§ 6034. Protected cells
A sponsored captive insurance company formed or licensed under the provisions of this chapter may establish and maintain one or more protected cells to insure risks of one or more participants, subject to the following conditions:
(1) The shareholders of a sponsored captive insurance company shall be limited to its participants and sponsors, provided that a sponsored captive insurance company may issue nonvoting securities to other persons on terms approved by the Commissioner.
(2) Each protected cell shall be accounted for separately on the books and records of the sponsored captive insurance company to reflect the financial condition and results of operations of such protected cell, net income or loss, dividends or other distributions to participants, and such other factors as may be provided in the participant contract or required by the Commissioner.
(3) The assets of a protected cell shall not be chargeable with liabilities arising out of any other insurance business the sponsored captive insurance company may conduct.
(4) No sale, exchange, or other transfer of assets may be made by such sponsored captive insurance company between or among any of its protected cells without the consent of such protected cells.
(5) No sale, exchange, transfer of assets, dividend, or distribution may be made from a protected cell to a sponsor or participant without the Commissioner's approval and in no event shall such approval be given if the sale, exchange, transfer, dividend, or distribution would result in insolvency or impairment with respect to a protected cell.
(6) All attributions of assets and liabilities to the protected cells and the general account shall be in accordance with the plan of operation approved by the Commissioner. No other attribution of assets or liabilities may be made by a sponsored captive insurance company between its general account and any protected cell or between any protected cells. The sponsored captive insurance company shall attribute all insurance obligations, assets, and liabilities relating to a reinsurance contract entered into with respect to a protected cell to such protected cell. The performance under such reinsurance contract and any tax benefits, losses, refunds, or credits allocated pursuant to a tax allocation agreement to which the sponsored captive insurance company is a party, including any payments made by or due to be made to the sponsored captive insurance company pursuant to the terms of such agreement, shall reflect the insurance obligations, assets, and liabilities relating to the reinsurance contract that are attributed to such protected cell.
(7) Each sponsored captive insurance company shall annually file with the Commissioner such financial reports as the Commissioner shall require, which shall include accounting statements detailing the financial experience of each protected cell.
(8) Each sponsored captive insurance company shall notify the Commissioner in writing within 10 business days of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations.
(9) No participant contract shall take effect without the Commissioner's prior written approval, and the addition of each new protected cell and withdrawal of any participant or termination of any existing protected cell shall constitute a change in the business plan requiring the Commissioner's prior written approval.
(10) If required by the Commissioner, in his or her discretion, the business written by a sponsored captive, with respect to each cell, shall be:
(A) Fronted by an insurance company licensed under the laws of any state.
(B) Reinsured by a reinsurer authorized or approved by the State of Vermont.
(C) Secured by a trust fund in the United States for the benefit of policyholders and claimants or funded by an irrevocable letter of credit or other arrangement that is acceptable to the Commissioner. The Commissioner may require the sponsored captive to increase the funding of any security arrangement established under this subdivision. If the form of security is a letter of credit, the letter of credit must be issued or confirmed by a bank approved by the Commissioner. A trust maintained pursuant to this subdivision shall be established in a form and upon such terms approved by the Commissioner. (Added 1999, No. 38, § 17, eff. May 20, 1999; amended 1999, No. 80 (Adj. Sess.), § 1, eff. April 11, 2000; 2003, No. 55, § 9; 2009, No. 42, § 23, eff. May 27, 2009; 2011, No. 21, § 22; 2015, No. 20, § 4, eff. May 7, 2015.)