As Passed by the House

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


Representatives Hackett, Stinziano 

Cosponsors: Representatives Henne, Sears, Carney, Retherford, Anielski, Beck, Blair, Blessing, Buchy, Budish, Burkley, Curtin, Grossman, Hagan, C., Letson, Milkovich, O'Brien, Patterson, Rogers, Smith, Stebelton, Wachtmann, Winburn Speaker Batchelder 



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 that offers direct 132
insurance to its parent shall submit to the superintendent 133
for approval a detailed description of the coverages, deductibles, 134
coverage limits, proposed rates or rating plans, documentation 135
from a qualified actuary that demonstrates the actuarial soundness 136
of the proposed rates or rating plans, and other such additional 137
information as the superintendent may require. 138

       (2)(a) Any captive insurance company licensed under the 139
provisions of this chapter that seeks to make any material change 140
to any item described in division (F)(1) of this section shall 141
submit to the superintendent for approval a detailed description 142
of the revision, documentation from a qualified actuary that 143
demonstrates the actuarial soundness of the revised rates or 144
rating plans, and other such additional information as the 145
superintendent may require.146

       (b) Each filing under division (F)(2)(a) of this section is 147
deemed approved thirty days after the filing is received by the 148
superintendent of insurance, unless the filing is disapproved by 149
the superintendent during that thirty-day period. 150

       (c) If at any time subsequent to the thirty-day review period 151
the superintendent finds that a filing does not demonstrate 152
actuarial soundness, the superintendent shall hold a hearing 153
requiring the captive insurance company to show cause why an order 154
should not be made by the superintendent to disapprove the revised 155
rates or rating plans. 156

       (d) If, upon such a hearing, the superintendent finds that 157
the captive insurance company failed to demonstrate the actuarial 158
soundness of the rates or rating plans, the superintendent shall 159
issue an order directing the captive insurance company to cease 160
and desist from using the revised rates or rating plans and to use 161
rates or rating plans as determined appropriate by the 162
superintendent.163

       (G) Except as otherwise provided in this division, documents 164
and information submitted by a captive insurance company pursuant 165
to this section are not subject to section 149.43 of the Revised 166
Code, and are confidential, and may not be disclosed by the 167
superintendent or any employee of the department of insurance 168
without the written consent of the company. 169

       (1) Such documents and information may be discoverable in a 170
civil action in which the captive insurance company filing the 171
material is a party upon a finding by a court of competent 172
jurisdiction that the information sought is relevant and necessary 173
to the case and the information sought is unavailable from other, 174
nonconfidential sources.175

       (2) The superintendent may, at the superintendent's sole 176
discretion, share documents required under this section with the 177
chief deputy rehabilitator, the chief deputy liquidator, other 178
deputy rehabilitators and liquidators, and any other person 179
employed by, or acting on behalf of the superintendent pursuant to 180
Chapter 3901. or 3903. of the Revised Code, with other local, 181
state, federal, and international regulatory and law enforcement 182
agencies, with local, state, and federal prosecutors, and with the 183
national association of insurance commissioners and its affiliates 184
and subsidiaries provided that the recipient agrees to maintain 185
the confidential or privileged status of the documents and has 186
authority to do so. 187

       (H)(1) Each applicant for a license to do the business of a 188
captive insurance company in this state shall pay to the 189
superintendent a nonrefundable fee of five hundred dollars for 190
processing its application for a license. The superintendent is 191
authorized to retain legal, financial, and examination services 192
from outside the department, at the expense of the applicant. Each 193
captive insurance company shall annually pay a license renewal fee 194
of five hundred dollars. 195

       (2) The fees collected pursuant to division (H)(1) of this 196
section shall be deposited into the state treasury to the credit 197
of the captive insurance regulation and supervision fund created 198
under section 3964.15 of the Revised Code.199

       Sec. 3964.04.  No captive insurance company shall adopt a 200
name that is the same, deceptively similar, or likely to be 201
confused with, or mistaken for, any other existing business name 202
registered in this state. The name under which a captive insurance 203
company engages in business must contain the word "captive."204

       Sec. 3964.05. (A) No captive insurance company shall be 205
issued a license unless it possesses and maintains unimpaired, 206
paid-in capital and surplus as follows:207

       (1) Not less than two hundred fifty thousand dollars; 208

       (2) In the case of a protected cell captive insurance 209
company, not less than five hundred thousand dollars. 210

       (B) The superintendent may prescribe additional capital and 211
surplus based upon the type, volume, and nature of insurance 212
business transacted. 213

       (C) Capital and surplus may be in the form of any of the 214
following:215

       (1) Cash;216

       (2) Marketable securities, as approved by the superintendent;217

       (3) Irrevocable, unconditional, and automatically renewable 218
letters of credit that are issued or confirmed by a qualified 219
United States financial institution.220

       (D) For purposes of division (C)(3) of this section, a United 221
States financial institution is qualified if all of the following 222
apply:223

       (1) It is organized under, or, in the case of the United 224
States branch or agency office of a foreign banking organization, 225
is chartered under the laws of the United States or any state 226
thereof.227

       (2) It is regulated, supervised, and examined by federal or 228
state officials that have regulatory authority over banks and 229
trust companies. 230

       (3) The superintendent has determined that it meets such 231
standards of financial condition and standing as are necessary and 232
appropriate for purposes of ensuring that its letters of credit 233
will be of a quality that is acceptable to the superintendent, in 234
the superintendent's sole discretion.235

       Sec. 3964.06.  (A) No captive insurance company shall pay any 236
extraordinary dividend or make any other extraordinary 237
distribution to its shareholders or members other than in 238
accordance with this section. The declaration of an extraordinary 239
dividend or distribution shall be conditional and shall confer no 240
rights upon shareholders or members until thirty days after the 241
superintendent has received notice of the declaration thereof and 242
has not, within the thirty-day period, disapproved the dividend or 243
distribution, unless the superintendent approves the dividend or 244
distribution within the thirty-day period. 245

       (B) Prior to paying any dividend or distribution, the 246
insurance company shall notify the superintendent on a form 247
provided by the superintendent for informational purposes within 248
five business days following its declaration of any dividend or 249
distribution and at least ten calendar days prior to payment of 250
such dividend or distribution. Such a ten-calendar-day period is 251
to begin on the date that the superintendent receives the notice.252

       (C)(1) For the purposes of this section, an extraordinary 253
dividend or distribution includes any dividend or distribution of 254
cash or other property, whose fair market value, together with 255
that of other dividends or distributions made within the preceding 256
twelve months, exceeds the greater of ten per cent of the 257
insurance company's surplus as regards policy holders as of the 258
thirty-first day of December immediately preceding, or the net 259
income of the insurance company for the twelve-month period ending 260
the thirty-first day of December immediately preceding. 261

       (2) Pro rata distributions of any class of the insurance 262
company's own securities shall not be considered an extraordinary 263
distribution under division (C)(1) of this section. 264

       (D) Any dividend or distribution paid from a source other 265
than earned surplus shall be considered an extraordinary dividend 266
or extraordinary distribution. 267

       (E) For the purposes of this section, "earned surplus" means 268
an amount equal to an insurance company's unassigned funds as set 269
forth in its most recent financial statement submitted to the 270
superintendent, including net unrealized capital gains and losses 271
or revaluation of assets. 272

       Sec. 3964.07.  (A) A captive insurance company shall not be 273
required to make any annual report except as required by this 274
section. 275

       (B)(1) Two of the executive officers of a captive insurance 276
company, or a majority of the directors of a captive insurance 277
company, shall annually prepare under oath and submit to the 278
superintendent, on the first day of January or within sixty days 279
thereafter, a statement showing the financial condition of the 280
company on the thirty-first day of the December next preceding. 281
The statement shall include an opinion from a qualified actuary 282
regarding the adequacy of the company's required reserves to make 283
full provision for the company's liabilities.284

        (2) All captive insurance companies shall have an annual 285
audit by an independent certified public accountant and shall file 286
an audited financial report with the superintendent on or before 287
the first day of June as a supplement to the annual statement 288
required under division (B)(1) of this section. 289

       (C) Each captive insurance company shall report using 290
generally accepted accounting principles, unless the 291
superintendent requires, approves, or accepts the use of statutory 292
accounting principles or other comprehensive basis accounting, any 293
appropriate, necessary modifications or adaptations required or 294
approved or accepted by the superintendent for each type of 295
insurance or kind of insurance company that makes such a report, 296
and as supplemented by additional information required by the 297
superintendent. 298

       (D) Captive insurance companies shall prepare, at a minimum, 299
internal quarterly financial statements. These statements shall be 300
made available upon request to the superintendent. 301

       (E) The superintendent shall adopt by rule the prescribed 302
forms, instructions, and manuals by which captive insurance 303
companies shall make the reports required under this section, as 304
the superintendent considers necessary.305

        (F) Division (G) of section 3964.03 of the Revised Code shall 306
apply to each report filed under this section. 307

       Sec. 3964.08.  (A) Captive insurance companies shall be 308
examined, evaluated, and monitored pursuant to section 3901.07 of 309
the Revised Code. 310

       (B) All examination reports, preliminary examination reports 311
or results, working papers, recorded information, documents and 312
copies thereof produced by, obtained by, or disclosed to the 313
superintendent or any other person in the course of an examination 314
made under this section are confidential and are not subject to 315
subpoena and may not be made public by the superintendent or an 316
employee or agent of the superintendent without the written 317
consent of the company, except to the extent provided in this 318
section. However, nothing in this section shall prevent the 319
superintendent from using such information in the furtherance of 320
the superintendent's regulatory authority under this chapter.321

       (C) The superintendent may, in the superintendent's sole 322
discretion, share documents that are the subject of this section 323
with the chief deputy rehabilitator, the chief deputy liquidator, 324
other deputy rehabilitators and liquidators, and any other person 325
employed by, or acting on behalf of, the superintendent pursuant 326
to Chapter 3901. or 3903. of the Revised Code, with other local, 327
state, federal, and international regulatory and law enforcement 328
agencies, with local, state, and federal prosecutors, and with the 329
national association of insurance commissioners and its affiliates 330
and subsidiaries provided that the recipient agrees to maintain 331
the confidential or privileged status of the confidential or 332
privileged work paper and has authority to do so.333

       Sec. 3964.09.  The superintendent may suspend or revoke the 334
license of a captive insurance company, in accordance with Chapter 335
119. of the Revised Code, for any of the following reasons:336

       (A) Insolvency or impairment of capital or surplus;337

       (B) Failure to meet the requirements of section 3964.05 of 338
the Revised Code;339

       (C) Refusal or failure to submit an annual report, as 340
required by section 3964.07 of the Revised Code, or any other 341
report or statement required by law or by lawful order of the 342
superintendent;343

       (D) Failure to comply with the provisions of its own 344
articles, bylaws, code of regulations, or other organizational 345
documents;346

       (E) Failure to submit to, or pay the cost of, examination, or 347
any legal obligation related to examination, as required by this 348
chapter;349

       (F) Use of practices that, although not otherwise 350
specifically prohibited by law, are determined by the 351
superintendent to render its operation detrimental or its 352
condition unsound with respect to the public or to its 353
policyholders; 354

       (G) Failure to otherwise comply with the laws of this state.355

       Sec. 3964.10.  (A) The board of directors of a captive 356
insurance company shall determine appropriate investments for the 357
company. With respect to all of the insurance company's 358
investments, the board of directors shall exercise the judgment 359
and care, under the circumstances then prevailing, that a person 360
of reasonable prudence, discretion, and intelligence might 361
exercise in the management of a like enterprise, that person not 362
having an intent to speculate, but having regard for the permanent 363
disposition of the person's funds, considering the probable income 364
as well as the probable safety of the person's capital. 365

       (B)(1) Investments shall be of sufficient value, liquidity, 366
and diversity to assure the captive insurance company's ability to 367
meet its outstanding obligations, based on reasonable estimations 368
of new business production for current lines of business. A copy 369
of the investment policy adopted by the board of directors shall 370
be filed with the superintendent. 371

       (2) If the superintendent determines that a board of 372
directors of a captive insurance company has failed to comply with 373
the requirements of division (B)(1) of this section, the company 374
shall be notified in writing that it is required to file a 375
schedule of its proposed investments with the superintendent.376

       (C)(1) No captive insurance company may make a loan to, or an 377
investment in, its parent company or affiliates without prior 378
written approval of the superintendent. 379

       (2) Any such loan or investment shall be evidenced by 380
documentation approved by the superintendent. 381

       (3) Loans that violate the minimum capital and surplus funds 382
requirements of section 3964.05 of the Revised Code are 383
prohibited.384

       Sec. 3964.11. No captive insurance company shall be required 385
to join a rating organization.386

       Sec. 3964.12. No captive insurance company shall be permitted 387
to join or contribute financially to any plan, pool, association, 388
or guaranty or insolvency fund in this state, nor shall any 389
captive insurance company, or any insured or affiliate thereof, 390
receive any benefit from any such plan, pool, association, or 391
guaranty or insolvency fund for claims arising out of the 392
operations of the captive insurance company.393

       Sec. 3964.13. (A)(1) Not later than the second day of March 394
of each year, a captive insurance company shall pay to the 395
superintendent of insurance a fee computed in accordance with both 396
of the following:397

       (a) 0.35 per cent on its net direct premiums;398

       (b) 0.15 per cent on revenue from assumed reinsurance 399
premiums.400

       (2) The annual minimum aggregate fee to be paid by a captive 401
insurance company calculated under this division shall be seven 402
thousand five hundred dollars. The annual maximum aggregate fee to 403
be paid by a captive insurance company calculated under this 404
division shall be two hundred fifty thousand dollars. 405

       (B) The fee on reinsurance premiums set forth under division 406
(A)(1)(b) of this section shall not be levied on premiums for 407
risks or portions of risks that are subject to the fee under 408
division (A)(1)(a) of this section. 409

       (C) A captive insurance company shall not pay any reinsurance 410
fee pursuant to division (A)(1)(b) of this section on revenue 411
related to the receipt of assets by the captive insurance company 412
in exchange for the assumption of loss reserves and other 413
liabilities of another insurance company that is under common 414
ownership and control with the captive insurance company, if the 415
transaction is part of a plan to discontinue the operation of the 416
other insurance company and the intent of the exchange is to renew 417
or maintain such business with the captive insurance company.418

       (D)(1) The fee imposed in division (A) of this section shall 419
be calculated on an annual basis, notwithstanding policies, 420
contracts, insurance, or contracts of reinsurance issued on a 421
multi-year basis. 422

       (2) In the case of multi-year policies or contracts, the 423
premium shall be prorated for purposes of determining the fee 424
required under division (A) of this section.425

       (E) All fees collected under this section shall be deposited 426
into the state treasury to the credit of the captive insurance 427
regulation and supervision fund.428

       Sec. 3964.14.  (A) Except as provided in this chapter, 429
captive insurance companies shall be governed by this chapter and 430
are exempt from all other provisions of the insurance laws of this 431
state. No insurance law of this state shall apply to captive 432
insurance companies unless captive insurance companies are 433
expressly designated as being subject to the law or, with respect 434
to a line of authority granted to a captive insurance company 435
pursuant to division (A)(10) of section 3964.02 of the Revised 436
Code, as required in the articles, bylaws, code of regulations, or 437
other organizational documents as approved by the superintendent.438

       (B) Except as otherwise provided in this chapter, sections 439
3903.01 to 3903.59 of the Revised Code shall apply to captive 440
insurance companies.441

       Sec. 3964.15.  (A) There is hereby created in the state 442
treasury the captive insurance regulation and supervision fund, 443
which shall consist of all fees, fines, penalties, and assessments 444
received by the superintendent under this chapter.445

       (B) The superintendent may charge captive insurance companies 446
for any of the following expenses incurred in carrying out this 447
chapter: 448

       (1) The entire compensation for each day, or portion thereof, 449
worked by all personnel, including those who are not employees of 450
the department of insurance, in any of the following capacities:451

       (a) The conduct of an examination, calculated at the rates 452
provided in the financial condition examiners' handbook published 453
by the national association of insurance commissioners;454

       (b) The review and analysis of a company's annual report 455
submitted pursuant to section 3964.07 of the Revised Code, and any 456
interim financial statements and examination reports or related 457
documents of captive insurance companies in this state;458

       (c) The ongoing evaluation and monitoring of the financial 459
affairs of captive insurance companies;460

       (d) The determination and review of the premium franchise fee 461
liability of a captive insurance company;462

       (e) The training and continuing education costs of examiners 463
and analysts.464

       (2) Travel and living expenses of all personnel, including 465
those who are not employees of the department of insurance, 466
directly engaged in the conduct of an examination calculated at 467
rates not to exceed the rates provided in the financial condition 468
examiners' handbook published by the national association of 469
insurance commissioners;470

       (3) All other incidental expenses incurred by or on behalf of 471
such personnel in the conduct of such examination;472

       (4) An allocated share of all expenses not described in 473
division (B)(1), (2), or (3) of this section, but that are 474
necessarily incurred in carrying out the duties of the 475
superintendent under this chapter, including the expenses of 476
direct overhead and support staff for the examiners and persons 477
appointed or employed pursuant to section 3964.08 of the Revised 478
Code.479

       (C) All amounts collected by the superintendent under 480
division (B) of this section shall be deposited into the state 481
treasury to the credit of the captive insurance regulation and 482
supervision fund.483

       (D) At the discretion of the superintendent, the expenses of 484
the captive insurance regulation and supervision fund may be 485
covered by the department of insurance operating fund created 486
under section 3901.021 of the Revised Code. 487

       (E) As used in this section, "examination" means the 488
examination required under section 3964.08 of the Revised Code.489

       Sec. 3964.17.  (A) As used in sections 3964.17 to 3964.1710 490
of the Revised Code: 491

       (1) "Protected cell" means a captive insurance company that 492
is a part of another captive insurance company, and that has a 493
separate legal identity from the captive insurance company of 494
which it is a part.495

       (2) "Protected cell captive insurance company" means a 496
captive insurance company that meets all of the following 497
requirements: 498

       (a) Is formed and licensed under the provisions of this 499
chapter; 500

       (b) Insures or reinsures the risks of separate participants 501
through a participant contract;502

       (c) Segregates each participant's liability into a protected 503
cell.504

       (3) "Participant" means an individual, company, corporation, 505
partnership, limited liability company, and their affiliated 506
entities that insure or reinsure with a protected cell. 507
"Participant" includes an insurance agent licensed in this state 508
that accepts a stated percentage of risk on a pro rata basis 509
within a defined category of business underwritten by a licensed 510
insurance company that is domiciled in this state and that is 511
affiliated with a protected cell captive insurance company.512

       (4) "Participant contract" means a contract by which a 513
protected cell captive insurance company insures or reinsures the 514
risks of a participant. 515

       (a) A participant that is not an insurance agent licensed in 516
this state shall insure or reinsure only its own risks through a 517
protected cell.518

       (b) If the participant is an insurance agent licensed in this 519
state, the participant contract must define each risk covered by 520
the contract with fixed and certain terms. 521

       (B) A captive insurance company may be organized as a 522
protected cell captive insurance company and shall be permitted to 523
form one or more protected cells under this section to insure or 524
reinsure risks of one or more participants.525

       (C) The assets and liabilities of each protected cell shall 526
be held separately from the assets and liabilities of all other 527
protected cells. 528

       (D) A protected cell of a protected cell captive insurance 529
company may be organized pursuant to Chapter 1701., 1702., or 530
1705. of the Revised Code.531

       (E) A protected cell captive insurance company shall, at the 532
time of paying the annual fee required under section 3964.13 of 533
the Revised Code, pay an additional annual fee for each protected 534
cell in an amount to be established by the superintendent. 535

       (F) Each protected cell of a protected cell captive insurance 536
company shall be treated as a captive insurance company for 537
purposes of this chapter. 538

       (G) Unless otherwise permitted by the articles of 539
incorporation, bylaws, code of regulations, or other 540
organizational document of a protected cell captive insurance 541
company, each protected cell of the protected cell captive 542
insurance company shall have the same directors, secretary, and 543
registered office as the protected cell captive insurance company. 544

       (H) A protected cell captive insurance company may provide in 545
its articles of incorporation, bylaws, code of regulations, or 546
other organizational documents that a protected cell it creates 547
shall be wound up and dissolved upon any of the following: 548

       (1) The bankruptcy, death, expulsion, insanity, resignation, 549
or retirement of any participant of the protected cell; 550

       (2) The happening of some event that is not the expiration of 551
a fixed period of time; 552

       (3) The expiration of a fixed period of time. 553

       (I)(1) The articles of incorporation, bylaws, code of 554
regulations, or other organizational documents, of a protected 555
cell captive insurance company shall provide that a protected cell 556
shall not own shares or membership interests in the protected cell 557
captive insurance company of which it is a part.558

       (2) Such a document may provide that a protected cell may own 559
shares or membership interests in any other protected cell of the 560
protected cell captive insurance company of which it is a part. 561

       (J) The name of a protected cell captive insurance company 562
shall include the words "protected cell captive" or the 563
abbreviation "PCC."564

       (K) A protected cell captive insurance company shall assign a 565
distinctive name to each of its protected cells that meets all of 566
the following: 567

       (1) The name identifies the protected cell as being part of 568
the protected cell captive insurance company.569

       (2) The name distinguishes the protected cell from any other 570
protected cell of the protected cell captive insurance company.571

       (3) The name includes the words "protected cell" or the 572
abbreviation "PC."573

       (L) A protected cell has no legal identity separate from that 574
of the protected cell captive insurance company of which it is a 575
part. 576

       (M)(1) A protected cell may enter into an agreement with its 577
protected cell captive insurance company or with another protected 578
cell of the same protected cell captive insurance company. 579

       (2) Such an agreement shall be enforceable as if each 580
protected cell of the protected cell captive insurance company 581
were a separate legal entity.582

       (N)(1) The assets of a protected cell captive insurance 583
company shall be either cell assets or general assets. 584

       (2) The cell assets comprise the assets of the protected cell 585
captive insurance company that are held within or on behalf of its 586
protected cells. 587

       (3) The general assets of a protected cell captive insurance 588
company comprise the assets of the protected cell captive 589
insurance company that are not cell assets. 590

       (O)(1) The liabilities of a protected cell captive insurance 591
company shall be either cell liabilities or general liabilities. 592

       (2) The cell liabilities comprise the obligations of the 593
protected cell captive insurance company attributable to its 594
protected cells. 595

       (3) The general liabilities of a protected cell captive 596
insurance company comprise the obligations of the protected cell 597
captive insurance company that are not cell liabilities. 598

       (P) Each protected cell insurance company shall account 599
separately on its books and records for each of its protected 600
cells to reflect the financial condition and results of operations 601
of the protected cell, including net income or loss, dividends or 602
other distributions to participants, and such other factors as may 603
be provided by participant contracts or required by the 604
superintendent. 605

       (Q) Each protected cell captive insurance company shall 606
annually file with the superintendent such financial reports as 607
the superintendent requires, which shall include financial 608
statements detailing the financial experience of each protected 609
cell and a statement regarding the adequacy of reserves kept to 610
make full provision for the liabilities insured by each protected 611
cell. 612

       (R) An officer or manager of a protected cell captive 613
insurance company shall immediately notify the superintendent if 614
any protected cell of the company is trending toward reserves that 615
are inadequate, or if the company becomes insolvent or is 616
otherwise unable to meet its claims or other obligations. 617

       (S) The duties of a director of a protected cell captive 618
insurance company under this chapter shall be in addition to, and 619
not in lieu of, those under other applicable law.620

       Sec. 3964.171.  (A) A protected cell captive insurance 621
company may create and issue shares in one or more classes or 622
series for one or more protected cells. 623

       (1) The proceeds of the issue of shares for a specific 624
protected cell shall be included in the assets of that protected 625
cell. 626

       (2) The proceeds of the issue of shares that are not for a 627
specific protected cell shall be included in the protected cell 628
captive insurance company's general assets. 629

       (B) A protected cell captive insurance company may pay a 630
dividend on protected cell shares of any class or series, 631
regardless of whether a dividend is declared on any other class or 632
series of shares of a protected cell or any other shares of the 633
company. Such payment is subject to section 3964.06 of the Revised 634
Code.635

       (C) Dividends may be paid on protected cell shares only from 636
the cell assets of the protected cell that issued the shares and 637
must otherwise be made in accordance with the rights of such 638
shares and in accordance with section 3964.06 of the Revised Code.639

       Sec. 3964.172.  (A) No sale, exchange, or other transfer of 640
assets may be made by a protected cell captive insurance company 641
between or among any of its protected cells without the written 642
consent of the participants of the protected cell and the 643
superintendent. 644

       (B)(1) No sale, exchange, transfer of assets, dividend, or 645
distribution may be made from a protected cell to any person 646
without the superintendent's prior written approval. 647

       (2) The superintendent shall not give approval if the sale, 648
exchange, transfer, dividend, or distribution would result in the 649
insolvency or impairment of the protected cell in question.650

       Sec. 3964.173.  (A) The owners of a protected cell captive 651
insurance company, shall not, by virtue of being owners, be the 652
owners or participants of any protected cell of the protected cell 653
captive insurance company. 654

       (B) The participants of a protected cell shall not, by virtue 655
of being such participants, be the owners of the protected cell 656
captive insurance company or participants or owners of any other 657
protected cell of the protected cell captive insurance company.658

       (C) A participant in a protected cell need not be a 659
shareholder or member of the protected cell or of the protected 660
cell captive insurance company or any affiliate thereof. 661

       (D) No participant contract shall take effect without the 662
superintendent's prior written approval. 663

       (E) The addition of a new protected cell, or the withdrawal 664
or other transfer of any participant from any existing protected 665
cell, shall constitute a change in the strategic business plan of 666
that protected cell, requiring the superintendent's prior written 667
approval. 668

       (F) A protected cell captive insurance company shall, in 669
addition to keeping a register of its owners or participants, keep 670
a register of the participants of each of its protected cells. 671

       Sec. 3964.174.  (A) If a protected cell captive insurance 672
company enters into a transaction with respect to a particular 673
protected cell, or incurs a liability arising from an activity or 674
asset of a particular protected cell, a claim by any person in 675
connection with the transaction or liability extends only to the 676
cell assets of the protected cell. 677

       (B) If a protected cell captive insurance company enters into 678
a transaction in its own right and not in respect of any of its 679
protected cells, incurs a liability arising from an activity in 680
its own right and not in respect of any of its protected cells, or 681
incurs a liability arising from an asset held in its own right and 682
not in respect of any of its protected cells, then a claim by any 683
person or a liability in connection with this type of transaction, 684
activity, or ownership shall extend only to the general assets of 685
the protected cell captive insurance company. 686

       (C) Except as provided by divisions (D) and (E) of this 687
section, a protected cell captive insurance company shall not do 688
either of the following: 689

       (1) Satisfy a liability attributable to a particular 690
protected cell of the protected cell captive insurance company 691
from the general assets of the protected cell captive insurance 692
company; 693

       (2) Satisfy a liability, whether attributable to a particular 694
protected cell or not, from the cell assets of another protected 695
cell. 696

       (D)(1) A protected cell captive insurance company may satisfy 697
any liability attributable to a particular protected cell from the 698
protected cell captive insurance company's general assets if both 699
of the following conditions are met:700

       (a) The articles of incorporation, bylaws, code of 701
regulations, or similar organization documents of the protected 702
cell captive insurance company allow the protected cell captive 703
insurance company to satisfy the liability.704

       (b) Satisfying the liability has been approved by two-thirds 705
of the participants of the protected cell or, if the protected 706
cell has more than one class of participants, two-thirds of each 707
class of participants, unless the organizational document of the 708
protected cell insurance company requires a greater percentage.709

       (2) Prior to a protected cell captive insurance company 710
satisfying any liability attributable to a particular protected 711
cell from the protected cell captive insurance company's general 712
assets, the directors who authorize the satisfaction of the 713
liability shall state as part of the authorization that, having 714
inquired into the affairs and prospects of the protected cell 715
captive insurance company, they have formed an opinion that 716
includes both of the following: 717

       (a) Immediately following the date on which the liability is 718
proposed to be met by the general assets of the protected cell 719
captive insurance company, the protected cell captive insurance 720
company will be able to discharge its liabilities as they fall 721
due.722

       (b) Having regard to the prospects of the protected cell 723
captive insurance company, the intentions of the directors with 724
respect to the management of the company's business, and the 725
amount and character of the financial resources that will, in 726
their view, be available to the protected cell captive insurance 727
company, the protected cell captive insurance company will be able 728
to continue its business and will be able to discharge its 729
liabilities as they fall due for a period of one year immediately 730
following the date on which the liability is proposed to be 731
satisfied by the general assets of the protected cell captive 732
insurance company or until the protected cell captive insurance 733
company is dissolved, whichever first occurs. 734

       (E)(1) A protected cell captive insurance company may satisfy 735
any liability, whether attributable to a particular protected cell 736
or not, from the cell assets of another protected cell if it is 737
permitted to do so by the articles of incorporation, bylaws, code 738
of regulations, or other organizational document, as well as the 739
participant agreement, of the protected cell whose assets are 740
proposed to be used to satisfy the liability.741

       (2)(a) Prior to a protected cell captive insurance company 742
satisfying any liability from the assets of a protected cell that 743
is not responsible for the liability, the directors who authorize 744
the satisfaction shall make a full inquiry into the affairs and 745
prospects of the protected cell whose assets are proposed to be 746
used to satisfy the liability to determine that both of the 747
following are true:748

       (i) Immediately following the date on which the liability is 749
proposed to be met by the cell assets of the protected cell in 750
question, the protected cell will be able to discharge its 751
liabilities as they fall due.752

       (ii) Having regard to the prospects of the protected cell, 753
the intentions of the directors with respect to the management of 754
the protected cell's business, and the amount and character of the 755
financial resources that will in their view be available to the 756
protected cell in question, the protected cell will be able to 757
continue to carry on business and will be able to discharge its 758
liabilities as they become due or until the protected cell is 759
dissolved, whichever first occurs. 760

       (b) If the criteria of division (E)(2)(a) of this section are 761
met, the directors shall make a written authorization stating the 762
outcome of their inquiry and shall submit the authorization to the 763
superintendent for approval prior to satisfying the liability. 764

       (F) A director who makes a statement under division (D) or 765
(E) of this section without having reasonable grounds for the 766
opinion expressed in the statement violates this chapter and may 767
be removed by order of the superintendent. 768

       Sec. 3964.175.  If a protected cell captive insurance company 769
is liable for any penalty, under this chapter or otherwise, due to 770
an act or the failure to act of a protected cell or an officer or 771
director of a protected cell, then both of the following apply: 772

       (A) The penalty shall only be met by the protected cell 773
captive insurance company from the cell assets of the protected 774
cell responsible.775

       (B) The penalty shall not be enforceable in any way against 776
any other assets of the protected cell captive insurance company 777
or assets of any other protected cell. 778

       Sec. 3964.176.  The directors of a protected cell captive 779
insurance company shall establish and maintain, or cause to be 780
established and maintained, procedures to do all of the following:781

       (A) Segregate cell assets and liabilities separate and 782
separately identifiable from general assets and liabilities; 783

       (B) Segregate cell assets and liabilities of each protected 784
cell separate and separately identifiable from cell assets and 785
liabilities of any other protected cell; 786

       (C) Apportion or transfer, where relevant, assets and 787
liabilities between protected cells or between protected cells and 788
the general assets and liabilities of the protected cell captive 789
insurance company. 790

       Sec. 3964.177.  (A) If a protected cell captive insurance 791
company enters into an agreement with respect to a protected cell 792
of the company, the directors shall ensure that both of the 793
following are met: 794

       (1) The other party to the transaction knows, or ought 795
reasonably to know, that the protected cell captive insurance 796
company is acting with respect to a particular protected cell.797

       (2) The minutes of any meeting of directors held with regard 798
to the agreement clearly record the fact that the company was 799
entering into the agreement with respect to the protected cell in 800
question and that the obligation imposed by division (A)(1) of 801
this section has been, or will be, complied with. 802

       (B) If a protected cell captive insurance company fails to 803
comply with division (A) of this section, then both of the 804
following shall apply: 805

       (1) The directors of the protected cell captive insurance 806
company shall be personally liable for the liabilities of the 807
protected cell captive insurance company and the protected cell 808
under the act, matter, deed, agreement, contract, instrument, or 809
arrangement that was executed, notwithstanding any provisions to 810
the contrary in the protected cell's organizational documents or 811
in any contract with the protected cell captive insurance company 812
or otherwise.813

       (2)(a) The directors of the protected cell captive insurance 814
company shall have a right of indemnity, in the case of a matter 815
on behalf of or attributable to a protected cell, against the 816
assets of the protected cell, unless the directors were 817
fraudulent, reckless, negligent, or acted in bad faith. 818

       (b) The directors shall have a right of indemnity against the 819
general assets of the protected cell captive insurance company, in 820
the case of a matter not on behalf of or attributable to a 821
protected cell. 822

       (C) Notwithstanding division (B)(1) of this section, a court 823
may relieve a director of all or part of the personal liability 824
required under division (B)(1) of this section if the director can 825
demonstrate either of the following to the satisfaction of the 826
court: 827

       (1) The director was not aware of the circumstances giving 828
rise to the liability and therefore was not fraudulent, reckless, 829
or negligent and did not act in bad faith.830

       (2) The director expressly objected, and exercised the rights 831
available to the director, whether by way of voting power or 832
otherwise, to try to prevent the circumstances giving rise to the 833
liability. 834

       (D) If, pursuant to division (C) of this section, a court 835
relieves a director of all or part of the director's personal 836
liability under division (B)(1) of this section, the court may 837
order that the liability in question instead be met from the 838
assets of the protected cell or the general assets of the 839
protected cell captive insurance company as the court finds 840
appropriate. 841

       (E) Any provision in the organizational document of a captive 842
insurance company or any other contractual provision under which 843
the protected cell captive insurance company may be liable shall 844
be void if it purports to indemnify the directors of a protected 845
cell captive insurance company despite fraudulent, negligent, 846
reckless, bad faith, or other conduct that would otherwise exempt 847
them from indemnification by virtue of division (B)(2)(a) of this 848
section.849

       (F) The duties of a director of a protective cell captive 850
insurance company under this chapter shall be in addition to and 851
not in lieu of, those under any other applicable law.852

       Sec. 3964.178.  (A) A captive insurance company may amend its 853
organizational document to become a protected cell captive 854
insurance company. 855

       (B) The amendment of the organizational document of a captive 856
insurance company to become a protected cell captive insurance 857
company shall require approval by both of the following: 858

       (1) Holders of two-thirds of the outstanding shares or 859
ownership interests of the captive insurance company, unless a 860
greater amount is required by the organizational document of the 861
captive insurance company;862

       (2) All the creditors of the captive insurance company.863

       (C) Notwithstanding division (B)(2) of this section, if the 864
consent of all the creditors of the captive insurance company 865
cannot be obtained, the amendment may be approved by the 866
superintendent if the superintendent is satisfied that no creditor 867
will be materially prejudiced by the amendment. 868

       (D) A protected cell captive insurance company may amend its 869
organizational document to cease to be a protected cell captive 870
insurance company.871

       (E) The amendment of an organizational document of a 872
protected cell captive insurance company to cease to be a 873
protected cell captive insurance company shall require approval by 874
all of the following: 875

       (1) The superintendent; 876

       (2) Holders of two-thirds of the outstanding shares or 877
ownership interests of the protected cell captive insurance 878
company, unless a greater amount is required by the organizational 879
document of the protected cell captive insurance company; 880

       (3) Two-thirds of the participants of each protected cell; 881

       (4) All the creditors of the protected cell captive insurance 882
company and its protected cells.883

       (F) Notwithstanding division (E)(4) of this section, if the 884
consent of all the creditors of the captive insurance company and 885
its protected cells cannot be obtained, the amendment may be 886
approved by the superintendent upon being satisfied that no 887
creditor will be materially prejudiced by the amendment.888

       (G)(1) If a captive insurance company or protected cell 889
captive insurance company seeks to change its status in accordance 890
with this section, the company shall deliver both of the following 891
to the superintendent: 892

       (a) A copy of the amendment to its name; 893

       (b) Evidence satisfactory to the superintendent that the 894
requirements of division (B) or (E) of this section have been met. 895

       (2) If the documents required under division (G)(1) of this 896
section are provided, the superintendent shall issue a license 897
that is appropriate to the amended status of the company.898

       (H) If a company changes its status in accordance with this 899
section, the change of status shall take effect when the 900
superintendent issues a new license.901

       Sec. 3964.179.  (A) A protected cell of a protected cell 902
captive insurance company may be transferred to another protected 903
cell captive insurance company. 904

       (B) The protected cell captive insurance companies between 905
which a protected cell is being transferred shall enter into a 906
written agreement that sets forth the terms of the transfer. 907

       (C) A transfer of a protected cell shall be approved by the 908
superintendent when all of the following are met:909

       (1) The board of directors of each protected cell captive 910
insurance company involved in the transfer have approved the 911
transfer.912

       (2) The transfer agreement is approved by the superintendent 913
as an arrangement in accordance with this chapter.914

       (3) One of the following applies:915

       (a) The transfer agreement is consented to by at least 916
two-thirds of the participants of the protected cell being 917
transferred and all the creditors, if any, of that protected cell. 918

       (b) If the agreement of all the creditors of the cell cannot 919
be obtained, the superintendent may approve the transfer upon 920
being satisfied that no creditor of the cell will be materially 921
prejudiced by the transfer. 922

       (D) Within thirty days after a transfer agreement is approved 923
by the superintendent, the protected cell captive insurance 924
company to which the protected cell is being transferred shall 925
deliver both of the following to the superintendent: 926

       (1) A copy of the executed transfer agreement; 927

       (2) A declaration signed by the directors of the protected 928
cell captive insurance company transferring the protected cell 929
stating that each director has reason to believe all of the 930
following:931

       (a) The protected cell being transferred is able to discharge 932
its liabilities as they become due.933

       (b) There are no creditors of the protected cell captive 934
insurance company from which the cell is being transferred whose 935
interests will be unfairly prejudiced by the transfer.936

       (c) The transfer agreement has been approved in accordance 937
with this chapter.938

       (E) If a protected cell captive insurance company fails to 939
deliver the documents required under division (D) of this section 940
within the required thirty-day period, the superintendent may void 941
the transfer. 942

       (F) The superintendent may void a transfer and order the 943
removal of any director who makes a declaration under division 944
(D)(2) of this section without having the grounds to do so. 945

       (G) Upon fulfillment of the requirements of division (D) of 946
this section, the superintendent shall do all of the following: 947

       (1) Record the transfer of the protected cell; 948

       (2) Issue to the protected cell a new license;949

       (3) Record that the protected cell has ceased to be a 950
protected cell of the protected cell captive insurance company 951
from which it was transferred. 952

       (H) Upon the issuance of the new license under this section 953
all of the following shall apply: 954

       (1) The protected cell shall cease to be a protected cell of 955
the protected cell captive insurance company from which it was 956
transferred.957

       (2) The protected cell becomes a protected cell of the 958
protected cell captive insurance company to which it has been 959
transferred.960

       (3) All of the following shall apply: 961

       (a) All property and rights to which the protected cell was 962
entitled immediately before the issue of the new license shall 963
remain the property and rights of the protected cell.964

       (b) All liabilities, contracts, debts, and other obligations 965
to which the protected cell was subject immediately before the 966
issue of the new license shall remain the liabilities, contracts, 967
debts, and other obligations of the protected cell.968

       (c) All actions and other legal proceedings that were pending 969
by or against a protected cell immediately before the issue of the 970
new license may be continued by or against the protected cell. 971

       (I) The operation of division (H) of this section shall not 972
be regarded as any of the following: 973

       (1) A breach of contract or otherwise as a civil wrong; 974

       (2) A breach of any contractual provision prohibiting, 975
restricting, or regulating the assignment or transfer of rights or 976
liabilities; 977

       (3) Giving rise to any remedy by a party to a contract or 978
other instrument as an event of default under any contract or 979
other instrument or as causing or permitting the termination of 980
any contract, other instrument, obligation, or relationship. 981

       (J) Except as provided in this section, a protected cell 982
shall not be transferred if the transfer would be inconsistent 983
with the articles of incorporation, bylaws, code of regulations, 984
or similar organizational document, of the protected cell, the 985
protected cell captive insurance company transferring the 986
protected cell, or the protected cell captive insurance company to 987
which the cell is to be transferred. 988

       Sec. 3964.1710.  (A) Any insurance company organized under 989
Chapter 3925. of the Revised Code, and any captive insurance 990
company that is not a protected cell captive insurance company, 991
may become a protected cell of a protected cell captive insurance 992
company, with the approval of the superintendent.993

       (B) A protected cell of a protected cell captive insurance 994
company may apply to the superintendent to be incorporated as an 995
insurance company, including a captive insurance company subject 996
to the requirements of this chapter, independent from the 997
protected cell captive insurance company of which it is currently 998
a part. 999

       (C) An application made under division (B) of this section 1000
shall be approved by two-thirds of the participants of the 1001
protected cell or, if the protected cell has more than one class 1002
of participants, two-thirds of each class of participant, unless 1003
the organizational document of the protected cell requires a 1004
greater percentage. 1005

       (D)(1) If a protected cell makes an application under 1006
division (B) of this section, any participant of the protected 1007
cell who objects to the protected cell being incorporated as an 1008
independent insurance company may petition the superintendent for 1009
an order denying the application on the grounds that the 1010
incorporation, or the terms of the incorporation, unfairly 1011
prejudice the interests of the participant. 1012

       (2) Such a petition shall be made within thirty days after an 1013
application has been made under division (B) of this section. 1014

       (E) If a protected cell is licensed as an independent legal 1015
entity pursuant to this section, then all of the following apply: 1016

       (1) All property and rights to which the protected cell was 1017
entitled immediately before its licensure as a new entity shall 1018
remain the property and rights of the new entity.1019

       (2) The protected cell shall remain subject to all criminal 1020
and civil liabilities and all contracts, debts, and other 1021
obligations to which the protected cell was subject immediately 1022
before its licensure as a new entity.1023

       (3) All contracts, debts, and other obligations of the 1024
protected cell shall remain the contracts, debts, and other 1025
obligations of the new entity.1026

       (4) All actions and other legal proceedings that, immediately 1027
before the licensure of the protected cell as a new entity, were 1028
pending by or against the protected cell may be continued by or 1029
against the new entity. 1030

       (F) The operation of division (E) of this section shall not 1031
be regarded as any of the following: 1032

       (1) A breach of contract; 1033

       (2) A breach of any contractual provision prohibiting, 1034
restricting, or regulating the assignment or transfer of rights or 1035
liabilities; 1036

       (3) Giving rise to any remedy by a party to a contract or 1037
other instrument as an event of default under the contract or 1038
other instrument or as causing or permitting the termination of 1039
any contract, other instrument, obligation, or relationship.1040

       Sec. 3964.18.  (A) If a protected cell captive insurance 1041
company with one or more protected cells is being liquidated, the 1042
protected cell captive insurance company may be considered to have 1043
no assets and no liabilities only if the protected cell captive 1044
insurance company continues to have no protected cells. 1045

       (B) In the course of liquidating a protected cell captive 1046
insurance company, each protected cell shall be dealt with one of 1047
the following ways: 1048

       (1) Transfer to another protected cell captive insurance 1049
company; 1050

       (2) Liquidation; 1051

       (3) Continuation as a separate legal entity or protected cell 1052
under the law of another jurisdiction; 1053

       (4) Incorporation, independent of the protected cell captive 1054
insurance company; 1055

       (5) Merge with another insurance company. 1056

       (C) If a protected cell captive insurance company is being 1057
liquidated, the liquidation shall not apply with respect to any 1058
protected cell of the protected cell captive insurance company. 1059

       (D) If a protected cell of a protected cell captive insurance 1060
company is being liquidated, the liquidation shall not apply with 1061
respect to the protected cell captive insurance company or any 1062
other protected cell of the company. 1063

       (E) A court, upon application of a protected cell captive 1064
insurance company that is being liquidated, may determine, in 1065
accordance with this chapter, if a liability of the protected cell 1066
captive insurance company shall be satisfied by its general 1067
assets, by the cell assets of a specific protected cell of the 1068
company, or by a combination of those assets. 1069

       (F) Notwithstanding any statutory provision or rule of law to 1070
the contrary, in the disposition of a protected cell captive 1071
insurance company, the liquidator shall do both of the following: 1072

       (1) Deal with the protected cell captive insurance company's 1073
assets only in accordance with the procedures set out in this 1074
section; 1075

       (2) Apply the protected cell captive insurance company's 1076
assets to those entitled to have recourse to them under this 1077
section, in the discharge of the claims of creditors of the 1078
protected cell captive insurance company. 1079

       (G)(1) A petition for a liquidation or rehabilitation order 1080
with respect to a protected cell of a protected cell captive 1081
insurance company may be made by any of the following: 1082

       (a) The protected cell captive insurance company; 1083

       (b) A majority of the directors of the protected cell captive 1084
insurance company; 1085

       (c) Any creditor of that protected cell; 1086

       (d) The superintendent. 1087

       (2) Notice of a petition to the court for a liquidation or 1088
rehabilitation order with respect to a protected cell of a 1089
protected cell captive insurance company shall be served upon all 1090
of the following: 1091

       (a) The protected cell captive insurance company; 1092

       (b) The superintendent; 1093

       (c) Such other persons as the court may direct. 1094

       (H)(1) Except otherwise provided in this section, the court 1095
may make a liquidation or rehabilitation order with respect to a 1096
protected cell if, in relation to a captive insurance company, the 1097
court is satisfied that both of the following are met: 1098

       (a) The cell assets attributable to a particular protected 1099
cell of the captive insurance company and the general assets of 1100
the company, in those cases where creditors of the captive 1101
insurance company with respect to the protected cell are entitled 1102
to have recourse to the captive insurance company's general 1103
assets, are, or are likely to be, insufficient to discharge the 1104
claims of creditors with respect to that protected cell.1105

       (b) An order would achieve the purposes set forth in division 1106
(H)(3) of this section. 1107

       (2) A liquidation or rehabilitation order may be made with 1108
respect to one or more protected cells. 1109

       (3) A liquidation or rehabilitation order shall direct that 1110
the business and cell assets of, or attributable to, a protected 1111
cell shall be managed by a liquidator or rehabilitator specified 1112
in the order for the purpose of accomplishing both of the 1113
following: 1114

       (a) The orderly closing or rehabilitation of the business of, 1115
or attributable to, the protected cell; 1116

       (b) The distribution of the cell assets, or assets 1117
attributable to the protected cell, to those having recourse 1118
thereto. 1119

       (I) All of the following apply to the liquidator or 1120
rehabilitator of a protected cell: 1121

       (1) The liquidator or rehabilitator shall have all the 1122
functions and powers of the directors responsible for the business 1123
and cell assets of, or attributable to, the protected cell.1124

       (2) The liquidator or rehabilitator may at any time apply to 1125
the court for any of the following:1126

       (a) Directions as to the extent or exercise of any function 1127
or power; 1128

       (b) The liquidation or rehabilitation order to be discharged 1129
or varied; 1130

       (c) Any other order as to any matter occurring during the 1131
course of the liquidation or rehabilitation.1132

       (3) The liquidator or rehabilitator shall act as the agent of 1133
the captive insurance company and shall not incur personal 1134
liability except to the extent that the liquidator or 1135
rehabilitator acts fraudulently, recklessly, negligently, or in 1136
bad faith, except that where the superintendent is appointed 1137
liquidator or rehabilitator of a protected cell. If the 1138
superintendent is appointed liquidator, section 3903.07 of the 1139
Revised Code shall apply to the superintendent, any deputy 1140
liquidator, any employee of the department of insurance, any 1141
employee appointed by the superintendent as liquidator, and any 1142
employee who serves under the liquidator.1143

       (4) The liquidator or rehabilitator shall administer the 1144
assets pursuant to the provisions of this section and sections 1145
3903.01 to 3903.59 of the Revised Code. 1146

       (J) Upon the filing of a petition for a liquidation or 1147
rehabilitation order, and during the period of operation of 1148
liquidation or rehabilitation, both of the following shall apply: 1149

       (1) No proceedings shall be instituted or continued by or 1150
against the captive insurance company or protected cell in respect 1151
of which the liquidation or rehabilitation order was made.1152

       (2) No action shall be taken to enforce any security, and no 1153
action shall be taken in the execution of a legal process with 1154
respect to the business or cell assets of, or attributable to, the 1155
protected cell with respect to which the liquidation or 1156
rehabilitation order was made, except by leave of the court. 1157

       (K) During the period of operation of a liquidation or 1158
rehabilitation both of the following shall apply: 1159

       (1) The functions and powers of the directors shall cease 1160
with respect to the business of, or attributable to, any protected 1161
cell or cell assets for which the order was made.1162

       (2)(a) The liquidator or rehabilitator of the protected cell 1163
shall be entitled to be present at all meetings of the captive 1164
insurance company and protected cell in question and to vote at 1165
such meetings as if the liquidator or rehabilitator were a 1166
director of the captive insurance company. 1167

       (b) The liquidator's or rehabilitator's voting authority 1168
shall include matters concerning the captive insurance company's 1169
general assets, unless there are no creditors that are entitled to 1170
have recourse to the captive insurance company's general assets. 1171

       (L)(1) A court shall not discharge a liquidation or 1172
rehabilitation order issued pursuant to this section unless it 1173
appears to the court that the purpose for which the order was made 1174
has been achieved, substantially achieved, or is incapable of 1175
being achieved. 1176

       (2) The court, on hearing a petition for the discharge or 1177
variation of a liquidation or rehabilitation order, may make any 1178
interim order, discharge the order, or continue the liquidation or 1179
rehabilitation unchanged. 1180

       (3) Upon the court issuing an order discharging a liquidation 1181
or rehabilitation order for a protected cell on the ground that 1182
the purpose for which the order was made had been achieved or 1183
substantially achieved, the court may direct that any payment made 1184
by the liquidator or rehabilitator to any creditor of the captive 1185
insurance company, with respect to that protected cell, shall be 1186
considered full satisfaction of the liabilities of the captive 1187
insurance company to the creditor with respect to the protected 1188
cell. However, such an order or discharge shall not be considered 1189
a bar to a creditor's claims against the captive cell insurance 1190
company arising out of the captive cell insurance company's 1191
administrative, regulatory, or marketing activities on behalf of 1192
the captive cell in question.1193

       Sec. 3964.20.  A captive insurance company organized under 1194
the laws of another state or jurisdiction may become a domestic 1195
captive insurance company pursuant to section 3913.40 of the 1196
Revised Code after complying with all the requirements of this 1197
chapter relative to the organization and formation of a domestic 1198
captive insurance company.1199

       Sec. 3964.21.  The superintendent may adopt rules in 1200
accordance with Chapter 119. of the Revised Code as are reasonably 1201
necessary for the implementation and operation of this chapter.1202

       Sec. 4123.351.  (A) The administrator of workers' 1203
compensation shall require every self-insuring employer, including 1204
any self-insuring employer that is indemnified by a captive 1205
insurance company granted a certificate of authority under Chapter 1206
3694. of the Revised Code, to pay a contribution, calculated under 1207
this section, to the self-insuring employers' guaranty fund 1208
established pursuant to this section. The fund shall provide for 1209
payment of compensation and benefits to employees of the 1210
self-insuring employer in order to cover any default in payment by 1211
that employer.1212

       (B) The bureau of workers' compensation shall operate the 1213
self-insuring employers' guaranty fund for self-insuring 1214
employers. The administrator annually shall establish the 1215
contributions due from self-insuring employers for the fund at 1216
rates as low as possible but such as will assure sufficient moneys 1217
to guarantee the payment of any claims against the fund. The 1218
bureau's operation of the fund is not subject to sections 3929.10 1219
to 3929.18 of the Revised Code or to regulation by the 1220
superintendent of insurance.1221

       (C) If a self-insuring employer defaults, the bureau shall 1222
recover the amounts paid as a result of the default from the 1223
self-insuring employers' guaranty fund. If a self-insuring 1224
employer defaults and is in compliance with this section for the 1225
payment of contributions to the fund, such self-insuring employer 1226
is entitled to the immunity conferred by section 4123.74 of the 1227
Revised Code for any claim arising during any period the employer 1228
is in compliance with this section.1229

       (D)(1) There is hereby established a self-insuring employers' 1230
guaranty fund, which shall be in the custody of the treasurer of 1231
state and which shall be separate from the other funds established 1232
and administered pursuant to this chapter. The fund shall consist 1233
of contributions and other payments made by self-insuring 1234
employers under this section. All investment earnings of the fund 1235
shall be credited to the fund. The bureau shall make disbursements 1236
from the fund pursuant to this section.1237

       (2) The administrator has the same powers to invest any of 1238
the surplus or reserve belonging to the fund as are delegated to 1239
the administrator under section 4123.44 of the Revised Code with 1240
respect to the state insurance fund. The administrator shall apply 1241
interest earned solely to the reduction of assessments for 1242
contributions from self-insuring employers and to the payments 1243
required due to defaults.1244

       (3) If the bureau of workers' compensation board of directors 1245
determines that reinsurance of the risks of the fund is necessary 1246
to assure solvency of the fund, the board may:1247

       (a) Enter into contracts for the purchase of reinsurance 1248
coverage of the risks of the fund with any company or agency 1249
authorized by law to issue contracts of reinsurance;1250

       (b) Require the administrator to pay the cost of reinsurance 1251
from the fund;1252

       (c) Include the costs of reinsurance as a liability and 1253
estimated liability of the fund.1254

       (E) The administrator, with the advice and consent of the 1255
board, may adopt rules pursuant to Chapter 119. of the Revised 1256
Code for the implementation of this section, including a rule, 1257
notwithstanding division (C) of this section, requiring 1258
self-insuring employers to provide security in addition to the 1259
contribution to the self-insuring employers' guaranty fund 1260
required by this section. The additional security required by the 1261
rule, as the administrator determines appropriate, shall be 1262
sufficient and adequate to provide for financial assurance to meet 1263
the obligations of self-insuring employers under this chapter and 1264
Chapter 4121. of the Revised Code.1265

       (F) The purchase of coverage under this section by 1266
self-insuring employers is valid notwithstanding the prohibitions 1267
contained in division (A) of section 4123.82 of the Revised Code 1268
and is in addition to the indemnity contracts that self-insuring 1269
employers may purchase pursuant to division (B) of section 4123.82 1270
of the Revised Code.1271

       (G) The administrator, on behalf of the self-insuring 1272
employers' guaranty fund, has the rights of reimbursement and 1273
subrogation and shall collect from a defaulting self-insuring 1274
employer or other liable person all amounts the administrator has 1275
paid or reasonably expects to pay from the fund on account of the 1276
defaulting self-insuring employer.1277

       (H) The assessments for contributions, the administration of 1278
the self-insuring employers' guaranty fund, the investment of the 1279
money in the fund, and the payment of liabilities incurred by the 1280
fund do not create any liability upon the state.1281

       Except for a gross abuse of discretion, neither the board, 1282
nor the individual members thereof, nor the administrator shall 1283
incur any obligation or liability respecting the assessments for 1284
contributions, the administration of the self-insuring employers' 1285
guaranty fund, the investment of the fund, or the payment of 1286
liabilities therefrom.1287

       Section 2. That existing section 4123.351 of the Revised Code 1288
is hereby repealed.1289