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To amend section 4123.351 and to enact sections | 1 |
3964.01 to 3964.15, 3964.17, 3964.171, 3964.172, | 2 |
3964.173, 3964.174, 3964.175, 3964.176, 3964.177, | 3 |
3964.178, 3964.179, 3964.1710, 3964.18, 3964.20, | 4 |
and 3964.21 of the Revised Code to provide for the | 5 |
operation of captive insurance companies in Ohio. | 6 |
Section 1. That section 4123.351 be amended and sections | 7 |
3964.01, 3964.02, 3964.03, 3964.04, 3964.05, 3964.06, 3964.07, | 8 |
3964.08, 3964.09, 3964.10, 3964.11, 3964.12, 3964.13, 3964.14, | 9 |
3964.15, 3964.17, 3964.171, 3964.172, 3964.173, 3964.174, | 10 |
3964.175, 3964.176, 3964.177, 3964.178, 3964.179, 3964.1710, | 11 |
3964.18, 3964.20, and 3964.21 of the Revised Code be enacted to | 12 |
read as follows: | 13 |
Sec. 3964.01. As used in this chapter: | 14 |
(A) "Affiliated company" means any company in the same | 15 |
corporate system as a parent, or a member organization by virtue | 16 |
of common ownership, control, operation, or management. | 17 |
(B) "Captive insurance company" means any insurer that | 18 |
insures only the risks of its parent or affiliated companies of | 19 |
its parent. "Captive insurance company" includes any protected | 20 |
cell captive insurance company formed or licensed under the | 21 |
provisions of this chapter. | 22 |
(C) "Department" means the department of insurance. | 23 |
(D) "Parent" means a corporation, limited liability company, | 24 |
partnership, other entity, or individual that directly or | 25 |
indirectly owns, controls, or holds, with power to vote, more than | 26 |
fifty per cent of either of the following: | 27 |
(1) Securities of a captive insurance company, organized as a | 28 |
stock corporation; | 29 |
(2) Membership interests of a captive insurance company | 30 |
organized as a nonprofit corporation or a limited liability | 31 |
company. | 32 |
(E) "Protected cell captive insurance company" means a | 33 |
captive insurance company organized pursuant to sections 3964.17 | 34 |
to 3964.1710 of the Revised Code. | 35 |
(F) "Qualified actuary" means an individual who is both of | 36 |
the following: | 37 |
(1) A member of the American academy of actuaries; | 38 |
(2) Qualified to provide such certifications as described in | 39 |
the United States qualifications standards promulgated by the | 40 |
American academy of actuaries pursuant to the code of professional | 41 |
conduct adopted by the American academy of actuaries, the society | 42 |
of actuaries, the American society of pension professionals and | 43 |
actuaries, the casualty actuarial society, and the conference of | 44 |
consulting actuaries. | 45 |
(G) "Superintendent" means the superintendent of the | 46 |
department of insurance. | 47 |
Sec. 3964.02. (A) A captive insurance company may apply for | 48 |
authority to insure only the following lines of insurance: | 49 |
(1) Commercial multiple peril; | 50 |
(2) Ocean marine; | 51 |
(3) Inland marine; | 52 |
(4) Medical malpractice; | 53 |
(5) Workers' compensation, to the extent permitted by law, | 54 |
but only for the purpose of indemnification of a self-insuring | 55 |
employer pursuant to division (B)(1) of section 4123.82 of the | 56 |
Revised Code; | 57 |
(6) Commercial auto liability; | 58 |
(7) Commercial auto physical damage; | 59 |
(8) Fidelity; | 60 |
(9) Surety; | 61 |
(10) Any other line which the superintendent, at the | 62 |
superintendent's sole discretion, permits. | 63 |
(B) A captive insurance company may purchase reinsurance | 64 |
coverage for any risk that a captive insurance company is | 65 |
permitted to write directly. | 66 |
(C) A captive insurance company shall not issue insurance | 67 |
policies or certificates, or any other similar documentation, to | 68 |
any person other than its parent or affiliated companies. | 69 |
(D) A captive insurance company may reinsure any risks | 70 |
insured by its parent or an affiliated company, as approved by the | 71 |
superintendent. | 72 |
Sec. 3964.03. (A) A captive insurance company shall be | 73 |
organized under Chapter 1701., 1702., or 1705. of the Revised | 74 |
Code. | 75 |
(B) A captive insurance company shall not operate in this | 76 |
state unless all of the following are met: | 77 |
(1) The captive insurance company obtains from the | 78 |
superintendent a license to do the business of captive insurance | 79 |
in this state. | 80 |
(2) The captive insurance company's board of directors holds | 81 |
at least one meeting each year in this state. | 82 |
(3) The captive insurance company maintains its principal | 83 |
place of business in this state. | 84 |
(4) The person managing the captive insurance company is a | 85 |
resident of this state. | 86 |
(5) The captive insurance company appoints a registered agent | 87 |
to accept service of process and act on its behalf in this state. | 88 |
(C) Whenever an agent required under division (B)(5) of this | 89 |
section cannot, with reasonable diligence, be found at the | 90 |
registered office of the captive insurance company, the | 91 |
superintendent shall be an agent of such a captive insurance | 92 |
company upon whom any process, notice, or demand may be served. | 93 |
(D) A captive insurance company seeking a license to be a | 94 |
captive insurance company in this state shall file an application | 95 |
with the superintendent and shall submit all of the following | 96 |
along with the application: | 97 |
(1) A certified copy of its articles of incorporation, | 98 |
bylaws, or other organizational document and code of regulations; | 99 |
(2) A statement, made under oath by the president and | 100 |
secretary, in a form prescribed by the superintendent, showing the | 101 |
captive insurance company's financial condition; | 102 |
(3) A statement of the captive insurance company's assets | 103 |
relative to its risks, detailing the amount of assets and their | 104 |
liquidity; | 105 |
(4) An account of the adequacy of the expertise, experience, | 106 |
and character of the person or persons who will manage the captive | 107 |
insurance company; | 108 |
(5) An account of the loss prevention programs of the persons | 109 |
that the captive insurance company insures; | 110 |
(6) Actuarial assumptions and methodologies that will be | 111 |
utilized in calculating reserves; | 112 |
(7) Any other information considered necessary by the | 113 |
superintendent to determine whether the proposed captive insurance | 114 |
company will be able to meet its obligations. | 115 |
(E) In determining whether to approve an application for a | 116 |
license, the superintendent shall consider all of the following: | 117 |
(1) The character, reputation, financial standing, and | 118 |
purposes of the incorporators, or other founders, of the captive | 119 |
insurance company; | 120 |
(2) The character, reputation, financial responsibility, | 121 |
experience relating to insurance, and business qualifications of | 122 |
the officers and directors of the captive insurance company; | 123 |
(3) The amount of liquidity and assets of the captive | 124 |
insurance company relative to the risks to be assumed; | 125 |
(4) The adequacy of the expertise, experience, and character | 126 |
of the person or persons who will manage the captive insurance | 127 |
company; | 128 |
(5) The overall soundness of the plan of operation; | 129 |
(6) The adequacy of the loss prevention programs of the | 130 |
persons that the captive insurance company insures. | 131 |
(F)(1) Each captive insurance company seeking a license to be | 132 |
a captive insurance company in this state shall submit to the | 133 |
superintendent for approval a detailed description of the | 134 |
coverages, deductibles, coverage limits, proposed rates or rating | 135 |
plans, documentation from a qualified actuary that demonstrates | 136 |
the actuarial soundness of the proposed rates or rating plans, and | 137 |
other such additional information as the superintendent may | 138 |
require. | 139 |
(2)(a) If a captive insurance company seeks to make any | 140 |
material change to any item described in division (F)(1) of this | 141 |
section, the captive insurance company shall submit to the | 142 |
superintendent for approval a detailed description of the | 143 |
revision, documentation from a qualified actuary that demonstrates | 144 |
the actuarial soundness of the revised rates or rating plans, and | 145 |
other such additional information as the superintendent may | 146 |
require. | 147 |
(b) Each filing under division (F)(2)(a) of this section is | 148 |
deemed approved thirty days after the filing is received by the | 149 |
superintendent of insurance, unless the filing is disapproved by | 150 |
the superintendent during that thirty-day period. | 151 |
(c) If at any time subsequent to the thirty-day review period | 152 |
the superintendent finds that a filing does not demonstrate | 153 |
actuarial soundness, the superintendent shall hold a hearing | 154 |
requiring the captive insurance company to show cause why an order | 155 |
should not be made by the superintendent to disapprove the revised | 156 |
rates or rating plans. | 157 |
(d) If, upon such a hearing, the superintendent finds that | 158 |
the captive insurance company failed to demonstrate the actuarial | 159 |
soundness of the rates or rating plans, the superintendent shall | 160 |
issue an order directing the captive insurance company to cease | 161 |
and desist from using the revised rates or rating plans and to use | 162 |
rates or rating plans as determined appropriate by the | 163 |
superintendent. | 164 |
(G) Except as otherwise provided in this division, documents | 165 |
and information submitted by a captive insurance company pursuant | 166 |
to this section are not subject to section 149.43 of the Revised | 167 |
Code, and are confidential, and may not be disclosed by the | 168 |
superintendent or any employee of the department of insurance | 169 |
without the written consent of the company. | 170 |
(1) Such documents and information may be discoverable in a | 171 |
civil action in which the captive insurance company filing the | 172 |
material is a party upon a finding by a court of competent | 173 |
jurisdiction that the information sought is relevant and necessary | 174 |
to the case and the information sought is unavailable from other, | 175 |
nonconfidential sources. | 176 |
(2) The superintendent may, at the superintendent's sole | 177 |
discretion, share documents required under this section with the | 178 |
chief deputy rehabilitator, the chief deputy liquidator, other | 179 |
deputy rehabilitators and liquidators, and any other person | 180 |
employed by, or acting on behalf of the superintendent pursuant to | 181 |
Chapter 3901. or 3903. of the Revised Code, with other local, | 182 |
state, federal, and international regulatory and law enforcement | 183 |
agencies, with local, state, and federal prosecutors, and with the | 184 |
national association of insurance commissioners and its affiliates | 185 |
and subsidiaries provided that the recipient agrees to maintain | 186 |
the confidential or privileged status of the documents and has | 187 |
authority to do so. | 188 |
(H)(1) Each applicant for a license to do the business of a | 189 |
captive insurance company in this state shall pay to the | 190 |
superintendent a nonrefundable fee of five hundred dollars for | 191 |
processing its application for a license. The superintendent is | 192 |
authorized to retain legal, financial, and examination services | 193 |
from outside the department, at the expense of the applicant. Each | 194 |
captive insurance company shall annually pay a license renewal fee | 195 |
of five hundred dollars. | 196 |
(2) The fees collected pursuant to division (H)(1) of this | 197 |
section shall be deposited into the state treasury to the credit | 198 |
of the captive insurance regulation and supervision fund created | 199 |
under section 3964.15 of the Revised Code. | 200 |
Sec. 3964.04. No captive insurance company shall adopt a | 201 |
name that is the same, deceptively similar, or likely to be | 202 |
confused with, or mistaken for, any other existing business name | 203 |
registered in this state. The name under which a captive insurance | 204 |
company engages in business must contain the word "captive." | 205 |
Sec. 3964.05. (A) No captive insurance company shall be | 206 |
issued a license unless it possesses and maintains unimpaired, | 207 |
paid-in capital and surplus as follows: | 208 |
(1) Not less than two hundred fifty thousand dollars; | 209 |
(2) In the case of a protected cell captive insurance | 210 |
company, not less than five hundred thousand dollars. | 211 |
(B) The superintendent may prescribe additional capital and | 212 |
surplus based upon the type, volume, and nature of insurance | 213 |
business transacted. | 214 |
(C) Capital and surplus may be in the form of any of the | 215 |
following: | 216 |
(1) Cash; | 217 |
(2) Marketable securities, as approved by the superintendent; | 218 |
(3) Irrevocable, unconditional, and automatically renewable | 219 |
letters of credit that are issued or confirmed by a qualified | 220 |
United States financial institution. | 221 |
(D) For purposes of division (C)(3) of this section, a United | 222 |
States financial institution is qualified if all of the following | 223 |
apply: | 224 |
(1) It is organized under, or, in the case of the United | 225 |
States branch or agency office of a foreign banking organization, | 226 |
is chartered under the laws of the United States or any state | 227 |
thereof. | 228 |
(2) It is regulated, supervised, and examined by federal or | 229 |
state officials that have regulatory authority over banks and | 230 |
trust companies. | 231 |
(3) The superintendent has determined that it meets such | 232 |
standards of financial condition and standing as are necessary and | 233 |
appropriate for purposes of ensuring that its letters of credit | 234 |
will be of a quality that is acceptable to the superintendent, in | 235 |
the superintendent's sole discretion. | 236 |
Sec. 3964.06. (A) No captive insurance company shall pay any | 237 |
extraordinary dividend or make any other extraordinary | 238 |
distribution to its shareholders or members other than in | 239 |
accordance with this section. The declaration of an extraordinary | 240 |
dividend or distribution shall be conditional and shall confer no | 241 |
rights upon shareholders or members until thirty days after the | 242 |
superintendent has received notice of the declaration thereof and | 243 |
has not, within the thirty-day period, disapproved the dividend or | 244 |
distribution, unless the superintendent approves the dividend or | 245 |
distribution within the thirty-day period. | 246 |
(B) Prior to paying any dividend or distribution, the | 247 |
insurance company shall notify the superintendent on a form | 248 |
provided by the superintendent for informational purposes within | 249 |
five business days following its declaration of any dividend or | 250 |
distribution and at least ten calendar days prior to payment of | 251 |
such dividend or distribution. Such a ten-calendar-day period is | 252 |
to begin on the date that the superintendent receives the notice. | 253 |
(C)(1) For the purposes of this section, an extraordinary | 254 |
dividend or distribution includes any dividend or distribution of | 255 |
cash or other property, whose fair market value, together with | 256 |
that of other dividends or distributions made within the preceding | 257 |
twelve months, exceeds the greater of ten per cent of the | 258 |
insurance company's surplus as regards policy holders as of the | 259 |
thirty-first day of December immediately preceding, or the net | 260 |
income of the insurance company for the twelve-month period ending | 261 |
the thirty-first day of December immediately preceding. | 262 |
(2) Pro rata distributions of any class of the insurance | 263 |
company's own securities shall not be considered an extraordinary | 264 |
distribution under division (C)(1) of this section. | 265 |
(D) Any dividend or distribution paid from a source other | 266 |
than earned surplus shall be considered an extraordinary dividend | 267 |
or extraordinary distribution. | 268 |
(E) For the purposes of this section, "earned surplus" means | 269 |
an amount equal to an insurance company's unassigned funds as set | 270 |
forth in its most recent financial statement submitted to the | 271 |
superintendent, including net unrealized capital gains and losses | 272 |
or revaluation of assets. | 273 |
Sec. 3964.07. (A) A captive insurance company shall not be | 274 |
required to make any annual report except as required by this | 275 |
section. | 276 |
(B)(1) Two of the executive officers of a captive insurance | 277 |
company, or a majority of the directors of a captive insurance | 278 |
company, shall annually prepare under oath and submit to the | 279 |
superintendent, on the first day of January or within sixty days | 280 |
thereafter, a statement showing the financial condition of the | 281 |
company on the thirty-first day of the December next preceding. | 282 |
The statement shall include an opinion from a qualified actuary | 283 |
regarding the adequacy of the company's required reserves to make | 284 |
full provision for the company's liabilities. | 285 |
(2) All captive insurance companies shall have an annual | 286 |
audit by an independent certified public accountant and shall file | 287 |
an audited financial report with the superintendent on or before | 288 |
the first day of June as a supplement to the annual statement | 289 |
required under division (B)(1) of this section. | 290 |
(C) Each captive insurance company shall report using | 291 |
generally accepted accounting principles, unless the | 292 |
superintendent requires, approves, or accepts the use of statutory | 293 |
accounting principles or other comprehensive basis accounting, any | 294 |
appropriate, necessary modifications or adaptations required or | 295 |
approved or accepted by the superintendent for each type of | 296 |
insurance or kind of insurance company that makes such a report, | 297 |
and as supplemented by additional information required by the | 298 |
superintendent. | 299 |
(D) Captive insurance companies shall prepare, at a minimum, | 300 |
internal quarterly financial statements. These statements shall be | 301 |
made available upon request to the superintendent. | 302 |
(E) The superintendent shall adopt by rule the prescribed | 303 |
forms, instructions, and manuals by which captive insurance | 304 |
companies shall make the reports required under this section, as | 305 |
the superintendent considers necessary. | 306 |
(F) Division (G) of section 3964.03 of the Revised Code shall | 307 |
apply to each report filed under this section. | 308 |
Sec. 3964.08. (A) Captive insurance companies shall be | 309 |
examined, evaluated, and monitored pursuant to section 3901.07 of | 310 |
the Revised Code. | 311 |
(B) All examination reports, preliminary examination reports | 312 |
or results, working papers, recorded information, documents and | 313 |
copies thereof produced by, obtained by, or disclosed to the | 314 |
superintendent or any other person in the course of an examination | 315 |
made under this section are confidential and are not subject to | 316 |
subpoena and may not be made public by the superintendent or an | 317 |
employee or agent of the superintendent without the written | 318 |
consent of the company, except to the extent provided in this | 319 |
section. However, nothing in this section shall prevent the | 320 |
superintendent from using such information in the furtherance of | 321 |
the superintendent's regulatory authority under this chapter. | 322 |
(C) The superintendent may, in the superintendent's sole | 323 |
discretion, share documents that are the subject of this section | 324 |
with the chief deputy rehabilitator, the chief deputy liquidator, | 325 |
other deputy rehabilitators and liquidators, and any other person | 326 |
employed by, or acting on behalf of, the superintendent pursuant | 327 |
to Chapter 3901. or 3903. of the Revised Code, with other local, | 328 |
state, federal, and international regulatory and law enforcement | 329 |
agencies, with local, state, and federal prosecutors, and with the | 330 |
national association of insurance commissioners and its affiliates | 331 |
and subsidiaries provided that the recipient agrees to maintain | 332 |
the confidential or privileged status of the confidential or | 333 |
privileged work paper and has authority to do so. | 334 |
Sec. 3964.09. The superintendent may suspend or revoke the | 335 |
license of a captive insurance company, in accordance with Chapter | 336 |
119. of the Revised Code, for any of the following reasons: | 337 |
(A) Insolvency or impairment of capital or surplus; | 338 |
(B) Failure to meet the requirements of section 3964.05 of | 339 |
the Revised Code; | 340 |
(C) Refusal or failure to submit an annual report, as | 341 |
required by section 3964.07 of the Revised Code, or any other | 342 |
report or statement required by law or by lawful order of the | 343 |
superintendent; | 344 |
(D) Failure to comply with the provisions of its own | 345 |
articles, bylaws, code of regulations, or other organizational | 346 |
documents; | 347 |
(E) Failure to submit to, or pay the cost of, examination, or | 348 |
any legal obligation related to examination, as required by this | 349 |
chapter; | 350 |
(F) Use of practices that, although not otherwise | 351 |
specifically prohibited by law, are determined by the | 352 |
superintendent to render its operation detrimental or its | 353 |
condition unsound with respect to the public or to its | 354 |
policyholders; | 355 |
(G) Failure to otherwise comply with the laws of this state. | 356 |
Sec. 3964.10. (A) The board of directors of a captive | 357 |
insurance company shall determine appropriate investments for the | 358 |
company. With respect to all of the insurance company's | 359 |
investments, the board of directors shall exercise the judgment | 360 |
and care, under the circumstances then prevailing, that a person | 361 |
of reasonable prudence, discretion, and intelligence might | 362 |
exercise in the management of a like enterprise, that person not | 363 |
having an intent to speculate, but having regard for the permanent | 364 |
disposition of the person's funds, considering the probable income | 365 |
as well as the probable safety of the person's capital. | 366 |
(B)(1) Investments shall be of sufficient value, liquidity, | 367 |
and diversity to assure the captive insurance company's ability to | 368 |
meet its outstanding obligations, based on reasonable estimations | 369 |
of new business production for current lines of business. A copy | 370 |
of the investment policy adopted by the board of directors shall | 371 |
be filed with the superintendent. | 372 |
(2) If the superintendent determines that a board of | 373 |
directors of a captive insurance company has failed to comply with | 374 |
the requirements of division (B)(1) of this section, the company | 375 |
shall be notified in writing that it is required to file a | 376 |
schedule of its proposed investments with the superintendent. | 377 |
(C)(1) No captive insurance company may make a loan to, or an | 378 |
investment in, its parent company or affiliates without prior | 379 |
written approval of the superintendent. | 380 |
(2) Any such loan or investment shall be evidenced by | 381 |
documentation approved by the superintendent. | 382 |
(3) Loans that violate the minimum capital and surplus funds | 383 |
requirements of section 3964.05 of the Revised Code are | 384 |
prohibited. | 385 |
Sec. 3964.11. No captive insurance company shall be required | 386 |
to join a rating organization. | 387 |
Sec. 3964.12. No captive insurance company shall be permitted | 388 |
to join or contribute financially to any plan, pool, association, | 389 |
or guaranty or insolvency fund in this state, nor shall any | 390 |
captive insurance company, or any insured or affiliate thereof, | 391 |
receive any benefit from any such plan, pool, association, or | 392 |
guaranty or insolvency fund for claims arising out of the | 393 |
operations of the captive insurance company. | 394 |
Sec. 3964.13. (A)(1) Not later than the second day of March | 395 |
of each year, a captive insurance company shall pay to the | 396 |
superintendent of insurance a fee computed in accordance with both | 397 |
of the following: | 398 |
(a) 0.35 per cent on its net direct premiums; | 399 |
(b) 0.15 per cent on revenue from assumed reinsurance | 400 |
premiums. | 401 |
(2) The annual minimum aggregate fee to be paid by a captive | 402 |
insurance company calculated under this division shall be seven | 403 |
thousand five hundred dollars. The annual maximum aggregate fee to | 404 |
be paid by a captive insurance company calculated under this | 405 |
division shall be two hundred fifty thousand dollars. | 406 |
(B) The fee on reinsurance premiums set forth under division | 407 |
(A)(1)(b) of this section shall not be levied on premiums for | 408 |
risks or portions of risks that are subject to the fee under | 409 |
division (A)(1)(a) of this section. | 410 |
(C) A captive insurance company shall not pay any reinsurance | 411 |
fee pursuant to division (A)(1)(b) of this section on revenue | 412 |
related to the receipt of assets by the captive insurance company | 413 |
in exchange for the assumption of loss reserves and other | 414 |
liabilities of another insurance company that is under common | 415 |
ownership and control with the captive insurance company, if the | 416 |
transaction is part of a plan to discontinue the operation of the | 417 |
other insurance company and the intent of the exchange is to renew | 418 |
or maintain such business with the captive insurance company. | 419 |
(D)(1) The fee imposed in division (A) of this section shall | 420 |
be calculated on an annual basis, notwithstanding policies, | 421 |
contracts, insurance, or contracts of reinsurance issued on a | 422 |
multi-year basis. | 423 |
(2) In the case of multi-year policies or contracts, the | 424 |
premium shall be prorated for purposes of determining the fee | 425 |
required under division (A) of this section. | 426 |
(E) All fees collected under this section shall be deposited | 427 |
into the state treasury to the credit of the captive insurance | 428 |
regulation and supervision fund. | 429 |
Sec. 3964.14. (A) Except as provided in this chapter, | 430 |
captive insurance companies shall be governed by this chapter and | 431 |
are exempt from all other provisions of the insurance laws of this | 432 |
state. No insurance law of this state shall apply to captive | 433 |
insurance companies unless captive insurance companies are | 434 |
expressly designated as being subject to the law or, with respect | 435 |
to a line of authority granted to a captive insurance company | 436 |
pursuant to division (A)(10) of section 3964.02 of the Revised | 437 |
Code, as required in the articles, bylaws, code of regulations, or | 438 |
other organizational documents as approved by the superintendent. | 439 |
(B) Except as otherwise provided in this chapter, sections | 440 |
3903.01 to 3903.59 of the Revised Code shall apply to captive | 441 |
insurance companies. | 442 |
Sec. 3964.15. (A) There is hereby created in the state | 443 |
treasury the captive insurance regulation and supervision fund, | 444 |
which shall consist of all fees, fines, penalties, and assessments | 445 |
received by the superintendent under this chapter. | 446 |
(B) The superintendent may charge captive insurance companies | 447 |
for any of the following expenses incurred in carrying out this | 448 |
chapter: | 449 |
(1) The entire compensation for each day, or portion thereof, | 450 |
worked by all personnel, including those who are not employees of | 451 |
the department of insurance, in any of the following capacities: | 452 |
(a) The conduct of an examination, calculated at the rates | 453 |
provided in the financial condition examiners' handbook published | 454 |
by the national association of insurance commissioners; | 455 |
(b) The review and analysis of a company's annual report | 456 |
submitted pursuant to section 3964.07 of the Revised Code, and any | 457 |
interim financial statements and examination reports or related | 458 |
documents of captive insurance companies in this state; | 459 |
(c) The ongoing evaluation and monitoring of the financial | 460 |
affairs of captive insurance companies; | 461 |
(d) The determination and review of the premium franchise fee | 462 |
liability of a captive insurance company; | 463 |
(e) The training and continuing education costs of examiners | 464 |
and analysts. | 465 |
(2) Travel and living expenses of all personnel, including | 466 |
those who are not employees of the department of insurance, | 467 |
directly engaged in the conduct of an examination calculated at | 468 |
rates not to exceed the rates provided in the financial condition | 469 |
examiners' handbook published by the national association of | 470 |
insurance commissioners; | 471 |
(3) All other incidental expenses incurred by or on behalf of | 472 |
such personnel in the conduct of such examination; | 473 |
(4) An allocated share of all expenses not described in | 474 |
division (B)(1), (2), or (3) of this section, but that are | 475 |
necessarily incurred in carrying out the duties of the | 476 |
superintendent under this chapter, including the expenses of | 477 |
direct overhead and support staff for the examiners and persons | 478 |
appointed or employed pursuant to section 3964.08 of the Revised | 479 |
Code. | 480 |
(C) All amounts collected by the superintendent under | 481 |
division (B) of this section shall be deposited into the state | 482 |
treasury to the credit of the captive insurance regulation and | 483 |
supervision fund. | 484 |
(D) At the discretion of the superintendent, the expenses of | 485 |
the captive insurance regulation and supervision fund may be | 486 |
covered by the department of insurance operating fund created | 487 |
under section 3901.021 of the Revised Code. | 488 |
(E) As used in this section, "examination" means the | 489 |
examination required under section 3964.08 of the Revised Code. | 490 |
Sec. 3964.17. (A) As used in sections 3964.17 to 3964.1710 | 491 |
of the Revised Code: | 492 |
(1) "Protected cell" means a captive insurance company that | 493 |
is a part of another captive insurance company, and that has a | 494 |
separate legal identity from the captive insurance company of | 495 |
which it is a part. | 496 |
(2) "Protected cell captive insurance company" means a | 497 |
captive insurance company that meets all of the following | 498 |
requirements: | 499 |
(a) Is formed and licensed under the provisions of this | 500 |
chapter; | 501 |
(b) Insures or reinsures the risks of separate participants | 502 |
through a participant contract; | 503 |
(c) Segregates each participant's liability into a protected | 504 |
cell. | 505 |
(3) "Participant" means an individual, company, corporation, | 506 |
partnership, limited liability company, and their affiliated | 507 |
entities that insure or reinsure with a protected cell. | 508 |
"Participant" includes an insurance agent licensed in this state | 509 |
that accepts a stated percentage of risk on a pro rata basis | 510 |
within a defined category of business underwritten by a licensed | 511 |
insurance company that is domiciled in this state and that is | 512 |
affiliated with a protected cell captive insurance company. | 513 |
(4) "Participant contract" means a contract by which a | 514 |
protected cell captive insurance company insures or reinsures the | 515 |
risks of a participant. | 516 |
(a) A participant that is not an insurance agent licensed in | 517 |
this state shall insure or reinsure only its own risks through a | 518 |
protected cell. | 519 |
(b) If the participant is an insurance agent licensed in this | 520 |
state, the participant contract must define each risk covered by | 521 |
the contract with fixed and certain terms. | 522 |
(B) A captive insurance company may be organized as a | 523 |
protected cell captive insurance company and shall be permitted to | 524 |
form one or more protected cells under this section to insure or | 525 |
reinsure risks of one or more participants. | 526 |
(C) The assets and liabilities of each protected cell shall | 527 |
be held separately from the assets and liabilities of all other | 528 |
protected cells. | 529 |
(D) A protected cell of a protected cell captive insurance | 530 |
company may be organized pursuant to Chapter 1701., 1702., or | 531 |
1705. of the Revised Code. | 532 |
(E) A protected cell captive insurance company shall, at the | 533 |
time of paying the annual fee required under section 3964.13 of | 534 |
the Revised Code, pay an additional annual fee for each protected | 535 |
cell in an amount to be established by the superintendent. | 536 |
(F) Each protected cell of a protected cell captive insurance | 537 |
company shall be treated as a captive insurance company for | 538 |
purposes of this chapter. | 539 |
(G) Unless otherwise permitted by the articles of | 540 |
incorporation, bylaws, code of regulations, or other | 541 |
organizational document of a protected cell captive insurance | 542 |
company, each protected cell of the protected cell captive | 543 |
insurance company shall have the same directors, secretary, and | 544 |
registered office as the protected cell captive insurance company. | 545 |
(H) A protected cell captive insurance company may provide in | 546 |
its articles of incorporation, bylaws, code of regulations, or | 547 |
other organizational documents that a protected cell it creates | 548 |
shall be wound up and dissolved upon any of the following: | 549 |
(1) The bankruptcy, death, expulsion, insanity, resignation, | 550 |
or retirement of any participant of the protected cell; | 551 |
(2) The happening of some event that is not the expiration of | 552 |
a fixed period of time; | 553 |
(3) The expiration of a fixed period of time. | 554 |
(I)(1) The articles of incorporation, bylaws, code of | 555 |
regulations, or other organizational documents, of a protected | 556 |
cell captive insurance company shall provide that a protected cell | 557 |
shall not own shares or membership interests in the protected cell | 558 |
captive insurance company of which it is a part. | 559 |
(2) Such a document may provide that a protected cell may own | 560 |
shares or membership interests in any other protected cell of the | 561 |
protected cell captive insurance company of which it is a part. | 562 |
(J) The name of a protected cell captive insurance company | 563 |
shall include the words "protected cell captive" or the | 564 |
abbreviation "PCC." | 565 |
(K) A protected cell captive insurance company shall assign a | 566 |
distinctive name to each of its protected cells that meets all of | 567 |
the following: | 568 |
(1) The name identifies the protected cell as being part of | 569 |
the protected cell captive insurance company. | 570 |
(2) The name distinguishes the protected cell from any other | 571 |
protected cell of the protected cell captive insurance company. | 572 |
(3) The name includes the words "protected cell" or the | 573 |
abbreviation "PC." | 574 |
(L) A protected cell has no legal identity separate from that | 575 |
of the protected cell captive insurance company of which it is a | 576 |
part. | 577 |
(M)(1) A protected cell may enter into an agreement with its | 578 |
protected cell captive insurance company or with another protected | 579 |
cell of the same protected cell captive insurance company. | 580 |
(2) Such an agreement shall be enforceable as if each | 581 |
protected cell of the protected cell captive insurance company | 582 |
were a separate legal entity. | 583 |
(N)(1) The assets of a protected cell captive insurance | 584 |
company shall be either cell assets or general assets. | 585 |
(2) The cell assets comprise the assets of the protected cell | 586 |
captive insurance company that are held within or on behalf of its | 587 |
protected cells. | 588 |
(3) The general assets of a protected cell captive insurance | 589 |
company comprise the assets of the protected cell captive | 590 |
insurance company that are not cell assets. | 591 |
(O)(1) The liabilities of a protected cell captive insurance | 592 |
company shall be either cell liabilities or general liabilities. | 593 |
(2) The cell liabilities comprise the obligations of the | 594 |
protected cell captive insurance company attributable to its | 595 |
protected cells. | 596 |
(3) The general liabilities of a protected cell captive | 597 |
insurance company comprise the obligations of the protected cell | 598 |
captive insurance company that are not cell liabilities. | 599 |
(P) Each protected cell insurance company shall account | 600 |
separately on its books and records for each of its protected | 601 |
cells to reflect the financial condition and results of operations | 602 |
of the protected cell, including net income or loss, dividends or | 603 |
other distributions to participants, and such other factors as may | 604 |
be provided by participant contracts or required by the | 605 |
superintendent. | 606 |
(Q) Each protected cell captive insurance company shall | 607 |
annually file with the superintendent such financial reports as | 608 |
the superintendent requires, which shall include financial | 609 |
statements detailing the financial experience of each protected | 610 |
cell and a statement regarding the adequacy of reserves kept to | 611 |
make full provision for the liabilities insured by each protected | 612 |
cell. | 613 |
(R) An officer or manager of a protected cell captive | 614 |
insurance company shall immediately notify the superintendent if | 615 |
any protected cell of the company is trending toward reserves that | 616 |
are inadequate, or if the company becomes insolvent or is | 617 |
otherwise unable to meet its claims or other obligations. | 618 |
(S) The duties of a director of a protected cell captive | 619 |
insurance company under this chapter shall be in addition to, and | 620 |
not in lieu of, those under other applicable law. | 621 |
Sec. 3964.171. (A) A protected cell captive insurance | 622 |
company may create and issue shares in one or more classes or | 623 |
series for one or more protected cells. | 624 |
(1) The proceeds of the issue of shares for a specific | 625 |
protected cell shall be included in the assets of that protected | 626 |
cell. | 627 |
(2) The proceeds of the issue of shares that are not for a | 628 |
specific protected cell shall be included in the protected cell | 629 |
captive insurance company's general assets. | 630 |
(B) A protected cell captive insurance company may pay a | 631 |
dividend on protected cell shares of any class or series, | 632 |
regardless of whether a dividend is declared on any other class or | 633 |
series of shares of a protected cell or any other shares of the | 634 |
company. Such payment is subject to section 3964.06 of the Revised | 635 |
Code. | 636 |
(C) Dividends may be paid on protected cell shares only from | 637 |
the cell assets of the protected cell that issued the shares and | 638 |
must otherwise be made in accordance with the rights of such | 639 |
shares and in accordance with section 3964.06 of the Revised Code. | 640 |
Sec. 3964.172. (A) No sale, exchange, or other transfer of | 641 |
assets may be made by a protected cell captive insurance company | 642 |
between or among any of its protected cells without the written | 643 |
consent of the participants of the protected cell and the | 644 |
superintendent. | 645 |
(B)(1) No sale, exchange, transfer of assets, dividend, or | 646 |
distribution may be made from a protected cell to any person | 647 |
without the superintendent's prior written approval. | 648 |
(2) The superintendent shall not give approval if the sale, | 649 |
exchange, transfer, dividend, or distribution would result in the | 650 |
insolvency or impairment of the protected cell in question. | 651 |
Sec. 3964.173. (A) The owners of a protected cell captive | 652 |
insurance company, shall not, by virtue of being owners, be the | 653 |
owners or participants of any protected cell of the protected cell | 654 |
captive insurance company. | 655 |
(B) The participants of a protected cell shall not, by virtue | 656 |
of being such participants, be the owners of the protected cell | 657 |
captive insurance company or participants or owners of any other | 658 |
protected cell of the protected cell captive insurance company. | 659 |
(C) A participant in a protected cell need not be a | 660 |
shareholder or member of the protected cell or of the protected | 661 |
cell captive insurance company or any affiliate thereof. | 662 |
(D) No participant contract shall take effect without the | 663 |
superintendent's prior written approval. | 664 |
(E) The addition of a new protected cell, or the withdrawal | 665 |
or other transfer of any participant from any existing protected | 666 |
cell, shall constitute a change in the strategic business plan of | 667 |
that protected cell, requiring the superintendent's prior written | 668 |
approval. | 669 |
(F) A protected cell captive insurance company shall, in | 670 |
addition to keeping a register of its owners or participants, keep | 671 |
a register of the participants of each of its protected cells. | 672 |
Sec. 3964.174. (A) If a protected cell captive insurance | 673 |
company enters into a transaction with respect to a particular | 674 |
protected cell, or incurs a liability arising from an activity or | 675 |
asset of a particular protected cell, a claim by any person in | 676 |
connection with the transaction or liability extends only to the | 677 |
cell assets of the protected cell. | 678 |
(B) If a protected cell captive insurance company enters into | 679 |
a transaction in its own right and not in respect of any of its | 680 |
protected cells, incurs a liability arising from an activity in | 681 |
its own right and not in respect of any of its protected cells, or | 682 |
incurs a liability arising from an asset held in its own right and | 683 |
not in respect of any of its protected cells, then a claim by any | 684 |
person or a liability in connection with this type of transaction, | 685 |
activity, or ownership shall extend only to the general assets of | 686 |
the protected cell captive insurance company. | 687 |
(C) Except as provided by divisions (D) and (E) of this | 688 |
section, a protected cell captive insurance company shall not do | 689 |
either of the following: | 690 |
(1) Satisfy a liability attributable to a particular | 691 |
protected cell of the protected cell captive insurance company | 692 |
from the general assets of the protected cell captive insurance | 693 |
company; | 694 |
(2) Satisfy a liability, whether attributable to a particular | 695 |
protected cell or not, from the cell assets of another protected | 696 |
cell. | 697 |
(D)(1) A protected cell captive insurance company may satisfy | 698 |
any liability attributable to a particular protected cell from the | 699 |
protected cell captive insurance company's general assets if both | 700 |
of the following conditions are met: | 701 |
(a) The articles of incorporation, bylaws, code of | 702 |
regulations, or similar organization documents of the protected | 703 |
cell captive insurance company allow the protected cell captive | 704 |
insurance company to satisfy the liability. | 705 |
(b) Satisfying the liability has been approved by two-thirds | 706 |
of the participants of the protected cell or, if the protected | 707 |
cell has more than one class of participants, two-thirds of each | 708 |
class of participants, unless the organizational document of the | 709 |
protected cell insurance company requires a greater percentage. | 710 |
(2) Prior to a protected cell captive insurance company | 711 |
satisfying any liability attributable to a particular protected | 712 |
cell from the protected cell captive insurance company's general | 713 |
assets, the directors who authorize the satisfaction of the | 714 |
liability shall state as part of the authorization that, having | 715 |
inquired into the affairs and prospects of the protected cell | 716 |
captive insurance company, they have formed an opinion that | 717 |
includes both of the following: | 718 |
(a) Immediately following the date on which the liability is | 719 |
proposed to be met by the general assets of the protected cell | 720 |
captive insurance company, the protected cell captive insurance | 721 |
company will be able to discharge its liabilities as they fall | 722 |
due. | 723 |
(b) Having regard to the prospects of the protected cell | 724 |
captive insurance company, the intentions of the directors with | 725 |
respect to the management of the company's business, and the | 726 |
amount and character of the financial resources that will, in | 727 |
their view, be available to the protected cell captive insurance | 728 |
company, the protected cell captive insurance company will be able | 729 |
to continue its business and will be able to discharge its | 730 |
liabilities as they fall due for a period of one year immediately | 731 |
following the date on which the liability is proposed to be | 732 |
satisfied by the general assets of the protected cell captive | 733 |
insurance company or until the protected cell captive insurance | 734 |
company is dissolved, whichever first occurs. | 735 |
(E)(1) A protected cell captive insurance company may satisfy | 736 |
any liability, whether attributable to a particular protected cell | 737 |
or not, from the cell assets of another protected cell if it is | 738 |
permitted to do so by the articles of incorporation, bylaws, code | 739 |
of regulations, or other organizational document, as well as the | 740 |
participant agreement, of the protected cell whose assets are | 741 |
proposed to be used to satisfy the liability. | 742 |
(2)(a) Prior to a protected cell captive insurance company | 743 |
satisfying any liability from the assets of a protected cell that | 744 |
is not responsible for the liability, the directors who authorize | 745 |
the satisfaction shall make a full inquiry into the affairs and | 746 |
prospects of the protected cell whose assets are proposed to be | 747 |
used to satisfy the liability to determine that both of the | 748 |
following are true: | 749 |
(i) Immediately following the date on which the liability is | 750 |
proposed to be met by the cell assets of the protected cell in | 751 |
question, the protected cell will be able to discharge its | 752 |
liabilities as they fall due. | 753 |
(ii) Having regard to the prospects of the protected cell, | 754 |
the intentions of the directors with respect to the management of | 755 |
the protected cell's business, and the amount and character of the | 756 |
financial resources that will in their view be available to the | 757 |
protected cell in question, the protected cell will be able to | 758 |
continue to carry on business and will be able to discharge its | 759 |
liabilities as they become due or until the protected cell is | 760 |
dissolved, whichever first occurs. | 761 |
(b) If the criteria of division (E)(2)(a) of this section are | 762 |
met, the directors shall make a written authorization stating the | 763 |
outcome of their inquiry and shall submit the authorization to the | 764 |
superintendent for approval prior to satisfying the liability. | 765 |
(F) A director who makes a statement under division (D) or | 766 |
(E) of this section without having reasonable grounds for the | 767 |
opinion expressed in the statement violates this chapter and may | 768 |
be removed by order of the superintendent. | 769 |
Sec. 3964.175. If a protected cell captive insurance company | 770 |
is liable for any penalty, under this chapter or otherwise, due to | 771 |
an act or the failure to act of a protected cell or an officer or | 772 |
director of a protected cell, then both of the following apply: | 773 |
(A) The penalty shall only be met by the protected cell | 774 |
captive insurance company from the cell assets of the protected | 775 |
cell responsible. | 776 |
(B) The penalty shall not be enforceable in any way against | 777 |
any other assets of the protected cell captive insurance company | 778 |
or assets of any other protected cell. | 779 |
Sec. 3964.176. The directors of a protected cell captive | 780 |
insurance company shall establish and maintain, or cause to be | 781 |
established and maintained, procedures to do all of the following: | 782 |
(A) Segregate cell assets and liabilities separate and | 783 |
separately identifiable from general assets and liabilities; | 784 |
(B) Segregate cell assets and liabilities of each protected | 785 |
cell separate and separately identifiable from cell assets and | 786 |
liabilities of any other protected cell; | 787 |
(C) Apportion or transfer, where relevant, assets and | 788 |
liabilities between protected cells or between protected cells and | 789 |
the general assets and liabilities of the protected cell captive | 790 |
insurance company. | 791 |
Sec. 3964.177. (A) If a protected cell captive insurance | 792 |
company enters into an agreement with respect to a protected cell | 793 |
of the company, the directors shall ensure that both of the | 794 |
following are met: | 795 |
(1) The other party to the transaction knows, or ought | 796 |
reasonably to know, that the protected cell captive insurance | 797 |
company is acting with respect to a particular protected cell. | 798 |
(2) The minutes of any meeting of directors held with regard | 799 |
to the agreement clearly record the fact that the company was | 800 |
entering into the agreement with respect to the protected cell in | 801 |
question and that the obligation imposed by division (A)(1) of | 802 |
this section has been, or will be, complied with. | 803 |
(B) If a protected cell captive insurance company fails to | 804 |
comply with division (A) of this section, then both of the | 805 |
following shall apply: | 806 |
(1) The directors of the protected cell captive insurance | 807 |
company shall be personally liable for the liabilities of the | 808 |
protected cell captive insurance company and the protected cell | 809 |
under the act, matter, deed, agreement, contract, instrument, or | 810 |
arrangement that was executed, notwithstanding any provisions to | 811 |
the contrary in the protected cell's organizational documents or | 812 |
in any contract with the protected cell captive insurance company | 813 |
or otherwise. | 814 |
(2)(a) The directors of the protected cell captive insurance | 815 |
company shall have a right of indemnity, in the case of a matter | 816 |
on behalf of or attributable to a protected cell, against the | 817 |
assets of the protected cell, unless the directors were | 818 |
fraudulent, reckless, negligent, or acted in bad faith. | 819 |
(b) The directors shall have a right of indemnity against the | 820 |
general assets of the protected cell captive insurance company, in | 821 |
the case of a matter not on behalf of or attributable to a | 822 |
protected cell. | 823 |
(C) Notwithstanding division (B)(1) of this section, a court | 824 |
may relieve a director of all or part of the personal liability | 825 |
required under division (B)(1) of this section if the director can | 826 |
demonstrate either of the following to the satisfaction of the | 827 |
court: | 828 |
(1) The director was not aware of the circumstances giving | 829 |
rise to the liability and therefore was not fraudulent, reckless, | 830 |
or negligent and did not act in bad faith. | 831 |
(2) The director expressly objected, and exercised the rights | 832 |
available to the director, whether by way of voting power or | 833 |
otherwise, to try to prevent the circumstances giving rise to the | 834 |
liability. | 835 |
(D) If, pursuant to division (C) of this section, a court | 836 |
relieves a director of all or part of the director's personal | 837 |
liability under division (B)(1) of this section, the court may | 838 |
order that the liability in question instead be met from the | 839 |
assets of the protected cell or the general assets of the | 840 |
protected cell captive insurance company as the court finds | 841 |
appropriate. | 842 |
(E) Any provision in the organizational document of a captive | 843 |
insurance company or any other contractual provision under which | 844 |
the protected cell captive insurance company may be liable shall | 845 |
be void if it purports to indemnify the directors of a protected | 846 |
cell captive insurance company despite fraudulent, negligent, | 847 |
reckless, bad faith, or other conduct that would otherwise exempt | 848 |
them from indemnification by virtue of division (B)(2)(a) of this | 849 |
section. | 850 |
(F) The duties of a director of a protective cell captive | 851 |
insurance company under this chapter shall be in addition to and | 852 |
not in lieu of, those under any other applicable law. | 853 |
Sec. 3964.178. (A) A captive insurance company may amend its | 854 |
organizational document to become a protected cell captive | 855 |
insurance company. | 856 |
(B) The amendment of the organizational document of a captive | 857 |
insurance company to become a protected cell captive insurance | 858 |
company shall require approval by both of the following: | 859 |
(1) Holders of two-thirds of the outstanding shares or | 860 |
ownership interests of the captive insurance company, unless a | 861 |
greater amount is required by the organizational document of the | 862 |
captive insurance company; | 863 |
(2) All the creditors of the captive insurance company. | 864 |
(C) Notwithstanding division (B)(2) of this section, if the | 865 |
consent of all the creditors of the captive insurance company | 866 |
cannot be obtained, the amendment may be approved by the | 867 |
superintendent if the superintendent is satisfied that no creditor | 868 |
will be materially prejudiced by the amendment. | 869 |
(D) A protected cell captive insurance company may amend its | 870 |
organizational document to cease to be a protected cell captive | 871 |
insurance company. | 872 |
(E) The amendment of an organizational document of a | 873 |
protected cell captive insurance company to cease to be a | 874 |
protected cell captive insurance company shall require approval by | 875 |
all of the following: | 876 |
(1) The superintendent; | 877 |
(2) Holders of two-thirds of the outstanding shares or | 878 |
ownership interests of the protected cell captive insurance | 879 |
company, unless a greater amount is required by the organizational | 880 |
document of the protected cell captive insurance company; | 881 |
(3) Two-thirds of the participants of each protected cell; | 882 |
(4) All the creditors of the protected cell captive insurance | 883 |
company and its protected cells. | 884 |
(F) Notwithstanding division (E)(4) of this section, if the | 885 |
consent of all the creditors of the captive insurance company and | 886 |
its protected cells cannot be obtained, the amendment may be | 887 |
approved by the superintendent upon being satisfied that no | 888 |
creditor will be materially prejudiced by the amendment. | 889 |
(G)(1) If a captive insurance company or protected cell | 890 |
captive insurance company seeks to change its status in accordance | 891 |
with this section, the company shall deliver both of the following | 892 |
to the superintendent: | 893 |
(a) A copy of the amendment to its name; | 894 |
(b) Evidence satisfactory to the superintendent that the | 895 |
requirements of division (B) or (E) of this section have been met. | 896 |
(2) If the documents required under division (G)(1) of this | 897 |
section are provided, the superintendent shall issue a license | 898 |
that is appropriate to the amended status of the company. | 899 |
(H) If a company changes its status in accordance with this | 900 |
section, the change of status shall take effect when the | 901 |
superintendent issues a new license. | 902 |
Sec. 3964.179. (A) A protected cell of a protected cell | 903 |
captive insurance company may be transferred to another protected | 904 |
cell captive insurance company. | 905 |
(B) The protected cell captive insurance companies between | 906 |
which a protected cell is being transferred shall enter into a | 907 |
written agreement that sets forth the terms of the transfer. | 908 |
(C) A transfer of a protected cell shall be approved by the | 909 |
superintendent when all of the following are met: | 910 |
(1) The board of directors of each protected cell captive | 911 |
insurance company involved in the transfer have approved the | 912 |
transfer. | 913 |
(2) The transfer agreement is approved by the superintendent | 914 |
as an arrangement in accordance with this chapter. | 915 |
(3) One of the following applies: | 916 |
(a) The transfer agreement is consented to by at least | 917 |
two-thirds of the participants of the protected cell being | 918 |
transferred and all the creditors, if any, of that protected cell. | 919 |
(b) If the agreement of all the creditors of the cell cannot | 920 |
be obtained, the superintendent may approve the transfer upon | 921 |
being satisfied that no creditor of the cell will be materially | 922 |
prejudiced by the transfer. | 923 |
(D) Within thirty days after a transfer agreement is approved | 924 |
by the superintendent, the protected cell captive insurance | 925 |
company to which the protected cell is being transferred shall | 926 |
deliver both of the following to the superintendent: | 927 |
(1) A copy of the executed transfer agreement; | 928 |
(2) A declaration signed by the directors of the protected | 929 |
cell captive insurance company transferring the protected cell | 930 |
stating that each director has reason to believe all of the | 931 |
following: | 932 |
(a) The protected cell being transferred is able to discharge | 933 |
its liabilities as they become due. | 934 |
(b) There are no creditors of the protected cell captive | 935 |
insurance company from which the cell is being transferred whose | 936 |
interests will be unfairly prejudiced by the transfer. | 937 |
(c) The transfer agreement has been approved in accordance | 938 |
with this chapter. | 939 |
(E) If a protected cell captive insurance company fails to | 940 |
deliver the documents required under division (D) of this section | 941 |
within the required thirty-day period, the superintendent may void | 942 |
the transfer. | 943 |
(F) The superintendent may void a transfer and order the | 944 |
removal of any director who makes a declaration under division | 945 |
(D)(2) of this section without having the grounds to do so. | 946 |
(G) Upon fulfillment of the requirements of division (D) of | 947 |
this section, the superintendent shall do all of the following: | 948 |
(1) Record the transfer of the protected cell; | 949 |
(2) Issue to the protected cell a new license; | 950 |
(3) Record that the protected cell has ceased to be a | 951 |
protected cell of the protected cell captive insurance company | 952 |
from which it was transferred. | 953 |
(H) Upon the issuance of the new license under this section | 954 |
all of the following shall apply: | 955 |
(1) The protected cell shall cease to be a protected cell of | 956 |
the protected cell captive insurance company from which it was | 957 |
transferred. | 958 |
(2) The protected cell becomes a protected cell of the | 959 |
protected cell captive insurance company to which it has been | 960 |
transferred. | 961 |
(3) All of the following shall apply: | 962 |
(a) All property and rights to which the protected cell was | 963 |
entitled immediately before the issue of the new license shall | 964 |
remain the property and rights of the protected cell. | 965 |
(b) All liabilities, contracts, debts, and other obligations | 966 |
to which the protected cell was subject immediately before the | 967 |
issue of the new license shall remain the liabilities, contracts, | 968 |
debts, and other obligations of the protected cell. | 969 |
(c) All actions and other legal proceedings that were pending | 970 |
by or against a protected cell immediately before the issue of the | 971 |
new license may be continued by or against the protected cell. | 972 |
(I) The operation of division (H) of this section shall not | 973 |
be regarded as any of the following: | 974 |
(1) A breach of contract or otherwise as a civil wrong; | 975 |
(2) A breach of any contractual provision prohibiting, | 976 |
restricting, or regulating the assignment or transfer of rights or | 977 |
liabilities; | 978 |
(3) Giving rise to any remedy by a party to a contract or | 979 |
other instrument as an event of default under any contract or | 980 |
other instrument or as causing or permitting the termination of | 981 |
any contract, other instrument, obligation, or relationship. | 982 |
(J) Except as provided in this section, a protected cell | 983 |
shall not be transferred if the transfer would be inconsistent | 984 |
with the articles of incorporation, bylaws, code of regulations, | 985 |
or similar organizational document, of the protected cell, the | 986 |
protected cell captive insurance company transferring the | 987 |
protected cell, or the protected cell captive insurance company to | 988 |
which the cell is to be transferred. | 989 |
Sec. 3964.1710. (A) Any insurance company organized under | 990 |
Chapter 3925. of the Revised Code, and any captive insurance | 991 |
company that is not a protected cell captive insurance company, | 992 |
may become a protected cell of a protected cell captive insurance | 993 |
company, with the approval of the superintendent. | 994 |
(B) A protected cell of a protected cell captive insurance | 995 |
company may apply to the superintendent to be incorporated as an | 996 |
insurance company, including a captive insurance company subject | 997 |
to the requirements of this chapter, independent from the | 998 |
protected cell captive insurance company of which it is currently | 999 |
a part. | 1000 |
(C) An application made under division (B) of this section | 1001 |
shall be approved by two-thirds of the participants of the | 1002 |
protected cell or, if the protected cell has more than one class | 1003 |
of participants, two-thirds of each class of participant, unless | 1004 |
the organizational document of the protected cell requires a | 1005 |
greater percentage. | 1006 |
(D)(1) If a protected cell makes an application under | 1007 |
division (B) of this section, any participant of the protected | 1008 |
cell who objects to the protected cell being incorporated as an | 1009 |
independent insurance company may petition the superintendent for | 1010 |
an order denying the application on the grounds that the | 1011 |
incorporation, or the terms of the incorporation, unfairly | 1012 |
prejudice the interests of the participant. | 1013 |
(2) Such a petition shall be made within thirty days after an | 1014 |
application has been made under division (B) of this section. | 1015 |
(E) If a protected cell is licensed as an independent legal | 1016 |
entity pursuant to this section, then all of the following apply: | 1017 |
(1) All property and rights to which the protected cell was | 1018 |
entitled immediately before its licensure as a new entity shall | 1019 |
remain the property and rights of the new entity. | 1020 |
(2) The protected cell shall remain subject to all criminal | 1021 |
and civil liabilities and all contracts, debts, and other | 1022 |
obligations to which the protected cell was subject immediately | 1023 |
before its licensure as a new entity. | 1024 |
(3) All contracts, debts, and other obligations of the | 1025 |
protected cell shall remain the contracts, debts, and other | 1026 |
obligations of the new entity. | 1027 |
(4) All actions and other legal proceedings that, immediately | 1028 |
before the licensure of the protected cell as a new entity, were | 1029 |
pending by or against the protected cell may be continued by or | 1030 |
against the new entity. | 1031 |
(F) The operation of division (E) of this section shall not | 1032 |
be regarded as any of the following: | 1033 |
(1) A breach of contract; | 1034 |
(2) A breach of any contractual provision prohibiting, | 1035 |
restricting, or regulating the assignment or transfer of rights or | 1036 |
liabilities; | 1037 |
(3) Giving rise to any remedy by a party to a contract or | 1038 |
other instrument as an event of default under the contract or | 1039 |
other instrument or as causing or permitting the termination of | 1040 |
any contract, other instrument, obligation, or relationship. | 1041 |
Sec. 3964.18. (A) If a protected cell captive insurance | 1042 |
company with one or more protected cells is being liquidated, the | 1043 |
protected cell captive insurance company may be considered to have | 1044 |
no assets and no liabilities only if the protected cell captive | 1045 |
insurance company continues to have no protected cells. | 1046 |
(B) In the course of liquidating a protected cell captive | 1047 |
insurance company, each protected cell shall be dealt with one of | 1048 |
the following ways: | 1049 |
(1) Transfer to another protected cell captive insurance | 1050 |
company; | 1051 |
(2) Liquidation; | 1052 |
(3) Continuation as a separate legal entity or protected cell | 1053 |
under the law of another jurisdiction; | 1054 |
(4) Incorporation, independent of the protected cell captive | 1055 |
insurance company; | 1056 |
(5) Merge with another insurance company. | 1057 |
(C) If a protected cell captive insurance company is being | 1058 |
liquidated, the liquidation shall not apply with respect to any | 1059 |
protected cell of the protected cell captive insurance company. | 1060 |
(D) If a protected cell of a protected cell captive insurance | 1061 |
company is being liquidated, the liquidation shall not apply with | 1062 |
respect to the protected cell captive insurance company or any | 1063 |
other protected cell of the company. | 1064 |
(E) A court, upon application of a protected cell captive | 1065 |
insurance company that is being liquidated, may determine, in | 1066 |
accordance with this chapter, if a liability of the protected cell | 1067 |
captive insurance company shall be satisfied by its general | 1068 |
assets, by the cell assets of a specific protected cell of the | 1069 |
company, or by a combination of those assets. | 1070 |
(F) Notwithstanding any statutory provision or rule of law to | 1071 |
the contrary, in the disposition of a protected cell captive | 1072 |
insurance company, the liquidator shall do both of the following: | 1073 |
(1) Deal with the protected cell captive insurance company's | 1074 |
assets only in accordance with the procedures set out in this | 1075 |
section; | 1076 |
(2) Apply the protected cell captive insurance company's | 1077 |
assets to those entitled to have recourse to them under this | 1078 |
section, in the discharge of the claims of creditors of the | 1079 |
protected cell captive insurance company. | 1080 |
(G)(1) A petition for a liquidation or rehabilitation order | 1081 |
with respect to a protected cell of a protected cell captive | 1082 |
insurance company may be made by any of the following: | 1083 |
(a) The protected cell captive insurance company; | 1084 |
(b) A majority of the directors of the protected cell captive | 1085 |
insurance company; | 1086 |
(c) Any creditor of that protected cell; | 1087 |
(d) The superintendent. | 1088 |
(2) Notice of a petition to the court for a liquidation or | 1089 |
rehabilitation order with respect to a protected cell of a | 1090 |
protected cell captive insurance company shall be served upon all | 1091 |
of the following: | 1092 |
(a) The protected cell captive insurance company; | 1093 |
(b) The superintendent; | 1094 |
(c) Such other persons as the court may direct. | 1095 |
(H)(1) Except otherwise provided in this section, the court | 1096 |
may make a liquidation or rehabilitation order with respect to a | 1097 |
protected cell if, in relation to a captive insurance company, the | 1098 |
court is satisfied that both of the following are met: | 1099 |
(a) The cell assets attributable to a particular protected | 1100 |
cell of the captive insurance company and the general assets of | 1101 |
the company, in those cases where creditors of the captive | 1102 |
insurance company with respect to the protected cell are entitled | 1103 |
to have recourse to the captive insurance company's general | 1104 |
assets, are, or are likely to be, insufficient to discharge the | 1105 |
claims of creditors with respect to that protected cell. | 1106 |
(b) An order would achieve the purposes set forth in division | 1107 |
(H)(3) of this section. | 1108 |
(2) A liquidation or rehabilitation order may be made with | 1109 |
respect to one or more protected cells. | 1110 |
(3) A liquidation or rehabilitation order shall direct that | 1111 |
the business and cell assets of, or attributable to, a protected | 1112 |
cell shall be managed by a liquidator or rehabilitator specified | 1113 |
in the order for the purpose of accomplishing both of the | 1114 |
following: | 1115 |
(a) The orderly closing or rehabilitation of the business of, | 1116 |
or attributable to, the protected cell; | 1117 |
(b) The distribution of the cell assets, or assets | 1118 |
attributable to the protected cell, to those having recourse | 1119 |
thereto. | 1120 |
(I) All of the following apply to the liquidator or | 1121 |
rehabilitator of a protected cell: | 1122 |
(1) The liquidator or rehabilitator shall have all the | 1123 |
functions and powers of the directors responsible for the business | 1124 |
and cell assets of, or attributable to, the protected cell. | 1125 |
(2) The liquidator or rehabilitator may at any time apply to | 1126 |
the court for any of the following: | 1127 |
(a) Directions as to the extent or exercise of any function | 1128 |
or power; | 1129 |
(b) The liquidation or rehabilitation order to be discharged | 1130 |
or varied; | 1131 |
(c) Any other order as to any matter occurring during the | 1132 |
course of the liquidation or rehabilitation. | 1133 |
(3) The liquidator or rehabilitator shall act as the agent of | 1134 |
the captive insurance company and shall not incur personal | 1135 |
liability except to the extent that the liquidator or | 1136 |
rehabilitator acts fraudulently, recklessly, negligently, or in | 1137 |
bad faith, except that where the superintendent is appointed | 1138 |
liquidator or rehabilitator of a protected cell. If the | 1139 |
superintendent is appointed liquidator, section 3903.07 of the | 1140 |
Revised Code shall apply to the superintendent, any deputy | 1141 |
liquidator, any employee of the department of insurance, any | 1142 |
employee appointed by the superintendent as liquidator, and any | 1143 |
employee who serves under the liquidator. | 1144 |
(4) The liquidator or rehabilitator shall administer the | 1145 |
assets pursuant to the provisions of this section and sections | 1146 |
3903.01 to 3903.59 of the Revised Code. | 1147 |
(J) Upon the filing of a petition for a liquidation or | 1148 |
rehabilitation order, and during the period of operation of | 1149 |
liquidation or rehabilitation, both of the following shall apply: | 1150 |
(1) No proceedings shall be instituted or continued by or | 1151 |
against the captive insurance company or protected cell in respect | 1152 |
of which the liquidation or rehabilitation order was made. | 1153 |
(2) No action shall be taken to enforce any security, and no | 1154 |
action shall be taken in the execution of a legal process with | 1155 |
respect to the business or cell assets of, or attributable to, the | 1156 |
protected cell with respect to which the liquidation or | 1157 |
rehabilitation order was made, except by leave of the court. | 1158 |
(K) During the period of operation of a liquidation or | 1159 |
rehabilitation both of the following shall apply: | 1160 |
(1) The functions and powers of the directors shall cease | 1161 |
with respect to the business of, or attributable to, any protected | 1162 |
cell or cell assets for which the order was made. | 1163 |
(2)(a) The liquidator or rehabilitator of the protected cell | 1164 |
shall be entitled to be present at all meetings of the captive | 1165 |
insurance company and protected cell in question and to vote at | 1166 |
such meetings as if the liquidator or rehabilitator were a | 1167 |
director of the captive insurance company. | 1168 |
(b) The liquidator's or rehabilitator's voting authority | 1169 |
shall include matters concerning the captive insurance company's | 1170 |
general assets, unless there are no creditors that are entitled to | 1171 |
have recourse to the captive insurance company's general assets. | 1172 |
(L)(1) A court shall not discharge a liquidation or | 1173 |
rehabilitation order issued pursuant to this section unless it | 1174 |
appears to the court that the purpose for which the order was made | 1175 |
has been achieved, substantially achieved, or is incapable of | 1176 |
being achieved. | 1177 |
(2) The court, on hearing a petition for the discharge or | 1178 |
variation of a liquidation or rehabilitation order, may make any | 1179 |
interim order, discharge the order, or continue the liquidation or | 1180 |
rehabilitation unchanged. | 1181 |
(3) Upon the court issuing an order discharging a liquidation | 1182 |
or rehabilitation order for a protected cell on the ground that | 1183 |
the purpose for which the order was made had been achieved or | 1184 |
substantially achieved, the court may direct that any payment made | 1185 |
by the liquidator or rehabilitator to any creditor of the captive | 1186 |
insurance company, with respect to that protected cell, shall be | 1187 |
considered full satisfaction of the liabilities of the captive | 1188 |
insurance company to the creditor with respect to the protected | 1189 |
cell. However, such an order or discharge shall not be considered | 1190 |
a bar to a creditor's claims against the captive cell insurance | 1191 |
company arising out of the captive cell insurance company's | 1192 |
administrative, regulatory, or marketing activities on behalf of | 1193 |
the captive cell in question. | 1194 |
Sec. 3964.20. A captive insurance company organized under | 1195 |
the laws of another state or jurisdiction may become a domestic | 1196 |
captive insurance company pursuant to section 3913.40 of the | 1197 |
Revised Code after complying with all the requirements of this | 1198 |
chapter relative to the organization and formation of a domestic | 1199 |
captive insurance company. | 1200 |
Sec. 3964.21. The superintendent may adopt rules in | 1201 |
accordance with Chapter 119. of the Revised Code as are reasonably | 1202 |
necessary for the implementation and operation of this chapter. | 1203 |
Sec. 4123.351. (A) The administrator of workers' | 1204 |
compensation shall require every self-insuring employer, including | 1205 |
any self-insuring employer that is indemnified by a captive | 1206 |
insurance company granted a certificate of authority under Chapter | 1207 |
3694. of the Revised Code, to pay a contribution, calculated under | 1208 |
this section, to the self-insuring employers' guaranty fund | 1209 |
established pursuant to this section. The fund shall provide for | 1210 |
payment of compensation and benefits to employees of the | 1211 |
self-insuring employer in order to cover any default in payment by | 1212 |
that employer. | 1213 |
(B) The bureau of workers' compensation shall operate the | 1214 |
self-insuring employers' guaranty fund for self-insuring | 1215 |
employers. The administrator annually shall establish the | 1216 |
contributions due from self-insuring employers for the fund at | 1217 |
rates as low as possible but such as will assure sufficient moneys | 1218 |
to guarantee the payment of any claims against the fund. The | 1219 |
bureau's operation of the fund is not subject to sections 3929.10 | 1220 |
to 3929.18 of the Revised Code or to regulation by the | 1221 |
superintendent of insurance. | 1222 |
(C) If a self-insuring employer defaults, the bureau shall | 1223 |
recover the amounts paid as a result of the default from the | 1224 |
self-insuring employers' guaranty fund. If a self-insuring | 1225 |
employer defaults and is in compliance with this section for the | 1226 |
payment of contributions to the fund, such self-insuring employer | 1227 |
is entitled to the immunity conferred by section 4123.74 of the | 1228 |
Revised Code for any claim arising during any period the employer | 1229 |
is in compliance with this section. | 1230 |
(D)(1) There is hereby established a self-insuring employers' | 1231 |
guaranty fund, which shall be in the custody of the treasurer of | 1232 |
state and which shall be separate from the other funds established | 1233 |
and administered pursuant to this chapter. The fund shall consist | 1234 |
of contributions and other payments made by self-insuring | 1235 |
employers under this section. All investment earnings of the fund | 1236 |
shall be credited to the fund. The bureau shall make disbursements | 1237 |
from the fund pursuant to this section. | 1238 |
(2) The administrator has the same powers to invest any of | 1239 |
the surplus or reserve belonging to the fund as are delegated to | 1240 |
the administrator under section 4123.44 of the Revised Code with | 1241 |
respect to the state insurance fund. The administrator shall apply | 1242 |
interest earned solely to the reduction of assessments for | 1243 |
contributions from self-insuring employers and to the payments | 1244 |
required due to defaults. | 1245 |
(3) If the bureau of workers' compensation board of directors | 1246 |
determines that reinsurance of the risks of the fund is necessary | 1247 |
to assure solvency of the fund, the board may: | 1248 |
(a) Enter into contracts for the purchase of reinsurance | 1249 |
coverage of the risks of the fund with any company or agency | 1250 |
authorized by law to issue contracts of reinsurance; | 1251 |
(b) Require the administrator to pay the cost of reinsurance | 1252 |
from the fund; | 1253 |
(c) Include the costs of reinsurance as a liability and | 1254 |
estimated liability of the fund. | 1255 |
(E) The administrator, with the advice and consent of the | 1256 |
board, may adopt rules pursuant to Chapter 119. of the Revised | 1257 |
Code for the implementation of this section, including a rule, | 1258 |
notwithstanding division (C) of this section, requiring | 1259 |
self-insuring employers to provide security in addition to the | 1260 |
contribution to the self-insuring employers' guaranty fund | 1261 |
required by this section. The additional security required by the | 1262 |
rule, as the administrator determines appropriate, shall be | 1263 |
sufficient and adequate to provide for financial assurance to meet | 1264 |
the obligations of self-insuring employers under this chapter and | 1265 |
Chapter 4121. of the Revised Code. | 1266 |
(F) The purchase of coverage under this section by | 1267 |
self-insuring employers is valid notwithstanding the prohibitions | 1268 |
contained in division (A) of section 4123.82 of the Revised Code | 1269 |
and is in addition to the indemnity contracts that self-insuring | 1270 |
employers may purchase pursuant to division (B) of section 4123.82 | 1271 |
of the Revised Code. | 1272 |
(G) The administrator, on behalf of the self-insuring | 1273 |
employers' guaranty fund, has the rights of reimbursement and | 1274 |
subrogation and shall collect from a defaulting self-insuring | 1275 |
employer or other liable person all amounts the administrator has | 1276 |
paid or reasonably expects to pay from the fund on account of the | 1277 |
defaulting self-insuring employer. | 1278 |
(H) The assessments for contributions, the administration of | 1279 |
the self-insuring employers' guaranty fund, the investment of the | 1280 |
money in the fund, and the payment of liabilities incurred by the | 1281 |
fund do not create any liability upon the state. | 1282 |
Except for a gross abuse of discretion, neither the board, | 1283 |
nor the individual members thereof, nor the administrator shall | 1284 |
incur any obligation or liability respecting the assessments for | 1285 |
contributions, the administration of the self-insuring employers' | 1286 |
guaranty fund, the investment of the fund, or the payment of | 1287 |
liabilities therefrom. | 1288 |
Section 2. That existing section 4123.351 of the Revised Code | 1289 |
is hereby repealed. | 1290 |