
to
Code
sections
9
521J.1(u1),
521J.1(22),
521J.1(24)(b),
521J.5(6),
521J.5(7)(b),
10
521J.5(9)(b),
521J.8(1)(a),
521J.8(5),
521J.9(1)(h)
and
(i),
11
521J.14(3),
521J.17(2),
521J.17(2)(a)(4),
521J.17(2)(c),
12
521J.18,
521J.22(3)(a)(3),
521J.23,
521J.24(1)(b),
and
521J.26.
13
An
LCRC
issued
a
certificate
of
authority
shall
only
14
reinsure
the
risks
of
a
ceding
insurer,
shall
not
otherwise
15
engage
in
the
business
of
insurance,
and
may
purchase
16
retrocession
to
cede
the
risks
assumed
under
a
reinsurance
17
contract.
An
LCRC
shall
not
write
any
insurance
business
18
unless
the
LCRC
complies
with
the
requirements
of
the
bill.
19
All
documents
and
information
submitted
by
an
LCRC
for
purposes
20
of
an
application
for
a
certificate
of
authority
shall
be
21
confidential
and
shall
not
be
made
public
without
the
advance
22
written
consent
of
the
submitting
LCRC,
unless
an
exception
23
detailed
in
the
bill
applies.
If
the
LCRC’s
application
is
24
complete,
the
commissioner
may
issue
a
certificate
of
authority
25
to
the
LCRC
upon
a
finding
that
the
LCRC’s
proposed
plan
of
26
operation
provides
for
a
viable
operation,
is
not
hazardous
to
27
a
ceding
insurer,
and
the
terms
of
any
reinsurance
contract
and
28
related
transactions
of
the
LCRC
comply
with
the
requirements
29
of
the
bill
and
all
applicable
insurance
laws
and
rules
of
the
30
state.
In
conjunction
with
the
issuance
of
the
certificate
of
31
authority,
the
commissioner
may
issue
an
order
regarding
any
32
terms
and
conditions
regarding
the
organization,
licensing,
and
33
operation
of
the
LCRC
that
the
commissioner
deems
appropriate.
34
“Ceding
insurer”
and
“life
captive
reinsurance
company”
are
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defined
by
the
bill.
1
An
LCRC
shall
not
adopt
a
name
that
is
the
same,
deceptively
2
similar,
or
likely
to
be
confused
with
or
mistaken
for
any
3
other
existing
business
name
already
registered
in
the
state.
4
On
the
date
an
LCRC
files
an
application
for
a
certificate
5
of
authority,
and
by
March
15
of
each
succeeding
year
that
an
6
LCRC
is
in
operation
and
is
ceded
new
business,
a
qualified
7
actuary
shall
file
with
the
commissioner
a
certification
that
8
the
ceding
insurer’s
transactions
with
the
LCRC
are
not
used
to
9
gain
an
unfair
advantage
if
pricing
of
policies
and
contracts
10
reinsured
by
the
LCRC
reflect,
at
the
time
the
policies
and
11
contracts
were
issued,
a
reasonable
long-term
estimate
of
12
the
cost
to
the
ceding
insurer
of
an
alternative
third-party
13
transaction
and
utilize
current
pricing
assumptions.
The
14
ceding
insurer
shall
maintain
documentation
detailing
15
the
process
by
which
the
qualified
actuary
arrived
at
the
16
conclusions
in
preparation
for
an
examination.
17
The
commissioner
shall
not
issue
a
certificate
of
authority
18
unless
an
LCRC
possesses
and
maintains
unimpaired
paid-in
19
capital
and
surplus
that
is
not
less
than
$5
million,
and
the
20
commissioner
may
require
additional
capital
and
surplus
based
21
upon
the
reinsurance
business
transacted
by
the
LCRC.
Minimum
22
capital
and
surplus
shall
be
in
the
form
of
cash
or
other
23
securities
that
are
investment-grade
at
the
time
of
acquisition
24
and
are
acceptable
to
the
commissioner.
Except
as
otherwise
25
provided,
Code
chapter
521E
(risk-based
capital
requirements
26
for
insurers)
shall
apply
to
an
LCRC.
27
An
LCRC
must
have
a
plan
of
operation
approved
by
its
28
board
of
directors,
and,
prior
to
assuming
risks
under
a
29
reinsurance
contract,
shall
submit
the
plan
of
operation
to
30
the
commissioner
for
approval.
The
commissioner
may
approve
31
the
plan
of
operation
upon
finding
that
the
plan
meets
the
32
requirements
of
the
bill,
and
may
require
amendments
to
the
33
plan
as
necessary.
Any
change
in
the
LCRC’s
plan
of
operation
34
shall
require
prior
approval
of
the
commissioner.
The
plan
of
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operation
must
include
all
of
the
information
detailed
in
the
1
bill.
2
An
LCRC
or
an
affiliated
company
may
organize
an
LCRC
3
pursuant
to
the
bill,
and
an
LCRC
must
be
formed
as
a
4
corporation,
may
only
reinsure
risks
of
the
organizing
company,
5
and
may
access
alternative
forms
of
financing.
An
organizing
6
company
shall
maintain
a
minimum
of
10
percent
voting
interest
7
and
10
percent
equity
ownership
in
the
LCRC
unless
otherwise
8
approved
by
the
commissioner.
An
LCRC’s
organizational
9
documents
shall
limit
the
company’s
authority
to
transact
the
10
business
of
reinsurance
to
only
reinsure
the
risks
of
a
ceding
11
insurer.
An
organizing
company
may
invest
funds
from
its
12
surplus
in
an
LCRC,
and
the
organizing
company’s
officers
and
13
directors
may
serve
as
officers
and
directors
of
an
LCRC.
An
14
LCRC
shall
be
deemed
to
be
licensed
to
transact
the
business
of
15
reinsurance.
An
LCRC
may,
upon
approval
of
the
commissioner,
16
purchase
reinsurance.
Admitted
assets
of
an
LCRC
include
17
assets
approved
by
the
commissioner
which
shall
be
deemed
to
18
be,
and
reported
as,
admitted
assets
of
the
LCRC.
19
An
LCRC
shall
not
pay
a
dividend
out
of,
or
other
20
distribution
with
respect
to,
the
minimum
capital
or
surplus
21
without
the
prior
written
approval
of
the
commissioner.
The
22
commissioner’s
approval
of
an
ongoing
plan
for
the
payment
23
of
dividends
or
other
distributions
shall
be
conditioned
24
upon
retention,
at
the
time
of
each
payment,
of
capital
and
25
surplus
in
excess
of
the
amounts
specified
by,
or
determined
in
26
accordance
with,
a
formula
approved
by
the
commissioner.
27
The
bill
details
the
reports
and
notifications
by
an
LCRC
28
required
to
be
filed
with
the
commissioner.
29
The
commissioner
may
examine
each
LCRC’s
compliance
with
30
the
bill,
and
may
examine
the
affairs,
transactions,
accounts,
31
records,
and
assets
of
each
LCRC
as
necessary,
but
not
less
32
frequently
than
every
five
years.
Upon
the
completion
of
an
33
examination,
or
at
regular
intervals,
the
commissioner
shall
34
prepare
an
account
of
the
costs
incurred
in
performing
and
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preparing
the
report
of
the
examination
which
shall
be
charged
1
to
and
paid
by
the
LCRC
examined.
If
the
LCRC
fails
or
refuses
2
to
pay,
the
charges
may
be
recovered
in
an
action
brought
in
3
the
name
of
the
state.
Examination
requirements
shall
apply
to
4
all
business
written
by
an
LCRC,
and
applicable
provisions
of
5
Code
chapter
507
(examination
of
insurance
companies)
apply
to
6
such
examinations.
7
An
LCRC’s
certificate
of
authority
may
be
suspended
or
8
revoked
by
the
commissioner
for
any
of
the
reasons
described
9
in
the
bill.
If
the
commissioner
does
not
revoke
an
LCRC’s
10
certificate
of
authority
during
a
suspension,
the
LCRC’s
11
certificate
of
authority
may
be
reinstated
if
the
commissioner
12
finds
that
the
cause
of
the
suspension
has
been
rectified.
13
A
merger
between
LCRCs
must
meet
the
requirements
of
Code
14
chapter
521
(consolidation,
merger,
and
reinsurance)
and
Code
15
section
521J.107,
as
applicable.
The
commissioner
may
provide
16
notice
to
the
public
of
a
proposed
merger
prior
to
approving
or
17
disapproving
of
a
merger.
A
plan
for
a
merger
shall
be
fair
and
18
equitable
to
the
shareholders
and
provide
for
the
purchase
of
19
the
shares
of
any
nonconsenting
shareholder.
20
An
LCRC’s
investment
program
shall
account
for
the
safety
of
21
the
company’s
assets,
investment
yield
and
return,
stability
22
in
the
value
of
the
investment,
and
liquidity
necessary
to
23
meet
the
company’s
expected
business
needs
and
investment
24
diversification.
The
assets
of
an
LCRC
shall
be
preserved
25
and
administered
to
satisfy
the
liabilities
and
obligations
26
of
the
LCRC
incident
to
the
reinsurance
contract,
any
27
insurance
securitizations,
and
other
related
agreements.
At
28
the
discretion
of
the
commissioner,
an
LCRC
shall
either
29
comply
with
Code
section
511.8
or
invest
its
assets
in
cash
30
and
securities
that
are
investment-grade
at
the
time
of
31
acquisition,
provided
that
an
LCRC
may
invest
up
to
10
percent
32
of
its
assets
in
securities
or
other
investments
that
are
not
33
investment-grade
except
for
any
of
the
assets
detailed
in
34
the
bill.
An
LCRC
securitization
shall
include
a
disclosure
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that
all
or
part
of
the
proceeds
of
the
securitization
will
1
be
used
to
fund
the
LCRC’s
obligations
to
the
ceding
insurer.
2
The
commissioner
may
reduce
the
amount
of
admitted
assets
3
previously
approved
if
it
is
determined
that
the
value
of
those
4
assets
has
decreased.
A
minimum
of
30
days
prior
to
reducing
5
the
amount
of
admitted
assets,
the
commissioner
shall
notify
6
the
LCRC
and
provide
an
opportunity
to
remedy
the
issues.
An
7
LCRC
shall
not
make
a
loan
to
or
an
investment
in
any
person,
8
other
than
as
permitted
in
the
plan
of
operation,
without
9
prior
written
approval
of
the
commissioner
and
evidenced
by
10
documentation
approved
by
the
commissioner.
An
LCRC
shall
not
11
loan
minimum
capital
and
surplus
funds.
An
organizing
company
12
shall
report
its
ownership
in
the
LCRC
and
value
the
ownership
13
equal
to
the
audited
statutory
surplus.
14
An
LCRC
shall
not
assume
or
retain
exposure
to
reinsurance
15
losses
for
the
LCRC’s
own
account
that
are
funded
as
detailed
16
in
the
bill.
An
LCRC
may
cede
risks
assumed
through
a
17
reinsurance
contract
to
reinsurers
through
the
purchase
of
18
retrocession,
subject
to
prior
approval
of
the
commissioner.
19
An
LCRC
may
enter
into
contracts
and
conduct
other
20
commercial
activities
related
or
incidental
to
and
necessary
to
21
fulfill
the
purposes
of
a
reinsurance
contract,
an
insurance
22
securitization,
and
the
bill.
Such
contracts
and
commercial
23
activities
must
be
included
in
the
LCRC’s
plan
of
operation
24
or
otherwise
be
approved
in
advance
by
the
commissioner
and
25
may
include
the
contracts
and
activities
detailed
in
the
bill.
26
Unless
approved
by
the
commissioner,
a
reinsurance
contract
27
shall
not
contain
a
provision
for
payment
by
the
LCRC
in
28
discharge
of
its
obligations
to
a
person
other
than
the
ceding
29
insurer
or
a
receiver
of
the
ceding
insurer.
30
An
LCRC
shall
not
be
required
to
join
a
rating
organization
31
and
shall
not
join
or
contribute
financially
to
any
plan,
pool,
32
association,
or
guaranty
or
insolvency
fund
in
this
state.
33
An
LCRC
domiciled
in
the
state
may
apply
to
the
commissioner
34
for
a
certificate
of
dormancy,
which
shall
be
valid
for
five
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years
and
may
not
be
renewed.
An
LCRC
issued
a
certificate
of
1
dormancy
shall
comply
with
the
requirements
of
the
bill
and
2
shall
not
be
subject
to
Code
section
432.1A.
At
the
discretion
3
of
the
commissioner,
a
dormant
LCRC
may
be
subject
to
an
4
annual
examination.
A
dormant
LCRC
must
apply
for
approval
5
to
surrender
a
certificate
of
dormancy
and
resume
conducting
6
business
prior
to
issuing
an
insurance
policy.
7
Unless
otherwise
approved,
an
LCRC
shall
maintain
the
8
original
books,
records,
documents,
accounts,
vouchers,
and
9
agreements
in
this
state,
make
them
available
for
examination
10
and
inspection
by
the
commissioner
upon
request,
and
keep
them
11
in
the
state
until
the
commissioner
approves
destruction
or
12
other
disposition
of
the
books,
records,
documents,
accounts,
13
vouchers,
and
agreements.
The
LCRC
may
store
and
reproduce
the
14
books,
records,
documents,
accounts,
vouchers,
and
agreements
15
electronically
but
shall
also
be
kept
in
a
manner
that
the
16
commissioner
can
readily
ascertain
the
LCRC’s
financial
17
condition,
affairs,
and
operations;
can
readily
verify
the
18
LCRC’s
financial
statements;
and
can
confirm
the
LCRC’s
19
compliance
with
the
bill.
20
An
LCRC
shall
not
take
any
of
the
actions
detailed
in
the
21
bill
unless
the
company
provides
the
commissioner
at
least
22
30
days
prior
written
notice
and
the
commissioner
expressly
23
approves
the
action.
An
LCRC
shall
submit
to
the
commissioner
24
requests
for
authorization
prior
to
making
payments
of
interest
25
on,
and
repayments
of
principal
of,
surplus
notes
and
other
26
debt
obligations
issued
by
an
LCRC.
The
commissioner
shall
27
not
approve
the
payment
or
repayment
if
it
would
jeopardize
28
the
ability
of
the
LCRC
or
another
person
to
fulfill
their
29
obligations.
30
An
LCRC
security
shall
not
be
subject
to
regulation
as
31
an
insurance
or
reinsurance
contract.
An
investor
in,
or
32
holder
of,
the
security
shall
not
be
considered
to
transact
33
in
the
business
of
insurance
solely
based
on
such
interest.
34
An
underwriter’s
placement
agents,
selling
agents,
partners,
35
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commissioners,
officers,
members,
managers,
employees,
1
agents,
representatives,
and
advisors
involved
in
an
insurance
2
securitization
shall
not
be
considered
to
be
insurance
3
producers
or
brokers
or
to
be
conducting
business
as
an
4
insurance
company,
a
reinsurance
company,
or
an
insurance
5
agency,
brokerage,
intermediary,
advisory,
or
consulting
6
business,
solely
by
virtue
of
their
underwriting
activities
in
7
connection
with
a
securitization.
8
The
commissioner
may
adopt
rules
to
implement
and
administer
9
the
bill.
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