As Introduced

130th General Assembly
Regular Session
2013-2014
H. B. No. 117


Representatives Hackett, Stinziano 

Cosponsors: Representatives Henne, Sears 



A BILL
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


BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

       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