Sponsored captive insurance companies -- Certificate of authority mandatory.

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  • (1) A sponsor of a sponsored captive insurance company shall be:
    • (a) an insurer authorized or approved under the laws of a state;
    • (b) a reinsurer authorized or approved under the laws of a state;
    • (c) a captive insurance company holding a certificate of authority under this chapter;
    • (d) an insurance holding company that:
      • (i) controls an insurer licensed pursuant to the laws of a state; and
      • (ii) is subject to registration pursuant to the holding company system of laws of the state of domicile of the insurer described in Subsection (1)(d)(i);
    • (e) an approved captive management firm in Utah or its affiliates; or
    • (f) another person approved by the commissioner after finding that the approval of the person as a sponsor is not inconsistent with the purposes of this chapter.
  • (2)
    • (a) The business written by a sponsored captive insurance company with respect to a protected cell shall be fronted by the sponsor insurance company through a controlled unaffiliated contract or an insurer that is:
      • (i) authorized or approved:
        • (A) under the laws of a state; or
        • (B) under any jurisdiction if the insurance company is a wholly owned subsidiary of an insurance company licensed pursuant to the laws of a state;
      • (ii) reinsured by a reinsurer authorized or approved by this state; or
      • (iii) subject to Subsection (2)(b), secured by a trust fund:
        • (A) in the United States;
        • (B) for the benefit of policyholders and claimants;
        • (C) funded by an irrevocable letter of credit or other asset acceptable to the commissioner; and
        • (D) held by the sponsor as provided in Subsection 31A-17-404(1).
    • (b)
      • (i) The amount of security provided by the trust fund described in Subsection (2)(a)(iii) may not be less than the reserves associated with the liabilities of the trust fund, including:
        • (A) reserves for losses;
        • (B) allocated loss adjustment expenses;
        • (C) incurred but unreported losses; and
        • (D) unearned premiums for business written through the participant's protected cell.
      • (ii) The commissioner may require the sponsored captive insurance company to increase the funding of a trust established pursuant to this Subsection (2).
      • (iii) If the form of security in the trust described in Subsection (2)(a)(iii) is a letter of credit, the letter of credit shall be established, issued, or confirmed by a bank that is:
        • (A) chartered in this state;
        • (B) a member of the federal reserve system; or
        • (C) chartered by another state if that state-chartered bank is acceptable to the commissioner.
      • (iv) A trust and trust instrument maintained pursuant to this Subsection (2) shall be in a form and upon terms approved by the commissioner.
  • (3) A risk retention group may not be either a sponsor or a participant of a sponsored captive insurance company.




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