As Passed by the Senate

130th General Assembly Regular Session 2013-2014

Sub. 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 

Senators Kearney, Bacon, Faber, Hughes, Peterson, Schaffer 

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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, 3964.19,

4

3964.191, 3964.193, 3964.194, 3964.20, and 3964.21

5

of the Revised Code to provide for the operation

6

of captive insurance companies in Ohio and special

7

purpose financial captive insurance companies.

8

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

Section 1. That section 4123.351 be amended and sections	9
3964.01, 3964.02, 3964.03, 3964.04, 3964.05, 3964.06, 3964.07,	10
3964.08, 3964.09, 3964.10, 3964.11, 3964.12, 3964.13, 3964.14,	11
3964.15, 3964.17, 3964.171, 3964.172, 3964.173, 3964.174,	12
3964.175, 3964.176, 3964.177, 3964.178, 3964.179, 3964.1710,	13
3964.18, 3964.19, 3964.191, 3964.193, 3964.194, 3964.20, and	14
3964.21 of the Revised Code be enacted to read as follows:	15

Sec. 3964.01. As used in this chapter:

16

(A) "Affiliated company" means any company in the same	17
corporate system as a parent, or a member organization by virtue	18
of common ownership, control, operation, or management.	19

(B) "Captive insurance company" means any insurer that	20
insures only the risks of its parent or affiliated companies of	21
its parent. "Captive insurance company" includes any protected	22
cell captive insurance company formed or licensed under the	23
provisions of this chapter.	24

(C) "Department" means the department of insurance.

25

(D) "Parent" means a corporation, limited liability company,	26
partnership, other entity, or individual that directly or	27
indirectly owns, controls, or holds, with power to vote, more than	28
fifty per cent of either of the following:	29

(1) Securities of a captive insurance company, organized as a	30
stock corporation;	31

(2) Membership interests of a captive insurance company	32
organized as a nonprofit corporation or a limited liability	33
company.	34

(E) "Protected cell captive insurance company" means a	35
captive insurance company organized pursuant to sections 3964.17	36
to 3964.1710 of the Revised Code.	37

(F) "Qualified actuary" means an individual who is both of	38
the following:	39

(1) A member of the American academy of actuaries;

40

(2) Qualified to provide such certifications as described in	41
the United States qualifications standards promulgated by the	42
American academy of actuaries pursuant to the code of professional	43
conduct adopted by the American academy of actuaries, the society	44
of actuaries, the American society of pension professionals and	45
actuaries, the casualty actuarial society, and the conference of	46
consulting actuaries.	47

(G) "Special purpose financial captive insurance company"	48
means a captive insurance company organized pursuant to sections	49
3964.19 to 3964.194 of the Revised Code.	50

(H) "Superintendent" means the superintendent of the	51
department of insurance.	52

Sec. 3964.02.  (A) A captive insurance company may apply for	53
authority to insure only the following lines of insurance:	54

(1) Commercial multiple peril;

55

(2) Ocean marine;

56

(3) Inland marine;

57

(4) Medical malpractice;

58

(5) Workers' compensation, to the extent permitted by law,	59
but only for the purpose of indemnification of a self-insuring	60
employer pursuant to division (B)(1) of section 4123.82 of the	61
Revised Code;	62

(6) Commercial auto liability;

63

(7) Commercial auto physical damage;

64

(8) Fidelity;

65

(9) Notwithstanding division (C) of this section, a special	66
purpose financial captive may apply to provide reinsurance of life	67
insurance risks of an Ohio domiciled parent or an affiliated	68
company that is authorized to transact the business of life	69
insurance in this state;	70

(10) Except as provided in division (C)(2) of this section,	71
any other line which the superintendent, at the superintendent's	72
sole discretion, permits.	73

(B) A captive insurance company may purchase reinsurance	74
coverage for any risk that a captive insurance company is	75
permitted to write directly.	76

(C)(1) A captive insurance company shall not issue, offer, or	77
present insurance policies or certificates, evidence of coverage,	78
or any other similar documentation, to any person other than its	79
parent or affiliated companies.	80

(2) A captive insurance company shall not do either of the	81
following:	82

(a) Insure or reinsure any personal lines, as defined in	83
division (B) of section 3905.06 of the Revised Code;	84

(b) Insure, offer, or enter a three-party agreement under	85
which the captive agrees to pay a parent or affiliate, agrees to	86
make complete, or become responsible for an obligation in response	87
to the default, acts, or omissions of a third party, the parent,	88
or an affiliate.	89

(D) A captive insurance company may reinsure any risks	90
insured by its parent or an affiliated company, as approved by the	91
superintendent.	92

Sec. 3964.03.  (A) A captive insurance company shall be	93
organized under Chapter 1701., 1702., or 1705. of the Revised	94
Code.	95

(B) A captive insurance company shall not operate in this	96
state unless all of the following are met:	97

(1) The captive insurance company obtains from the	98
superintendent a license to do the business of captive insurance	99
in this state.	100

(2) The captive insurance company's board of directors holds	101
at least one meeting each year in this state.	102

(3) The captive insurance company maintains its principal	103
place of business in this state.	104

(4) The person managing the captive insurance company is a	105
resident of this state.	106

(5) The captive insurance company appoints a registered agent	107
to accept service of process and act on its behalf in this state.	108

(C) Whenever an agent required under division (B)(5) of this	109
section cannot, with reasonable diligence, be found at the	110
registered office of the captive insurance company, the	111
superintendent shall be an agent of such a captive insurance	112
company upon whom any process, notice, or demand may be served.	113

(D) A captive insurance company seeking a license to be a	114
captive insurance company in this state shall file an application	115
with the superintendent and shall submit all of the following	116
along with the application:	117

(1) A certified copy of its articles of incorporation,	118
bylaws, or other organizational document and code of regulations;	119

(2) A statement, made under oath by the president and	120
secretary, in a form prescribed by the superintendent, showing the	121
captive insurance company's financial condition;	122

(3) A statement of the captive insurance company's assets	123
relative to its risks, detailing the amount of assets and their	124
liquidity;	125

(4) An account of the adequacy of the expertise, experience,	126
and character of the person or persons who will manage the captive	127
insurance company;	128

(5) An account of the loss prevention programs of the persons	129
that the captive insurance company insures;	130

(6) Actuarial assumptions and methodologies that will be	131
utilized in calculating reserves;	132

(7) Any other information considered necessary by the	133
superintendent to determine whether the proposed captive insurance	134
company will be able to meet its obligations.	135

(E)(1) A special purpose financial captive insurance company	136
shall follow the national association of insurance commissioner's	137
accounting practices and procedures manual.	138

(2)(a) Upon request, the superintendent may allow a special	139
purpose financial captive insurance company to use a reserve basis	140
other than that found in the national association of insurance	141
commissioner's accounting practices and procedures manual.	142

(b) The superintendent, in accordance with Chapter 119. of	143
the Revised Code, shall adopt rules that define acceptable	144
alternative reserve bases.	145

(c) Such rules shall be adopted prior to availability for use	146
of any such alternative reserve basis and shall ensure that the	147
resulting reserves meet all of the following conditions:	148

(i) Quantify the benefits and guarantees, and the funding,	149
associated with the contracts and their risks at a level of	150
conservatism that reflects conditions that include unfavorable	151
events that have a reasonable probability of occurring during the	152
lifetime of the contracts. For policies or contracts with	153
significant tail risk, reflects conditions appropriately adverse	154
to quantify the tail risk.	155

(ii) Incorporate assumptions, risk analysis methods, and	156
financial models and management techniques that are consistent	157
with, but not necessarily identical to, those utilized within the	158
company's overall risk assessment process, while recognizing	159
potential differences in financial reporting structures and any	160
prescribed assumptions or methods;	161

(iii) Provide margins for uncertainty including adverse	162
deviation and estimation error, such that the greater the	163
uncertainty the larger the margin and resulting reserve.	164

(d) An alternative basis for calculating a reserve approved	165
by the superintendent shall be treated as a public document after	166
the date the alternative basis for calculating the reserve has	167
been approved, regardless of the application of the uniform trade	168
secrets act set forth in sections 1333.61 to 1333.69 of the	169
Revised Code.	170

(3) The special purpose financial captive insurance company	171
shall submit a request for an alternative reserve basis in	172
writing, and affirmed by the company's appointed actuary, that	173
includes, at a minimum, the following information for the	174
superintendent to consider in evaluating the request:	175

(a) The reserves based on the national association of	176
insurance commissioner's accounting practices and procedures	177
manual and the reserves based on the proposed alternative method	178
for calculation and the difference between these two calculations;	179

(b) A detailed analysis of the proposed alternative method	180
explaining why the use of an alternative basis for calculating the	181
reserve is appropriate;	182

(c) All assumptions utilized within the proposed alternative	183
method, together with the source of the assumptions, as well as	184
information, satisfactory to the superintendent, supporting the	185
appropriateness of the assumptions and analysis and identifying	186
the assumptions that result in the greatest variability in the	187
reserve and how that analysis was used in setting those	188
assumptions;	189

(d) A detailed overview of the corporate governance and	190
oversight of the actuarial valuation function;	191

(e) Any other information the superintendent may require to	192
assess the proposed alternative method for approval or	193
disapproval.	194

(4) At the expense of the special purpose financial captive	195
insurance company, the superintendent may require the company to	196
secure the affirmation of an independent qualified actuary in	197
support of any alternative basis for calculating the reserve that	198
is requested pursuant to this section or to assist the	199
superintendent in the review of said request.	200

(5) If the superintendent approves the use of an alternative	201
basis for calculating a reserve, the special purpose financial	202
captive insurance company, and the ceding insurer shall each	203
include a note in its financial statements disclosing the use of a	204
basis other than the national association of insurance	205
commissioner's accounting practices and procedures manual and the	206
difference between the reserve amount determined under the	207
alternative basis and the reserve amount that would have been	208
determined had the company utilized the national association of	209
insurance commissioner's accounting practices and procedures	210
manual.	211

(6)(a) The superintendent shall establish an acceptable total	212
capital and surplus requirement for each insurance company that	213
will cede risks and obligations to a special purpose financial	214
captive insurance company. The total capital and surplus	215
requirement must be met at the time the special purpose financial	216
captive insurance company applies for a license to do the business	217
of captive insurance. The total capital and surplus requirement	218
shall be determined in accordance with a minimum required total	219
capital and surplus methodology that meets both of the following	220
requirements:	221

(i) Is consistent with current risk-based capital principles;

222

(ii) Takes into account all material risks and obligations,	223
as well as the assets, of the insurance company.	224

(b) An insurance company ceding risks and obligations to a	225
special purpose financial captive insurance company shall fully	226
disclose all material risks and obligations, as well as its assets	227
and all affiliated captive insurance company risks. The ceding	228
insurance company shall advise the superintendent whenever there	229
is a material change to such risks, obligations, or assets.	230

(F) In determining whether to approve an application for a	231
license, the superintendent shall consider all of the following:	232

(1) The character, reputation, financial standing, and	233
purposes of the incorporators, or other founders, of the captive	234
insurance company;	235

(2) The character, reputation, financial responsibility,	236
experience relating to insurance, and business qualifications of	237
the officers and directors of the captive insurance company;	238

(3) The amount of liquidity and assets of the captive	239
insurance company relative to the risks to be assumed;	240

(4) The adequacy of the expertise, experience, and character	241
of the person or persons who will manage the captive insurance	242
company;	243

(5) The overall soundness of the plan of operation;

244

(6) The adequacy of the loss prevention programs of the	245
persons that the captive insurance company insures.	246

(G)(1) Each captive insurance company that offers direct	247
insurance to its parent shall submit to the superintendent for	248
approval a detailed description of the coverages, deductibles,	249
coverage limits, proposed rates or rating plans, documentation	250
from a qualified actuary that demonstrates the actuarial soundness	251
of the proposed rates or rating plans, and other such additional	252
information as the superintendent may require.	253

(2)(a) Any captive insurance company licensed under the	254
provisions of this chapter that seeks to make any material change	255
to any item described in division (G)(1) of this section shall	256
submit to the superintendent for approval a detailed description	257
of the revision, documentation from a qualified actuary that	258
demonstrates the actuarial soundness of the revised rates or	259
rating plans, and other such additional information as the	260
superintendent may require.	261

(b) Each filing under division (G)(2)(a) of this section is	262
deemed approved thirty days after the filing is received by the	263
superintendent of insurance, unless the filing is disapproved by	264
the superintendent during that thirty-day period.	265

(c) If at any time subsequent to the thirty-day review period	266
the superintendent finds that a filing does not demonstrate	267
actuarial soundness, the superintendent shall hold a hearing	268
requiring the captive insurance company to show cause why an order	269
should not be made by the superintendent to disapprove the revised	270
rates or rating plans.	271

(d) If, upon such a hearing, the superintendent finds that	272
the captive insurance company failed to demonstrate the actuarial	273
soundness of the rates or rating plans, the superintendent shall	274
issue an order directing the captive insurance company to cease	275
and desist from using the revised rates or rating plans and to use	276
rates or rating plans as determined appropriate by the	277
superintendent.	278

(H) Except as otherwise provided in this division, documents	279
and information submitted by a captive insurance company pursuant	280
to this section are not subject to section 149.43 of the Revised	281
Code, and are confidential, and may not be disclosed by the	282
superintendent or any employee of the department of insurance	283
without the written consent of the company.	284

(1) Such documents and information may be discoverable in a	285
civil action in which the captive insurance company filing the	286
material is a party upon a finding by a court of competent	287
jurisdiction that the information sought is relevant and necessary	288
to the case and the information sought is unavailable from other,	289
nonconfidential sources.	290

(2) The superintendent may, at the superintendent's sole	291
discretion, share documents required under this section with the	292
chief deputy rehabilitator, the chief deputy liquidator, other	293
deputy rehabilitators and liquidators, and any other person	294
employed by, or acting on behalf of the superintendent pursuant to	295
Chapter 3901. or 3903. of the Revised Code, with other local,	296
state, federal, and international regulatory and law enforcement	297
agencies, with local, state, and federal prosecutors, and with the	298
national association of insurance commissioners and its affiliates	299
and subsidiaries provided that the recipient agrees to maintain	300
the confidential or privileged status of the documents and has	301
authority to do so.	302

(I)(1) Each applicant for a license to do the business of a	303
captive insurance company in this state shall pay to the	304
superintendent a nonrefundable fee of five hundred dollars for	305
processing its application for a license. The superintendent is	306
authorized to retain legal, financial, and examination services	307
from outside the department, at the expense of the applicant. Each	308
captive insurance company shall annually pay a license renewal fee	309
of five hundred dollars.	310

(2) The fees collected pursuant to division (I)(1) of this	311
section shall be deposited into the state treasury to the credit	312
of the captive insurance regulation and supervision fund created	313
under section 3964.15 of the Revised Code.	314

Sec. 3964.04.  No captive insurance company shall adopt a	315
name that is the same, deceptively similar, or likely to be	316
confused with, or mistaken for, any other existing business name	317
registered in this state. The name under which a captive insurance	318
company engages in business must contain the word "captive."	319

Sec. 3964.05. (A) No captive insurance company shall be	320
issued a license unless it possesses and maintains minimum	321
unimpaired, paid-in total capital and surplus as follows:	322

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

323

(2) In the case of a protected cell captive insurance	324
company, not less than five hundred thousand dollars.	325

(B) The superintendent may prescribe additional capital and	326
surplus based upon the type, volume, and nature of insurance	327
business transacted.	328

(C) Capital and surplus may be in the form of any of the	329
following:	330

(1) Cash;

331

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

332

(3) For a captive insurance company other than a special	333
purpose financial captive insurance company, irrevocable,	334
unconditional, and automatically renewable letters of credit that	335
are issued or confirmed by a qualified United States financial	336
institution.	337

(D) For purposes of division (C)(3) of this section, a United	338
States financial institution is qualified if all of the following	339
apply:	340

(1) It is organized under, or, in the case of the United	341
States branch or agency office of a foreign banking organization,	342
is chartered under the laws of the United States or any state	343
thereof.	344

(2) It is regulated, supervised, and examined by federal or	345
state officials that have regulatory authority over banks and	346
trust companies.	347

(3) The superintendent has determined that it meets such	348
standards of financial condition and standing as are necessary and	349
appropriate for purposes of ensuring that its letters of credit	350
will be of a quality that is acceptable to the superintendent, in	351
the superintendent's sole discretion.	352

Sec. 3964.06.  (A) No captive insurance company shall pay any	353
extraordinary dividend or make any other extraordinary	354
distribution to its shareholders or members other than in	355
accordance with this section. The declaration of an extraordinary	356
dividend or distribution shall be conditional and shall confer no	357
rights upon shareholders or members until thirty days after the	358
superintendent has received notice of the declaration thereof and	359
has not, within the thirty-day period, disapproved the dividend or	360
distribution, unless the superintendent approves the dividend or	361
distribution within the thirty-day period.	362

(B) Prior to paying any dividend or distribution, the	363
insurance company shall notify the superintendent on a form	364
provided by the superintendent for informational purposes within	365
five business days following its declaration of any dividend or	366
distribution and at least ten calendar days prior to payment of	367
such dividend or distribution. Such a ten-calendar-day period is	368
to begin on the date that the superintendent receives the notice.	369

(C)(1) For the purposes of this section, an extraordinary	370
dividend or distribution includes any dividend or distribution of	371
cash or other property, whose fair market value, together with	372
that of other dividends or distributions made within the preceding	373
twelve months, exceeds the greater of ten per cent of the	374
insurance company's surplus as regards policy holders as of the	375
thirty-first day of December immediately preceding, or the net	376
income of the insurance company for the twelve-month period ending	377
the thirty-first day of December immediately preceding.	378

(2) Pro rata distributions of any class of the insurance	379
company's own securities shall not be considered an extraordinary	380
distribution under division (C)(1) of this section.	381

(D) Any dividend or distribution paid from a source other	382
than earned surplus shall be considered an extraordinary dividend	383
or extraordinary distribution.	384

(E) In no instance shall any extraordinary dividend or	385
distribution be permitted by a captive insurance company if such	386
dividend or distribution results in a decrease of the unimpaired,	387
total capital and surplus of the captive insurance company below	388
the limits prescribed in section 3964.05 of the Revised Code.	389

(F) For the purposes of this section, "earned surplus" means	390
an amount equal to an insurance company's unassigned funds as set	391
forth in its most recent financial statement submitted to the	392
superintendent, including net unrealized capital gains and losses	393
or revaluation of assets.	394

Sec. 3964.07.  (A) A captive insurance company shall not be	395
required to make any annual report except as required by this	396
section.	397

(B)(1) The chief financial officer and at least one	398
additional executive officer of a captive insurance company, or a	399
majority of the directors of a captive insurance company annually,	400
on the first day of January, or within sixty days thereafter	401
prepare under oath and deposit in the office of the	402
superintendent, a statement showing the financial condition of the	403
captive insurance company on the thirty-first day of the December	404
next preceding. An actuarial opinion from a qualified actuary	405
regarding the adequacy of the company's required reserves to make	406
full provision for the company's liabilities, insured or	407
reinsured, shall be included in this statement. The qualified	408
actuary shall submit a memorandum to the superintendent detailing	409
the support for that opinion.	410

(2) All captive insurance companies shall have an annual	411
audit by an independent certified public accountant and shall file	412
an audited financial report with the superintendent on or before	413
the first day of June as a supplement to the annual statement	414
required under division (B)(1) of this section.	415

(C) Each captive insurance company shall report using	416
generally accepted accounting principles, unless the	417
superintendent requires, approves, or accepts the use of statutory	418
accounting principles or other comprehensive basis accounting, any	419
appropriate, necessary modifications or adaptations required or	420
approved or accepted by the superintendent for each type of	421
insurance or kind of insurance company that makes such a report,	422
and as supplemented by additional information required by the	423
superintendent.	424

(D) Captive insurance companies shall prepare, at a minimum,	425
internal quarterly financial statements. These statements shall be	426
made available upon request to the superintendent.	427

(E) The superintendent shall adopt by rule the prescribed	428
forms, instructions, and manuals by which captive insurance	429
companies shall make the reports required under this section, as	430
the superintendent considers necessary.	431

(F) Division (H) of section 3964.03 of the Revised Code shall	432
apply to each report filed under this section.	433

(G)(1) Special purpose financial captive insurance companies	434
are subject to sections 3903.81 to 3903.93 of the Revised Code.	435

(2)(a) Notwithstanding division (G)(1) of this section, the	436
superintendent shall establish an acceptable total capital and	437
surplus requirement for a special purpose financial captive	438
insurance company that is permitted by the superintendent to use	439
an alternative reserve basis pursuant to division (E)(2) of	440
section 3964.03 of the Revised Code if there is an inherent	441
inconsistency between the approved alternative reserve basis and	442
sections 3903.81 to 3903.93 of the Revised Code.	443

(b) The total capital and surplus requirement as established	444
by the superintendent shall be determined in accordance with a	445
minimum required total capital and surplus methodology that meets	446
both of the following:	447

(i) Is consistent with current risk-based capital principles;

448

(ii) Takes into account all material risks and obligations,	449
as well as the assets, of the special purpose financial captive	450
insurance company.	451

Sec. 3964.08.  (A) Captive insurance companies shall be	452
examined, evaluated, and monitored pursuant to section 3901.07 of	453
the Revised Code.	454

(B) All examination reports, preliminary examination reports	455
or results, working papers, recorded information, documents and	456
copies thereof produced by, obtained by, or disclosed to the	457
superintendent or any other person in the course of an examination	458
made under this section are confidential and are not subject to	459
subpoena and may not be made public by the superintendent or an	460
employee or agent of the superintendent without the written	461
consent of the company, except to the extent provided in this	462
section. However, nothing in this section shall prevent the	463
superintendent from using such information in the furtherance of	464
the superintendent's regulatory authority under this chapter.	465

(C) The superintendent may, in the superintendent's sole	466
discretion, share documents that are the subject of this section	467
with the chief deputy rehabilitator, the chief deputy liquidator,	468
other deputy rehabilitators and liquidators, and any other person	469
employed by, or acting on behalf of, the superintendent pursuant	470
to Chapter 3901. or 3903. of the Revised Code, with other local,	471
state, federal, and international regulatory and law enforcement	472
agencies, with local, state, and federal prosecutors, and with the	473
national association of insurance commissioners and its affiliates	474
and subsidiaries provided that the recipient agrees to maintain	475
the confidential or privileged status of the confidential or	476
privileged work paper and has authority to do so.	477

Sec. 3964.09.  The superintendent may suspend or revoke the	478
license of a captive insurance company, in accordance with Chapter	479
119. of the Revised Code, for any of the following reasons:	480

(A) Insolvency or impairment of capital or surplus;

481

(B) Failure to meet the requirements of section 3964.05 of	482
the Revised Code;	483

(C) Refusal or failure to submit an annual report, as	484
required by section 3964.07 of the Revised Code, or any other	485
report or statement required by law or by lawful order of the	486
superintendent;	487

(D) Failure to comply with the provisions of its own	488
articles, bylaws, code of regulations, or other organizational	489
documents;	490

(E) Failure to submit to, or pay the cost of, examination, or	491
any legal obligation related to examination, as required by this	492
chapter;	493

(F) Use of practices that, although not otherwise	494
specifically prohibited by law, are determined by the	495
superintendent to render its operation detrimental or its	496
condition unsound with respect to the public or to its	497
policyholders;	498

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

499

Sec. 3964.10.  (A) The board of directors of a captive	500
insurance company shall determine appropriate investments for the	501
company. With respect to all of the insurance company's	502
investments, the board of directors shall exercise the judgment	503
and care, under the circumstances then prevailing, that a person	504
of reasonable prudence, discretion, and intelligence might	505
exercise in the management of a like enterprise, that person not	506
having an intent to speculate, but having regard for the permanent	507
disposition of the person's funds, considering the probable income	508
as well as the probable safety of the person's capital.	509

(B)(1) Investments shall be of sufficient value, liquidity,	510
and diversity to assure the captive insurance company's ability to	511
meet its outstanding obligations, based on reasonable estimations	512
of new business production for current lines of business. A copy	513
of the investment policy adopted by the board of directors shall	514
be filed with the superintendent.	515

(2) If the superintendent determines that a board of	516
directors of a captive insurance company has failed to comply with	517
the requirements of division (B)(1) of this section, the company	518
shall be notified in writing that it is required to file a	519
schedule of its proposed investments with the superintendent.	520

(C)(1) No captive insurance company may make a loan to, or an	521
investment in, its parent company or affiliates without prior	522
written approval of the superintendent.	523

(2) Any such loan or investment shall be evidenced by	524
documentation approved by the superintendent.	525

(3) Loans that violate the minimum capital and surplus funds	526
requirements of section 3964.05 of the Revised Code are	527
prohibited.	528

Sec. 3964.11. No captive insurance company shall be required	529
to join a rating organization.	530

Sec. 3964.12. No captive insurance company shall be permitted	531
to join or contribute financially to any plan, pool, association,	532
or guaranty or insolvency fund in this state, nor shall any	533
captive insurance company, or any insured or affiliate thereof,	534
receive any benefit from any such plan, pool, association, or	535
guaranty or insolvency fund for claims arising out of the	536
operations of the captive insurance company.	537

Sec. 3964.13. (A)(1) Not later than the second day of March	538
of each year, a captive insurance company shall pay to the	539
superintendent of insurance a fee computed in accordance with both	540
of the following:	541

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

542

(b) 0.15 per cent on revenue from assumed reinsurance	543
premiums.	544

(2) The annual minimum aggregate fee to be paid by a captive	545
insurance company calculated under this division shall be seven	546
thousand five hundred dollars. The annual maximum aggregate fee to	547
be paid by a captive insurance company calculated under this	548
division shall be two hundred fifty thousand dollars.	549

(B) The fee on reinsurance premiums set forth under division	550
(A)(1)(b) of this section shall not be levied on premiums for	551
risks or portions of risks that are subject to the fee under	552
division (A)(1)(a) of this section.	553

(C) A captive insurance company shall not pay any reinsurance	554
fee pursuant to division (A)(1)(b) of this section on revenue	555
related to the receipt of assets by the captive insurance company	556
in exchange for the assumption of loss reserves and other	557
liabilities of another insurance company that is under common	558
ownership and control with the captive insurance company, if the	559
transaction is part of a plan to discontinue the operation of the	560
other insurance company and the intent of the exchange is to renew	561
or maintain such business with the captive insurance company.	562

(D)(1) The fee imposed in division (A) of this section shall	563
be calculated on an annual basis, notwithstanding policies,	564
contracts, insurance, or contracts of reinsurance issued on a	565
multi-year basis.	566

(2) In the case of multi-year policies or contracts, the	567
premium shall be prorated for purposes of determining the fee	568
required under division (A) of this section.	569

(E) All fees collected under this section shall be deposited	570
into the state treasury to the credit of the captive insurance	571
regulation and supervision fund.	572

Sec. 3964.14.  (A) Except as provided in this chapter,	573
captive insurance companies shall be governed by this chapter and	574
are exempt from all other provisions of the insurance laws of this	575
state. No insurance law of this state shall apply to captive	576
insurance companies unless captive insurance companies are	577
expressly designated as being subject to the law or, with respect	578
to a line of authority granted to a captive insurance company	579
pursuant to division (A)(10) of section 3964.02 of the Revised	580
Code, as required in the articles, bylaws, code of regulations, or	581
other organizational documents as approved by the superintendent.	582

(B) Except as otherwise provided in this chapter, sections	583
3903.01 to 3903.59 of the Revised Code shall apply to captive	584
insurance companies.	585

Sec. 3964.15.  (A) There is hereby created in the state	586
treasury the captive insurance regulation and supervision fund,	587
which shall consist of all fees, fines, penalties, and assessments	588
received by the superintendent under this chapter.	589

(B) The superintendent may charge captive insurance companies	590
for any of the following expenses incurred in carrying out this	591
chapter:	592

(1) The entire compensation for each day, or portion thereof,	593
worked by all personnel, including those who are not employees of	594
the department of insurance, in any of the following capacities:	595

(a) The conduct of an examination, calculated at the rates	596
provided in the financial condition examiners' handbook published	597
by the national association of insurance commissioners;	598

(b) The review and analysis of a company's annual report	599
submitted pursuant to section 3964.07 of the Revised Code, and any	600
interim financial statements and examination reports or related	601
documents of captive insurance companies in this state;	602

(c) The ongoing evaluation and monitoring of the financial	603
affairs of captive insurance companies;	604

(d) The determination and review of the premium franchise fee	605
liability of a captive insurance company;	606

(e) The training and continuing education costs of examiners	607
and analysts.	608

(2) Travel and living expenses of all personnel, including	609
those who are not employees of the department of insurance,	610
directly engaged in the conduct of an examination calculated at	611
rates not to exceed the rates provided in the financial condition	612
examiners' handbook published by the national association of	613
insurance commissioners;	614

(3) All other incidental expenses incurred by or on behalf of	615
such personnel in the conduct of such examination;	616

(4) An allocated share of all expenses not described in	617
division (B)(1), (2), or (3) of this section, but that are	618
necessarily incurred in carrying out the duties of the	619
superintendent under this chapter, including the expenses of	620
direct overhead and support staff for the examiners and persons	621
appointed or employed pursuant to section 3964.08 of the Revised	622
Code.	623

(C) All amounts collected by the superintendent under	624
division (B) of this section shall be deposited into the state	625
treasury to the credit of the captive insurance regulation and	626
supervision fund.	627

(D) At the discretion of the superintendent, the expenses of	628
the captive insurance regulation and supervision fund may be	629
covered by the department of insurance operating fund created	630
under section 3901.021 of the Revised Code.	631

(E) As used in this section, "examination" means the	632
examination required under section 3964.08 of the Revised Code.	633

Sec. 3964.17.  (A) As used in sections 3964.17 to 3964.1710	634
of the Revised Code:	635

(1) "Protected cell" means an incorporated cell that is	636
organized pursuant to Chapter 1701., 1702., or 1705. of the	637
Revised Code and that has a separate legal identity from the	638
protected cell captive insurance company of which it is a part.	639

(2) "Protected cell captive insurance company" means a	640
captive insurance company that meets all of the following	641
requirements:	642

(a) Is formed and licensed under the provisions of this	643
chapter;	644

(b) Insures or reinsures the risks of separate participants	645
through a participant contract;	646

(c) Segregates each participant's liability into a protected	647
cell.	648

(3) "Participant" means an individual, company, corporation,	649
partnership, limited liability company, and their affiliated	650
entities that insure or reinsure with a protected cell.	651
"Participant" includes an insurance agent licensed in this state	652
that accepts a stated percentage of risk on a pro rata basis	653
within a defined category of business underwritten by a licensed	654
insurance company that is domiciled in this state and that is	655
affiliated with a protected cell captive insurance company.	656

(4) "Participant contract" means a contract by which a	657
protected cell insures or reinsures the risks of a participant.	658

(a) A participant that is not an insurance agent licensed in	659
this state shall insure or reinsure only its own risks through a	660
protected cell.	661

(b) If the participant is an insurance agent licensed in this	662
state, the participant contract must define each risk covered by	663
the contract with fixed and certain terms.	664

(B) A captive insurance company may be organized as a	665
protected cell captive insurance company and shall be permitted to	666
form one or more protected cells under this section to insure or	667
reinsure risks of one or more participants.	668

(C) The assets and liabilities of each protected cell shall	669
be held separately from the assets and liabilities of all other	670
protected cells.	671

(D) A protected cell of a protected cell captive insurance	672
company shall be organized pursuant to Chapter 1701., 1702., or	673
1705. of the Revised Code.	674

(E) A protected cell captive insurance company shall, at the	675
time of paying the annual fee required under section 3964.13 of	676
the Revised Code, pay an additional annual fee for each protected	677
cell in an amount to be established by the superintendent.	678

(F) Each protected cell of a protected cell captive insurance	679
company shall be treated as a captive insurance company for	680
purposes of this chapter.	681

(G) Unless otherwise permitted by the articles of	682
incorporation, bylaws, code of regulations, or other	683
organizational document of a protected cell captive insurance	684
company, each protected cell of the protected cell captive	685
insurance company shall have the same directors, secretary, and	686
registered office as the protected cell captive insurance company.	687

(H) A protected cell captive insurance company may provide in	688
its articles of incorporation, bylaws, code of regulations, or	689
other organizational documents that a protected cell it creates	690
shall be wound up and dissolved upon any of the following:	691

(1) The bankruptcy, death, expulsion, insanity, resignation,	692
or retirement of any participant of the protected cell;	693

(2) The happening of some event that is not the expiration of	694
a fixed period of time;	695

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

696

(I)(1) The articles of incorporation, bylaws, code of	697
regulations, or other organizational documents, of a protected	698
cell captive insurance company shall provide that a protected cell	699
shall not own shares or membership interests in the protected cell	700
captive insurance company of which it is a part.	701

(2) Such a document may provide that a protected cell may own	702
shares or membership interests in any other protected cell of the	703
protected cell captive insurance company of which it is a part.	704

(J) The name of a protected cell captive insurance company	705
shall include the words "protected cell captive" or the	706
abbreviation "PCC."	707

(K) A protected cell captive insurance company shall assign a	708
distinctive name to each of its protected cells that meets all of	709
the following:	710

(1) The name identifies the protected cell as being part of	711
the protected cell captive insurance company.	712

(2) The name distinguishes the protected cell from any other	713
protected cell of the protected cell captive insurance company.	714

(3) The name includes the words "protected cell" or the	715
abbreviation "PC."	716

(L) A protected cell may enter into an agreement with its	717
protected cell captive insurance company or with another protected	718
cell of the same protected cell captive insurance company.	719

(M)(1) The assets of a protected cell captive insurance	720
company shall be either cell assets or general assets.	721

(2) The cell assets comprise the assets of the protected cell	722
captive insurance company that are held within or on behalf of its	723
protected cells.	724

(3) The general assets of a protected cell captive insurance	725
company comprise the assets of the protected cell captive	726
insurance company that are not cell assets.	727

(N)(1) The liabilities of a protected cell captive insurance	728
company shall be either cell liabilities or general liabilities.	729

(2) The cell liabilities comprise the obligations of the	730
protected cell captive insurance company attributable to its	731
protected cells.	732

(3) The general liabilities of a protected cell captive	733
insurance company comprise the obligations of the protected cell	734
captive insurance company that are not cell liabilities.	735

(O) Each protected cell insurance company shall account	736
separately on its books and records for each of its protected	737
cells to reflect the financial condition and results of operations	738
of the protected cell, including net income or loss, dividends or	739
other distributions to participants, and such other factors as may	740
be provided by participant contracts or required by the	741
superintendent.	742

(P) Each protected cell captive insurance company shall	743
annually file with the superintendent such financial reports as	744
the superintendent requires, which shall include financial	745
statements detailing the financial experience of each protected	746
cell and a statement regarding the adequacy of reserves kept to	747
make full provision for the liabilities insured by each protected	748
cell.	749

(Q) An officer or manager of a protected cell captive	750
insurance company shall immediately notify the superintendent if	751
any protected cell of the protected cell captive insurance company	752
or the protected cell captive insurance company itself is trending	753
toward reserves that are inadequate, or if a protected cell or the	754
protected cell captive insurance company becomes insolvent or is	755
otherwise unable to meet its claims or other obligations.	756

(R) The duties of a director of a protected cell captive	757
insurance company under this chapter shall be in addition to, and	758
not in lieu of, those under other applicable law.	759

Sec. 3964.171.  (A) A protected cell captive insurance	760
company may create and issue shares in one or more classes for one	761
or more protected cells.	762

(1) The proceeds of the issue of shares for a specific	763
protected cell shall be included in the assets of that protected	764
cell.	765

(2) The proceeds of the issue of shares that are not for a	766
specific protected cell shall be included in the protected cell	767
captive insurance company's general assets.	768

(B) A protected cell captive insurance company may pay a	769
dividend on protected cell or protected cell captive insurance	770
company shares of any class, regardless of whether a dividend is	771
declared on any other class of shares of a protected cell or any	772
other shares of the protected cell captive insurance company. Such	773
payment is subject to section 3964.06 of the Revised Code.	774

(C) Dividends may be paid on protected cell shares only from	775
the cell assets of the protected cell that issued the shares and	776
must otherwise be made in accordance with the rights of such	777
shares and in accordance with section 3964.06 of the Revised Code.	778

Sec. 3964.172.  (A) No sale, exchange, or other transfer of	779
assets may be made by a protected cell captive insurance company	780
between or among any of its protected cells without the written	781
consent of the participants of the protected cell and the	782
superintendent.	783

(B)(1) No sale, exchange, transfer of assets, or distribution	784
may be made from a protected cell to any person without the	785
superintendent's prior written approval.	786

(2) The superintendent shall not give approval if the sale,	787
exchange, transfer, or distribution would result in the insolvency	788
or impairment of the protected cell in question.	789

Sec. 3964.173.  (A) The owners of a protected cell captive	790
insurance company, shall not, by virtue of being owners of the	791
protected cell captive insurance company, be the owners or	792
participants of any protected cell of the protected cell captive	793
insurance company.	794

(B) The participants of a protected cell shall not, by virtue	795
of being such participants, be the owners of the protected cell	796
captive insurance company or participants or owners of any other	797
protected cell of the protected cell captive insurance company.	798

(C) No participant contract shall take effect without the	799
superintendent's prior written approval.	800

(D) The addition of a new protected cell, or the withdrawal	801
or other transfer of any participant from any existing protected	802
cell, shall constitute a change in the strategic business plan of	803
that protected cell captive insurance company, requiring the	804
superintendent's prior written approval.	805

(E) A protected cell captive insurance company shall, in	806
addition to keeping a register of its owners or participants, keep	807
a register of the participants of each of its protected cells.	808

Sec. 3964.174.  (A) If a protected cell captive insurance	809
company enters into a transaction with respect to a particular	810
protected cell, or incurs a liability arising from an activity or	811
asset of a particular protected cell, a claim by any person in	812
connection with the transaction or liability extends only to the	813
cell assets of the protected cell.	814

(B) If a protected cell captive insurance company enters into	815
a transaction in its own right and not in respect of any of its	816
protected cells, incurs a liability arising from an activity in	817
its own right and not in respect of any of its protected cells, or	818
incurs a liability arising from an asset held in its own right and	819
not in respect of any of its protected cells, then a claim by any	820
person or a liability in connection with this type of transaction,	821
activity, or ownership shall extend only to the general assets of	822
the protected cell captive insurance company.	823

(C) Except as provided by divisions (D) and (E) of this	824
section, a protected cell captive insurance company shall not do	825
either of the following:	826

(1) Satisfy a liability attributable to a particular	827
protected cell of the protected cell captive insurance company	828
from the general assets of the protected cell captive insurance	829
company;	830

(2) Satisfy a liability, whether attributable to a particular	831
protected cell or not, from the cell assets of another protected	832
cell.	833

(D)(1) A protected cell captive insurance company may satisfy	834
any liability attributable to a particular protected cell from the	835
protected cell captive insurance company's general assets if both	836
of the following conditions are met:	837

(a) The articles of incorporation, bylaws, code of	838
regulations, or similar organization documents of the protected	839
cell captive insurance company allow the protected cell captive	840
insurance company to satisfy the liability.	841

(b) Satisfying the liability has been approved by two-thirds	842
of the participants of the protected cell or, if the protected	843
cell has more than one class of participants, two-thirds of each	844
class of participants, unless the organizational document of the	845
protected cell insurance company requires a greater percentage.	846

(2) Prior to a protected cell captive insurance company	847
satisfying any liability attributable to a particular protected	848
cell from the protected cell captive insurance company's general	849
assets, the directors who authorize the satisfaction of the	850
liability shall state as part of the authorization that, having	851
inquired into the affairs and prospects of the protected cell	852
captive insurance company, they have formed an opinion that	853
includes both of the following:	854

(a) Immediately following the date on which the liability is	855
proposed to be met by the general assets of the protected cell	856
captive insurance company, the protected cell captive insurance	857
company will be able to discharge its liabilities as they fall	858
due.	859

(b) Having regard to the prospects of the protected cell	860
captive insurance company, the intentions of the directors with	861
respect to the management of the protected cell captive insurance	862
company's business, and the amount and character of the financial	863
resources that will, in their view, be available to the protected	864
cell captive insurance company, the protected cell captive	865
insurance company will be able to continue its business and will	866
be able to discharge its liabilities as they fall due for a period	867
of one year immediately following the date on which the liability	868
is proposed to be satisfied by the general assets of the protected	869
cell captive insurance company or until the protected cell captive	870
insurance company is dissolved, whichever first occurs.	871

(E)(1) A protected cell captive insurance company may satisfy	872
any liability, whether attributable to a particular protected cell	873
or not, from the cell assets of another protected cell if it is	874
permitted to do so by the articles of incorporation, bylaws, code	875
of regulations, or other organizational document, as well as the	876
participant agreement, of the protected cell whose assets are	877
proposed to be used to satisfy the liability.	878

(2)(a) Prior to a protected cell captive insurance company	879
satisfying any liability from the assets of a protected cell that	880
is not responsible for the liability, the directors who authorize	881
the satisfaction shall make a full inquiry into the affairs and	882
prospects of the protected cell whose assets are proposed to be	883
used to satisfy the liability to determine that both of the	884
following are true:	885

(i) Immediately following the date on which the liability is	886
proposed to be met by the cell assets of the protected cell in	887
question, the protected cell will be able to discharge its	888
liabilities as they fall due.	889

(ii) Having regard to the prospects of the protected cell,	890
the intentions of the directors with respect to the management of	891
the protected cell's business, and the amount and character of the	892
financial resources that will in their view be available to the	893
protected cell in question, the protected cell will be able to	894
continue to carry on business and will be able to discharge its	895
liabilities as they become due or until the protected cell is	896
dissolved, whichever first occurs.	897

(b) If the criteria of division (E)(2)(a) of this section are	898
met, the directors shall make a written authorization stating the	899
outcome of their inquiry and shall submit the authorization to the	900
superintendent for approval prior to satisfying the liability.	901

(F) A director who makes a statement under division (D) or	902
(E) of this section without having reasonable grounds for the	903
opinion expressed in the statement violates this chapter and may	904
be removed by order of the superintendent.	905

Sec. 3964.175.  If a protected cell captive insurance company	906
is liable for any penalty, under this chapter or otherwise, due to	907
an act or the failure to act of a protected cell or an officer or	908
director of a protected cell, then both of the following apply:	909

(A) The penalty shall only be met by the protected cell	910
captive insurance company from the cell assets of the protected	911
cell responsible.	912

(B) The penalty shall not be enforceable in any way against	913
any other assets of the protected cell captive insurance company	914
or assets of any other protected cell.	915

Sec. 3964.176.  The directors of a protected cell captive	916
insurance company shall establish and maintain, or cause to be	917
established and maintained, procedures to do all of the following:	918

(A) Segregate cell assets and liabilities separate and	919
separately identifiable from general assets and liabilities;	920

(B) Segregate cell assets and liabilities of each protected	921
cell separate and separately identifiable from cell assets and	922
liabilities of any other protected cell;	923

(C) Apportion or transfer, where relevant, assets and	924
liabilities between protected cells or between protected cells and	925
the general assets and liabilities of the protected cell captive	926
insurance company.	927

Sec. 3964.177.  (A) If a protected cell captive insurance	928
company enters into an agreement with respect to a protected cell	929
of the protected cell captive insurance company, the directors	930
shall ensure that both of the following are met:	931

(1) The other party to the transaction knows, or ought	932
reasonably to know, that the protected cell captive insurance	933
company is acting with respect to a particular protected cell.	934

(2) The minutes of any meeting of directors held with regard	935
to the agreement clearly record the fact that the protected cell	936
captive insurance company was entering into the agreement with	937
respect to the protected cell in question and that the obligation	938
imposed by division (A)(1) of this section has been, or will be,	939
complied with.	940

(B) If a protected cell captive insurance company fails to	941
comply with division (A) of this section, then both of the	942
following shall apply:	943

(1) The directors of the protected cell captive insurance	944
company shall be personally liable for the liabilities of the	945
protected cell captive insurance company and the protected cell	946
under the act, matter, deed, agreement, contract, instrument, or	947
arrangement that was executed, notwithstanding any provisions to	948
the contrary in the protected cell's organizational documents or	949
in any contract with the protected cell captive insurance company	950
or otherwise.	951

(2)(a) The directors of the protected cell captive insurance	952
company shall have a right of indemnity, in the case of a matter	953
on behalf of or attributable to a protected cell, against the	954
assets of the protected cell, unless the directors were	955
fraudulent, reckless, negligent, or acted in bad faith.	956

(b) The directors shall have a right of indemnity against the	957
general assets of the protected cell captive insurance company, in	958
the case of a matter not on behalf of or attributable to a	959
protected cell.	960

(C) Notwithstanding division (B)(1) of this section, a court	961
may relieve a director of all or part of the personal liability	962
required under division (B)(1) of this section if the director can	963
demonstrate either of the following to the satisfaction of the	964
court:	965

(1) The director was not aware of the circumstances giving	966
rise to the liability and therefore was not fraudulent, reckless,	967
or negligent and did not act in bad faith.	968

(2) The director expressly objected, and exercised the rights	969
available to the director, whether by way of voting power or	970
otherwise, to try to prevent the circumstances giving rise to the	971
liability.	972

(D) If, pursuant to division (C) of this section, a court	973
relieves a director of all or part of the director's personal	974
liability under division (B)(1) of this section, the court may	975
order that the liability in question instead be met from the	976
assets of the protected cell or the general assets of the	977
protected cell captive insurance company as the court finds	978
appropriate.	979

(E) Any provision in the organizational document of a captive	980
insurance company or any other contractual provision under which	981
the protected cell captive insurance company may be liable shall	982
be void if it purports to indemnify the directors of a protected	983
cell captive insurance company despite fraudulent, negligent,	984
reckless, bad faith, or other conduct that would otherwise exempt	985
them from indemnification by virtue of division (B)(2)(a) of this	986
section.	987

(F) The duties of a director of a protective cell captive	988
insurance company under this chapter shall be in addition to and	989
not in lieu of, those under any other applicable law.	990

Sec. 3964.178.  (A) A captive insurance company may amend its	991
organizational document to become a protected cell captive	992
insurance company.	993

(B) The amendment of the organizational document of a captive	994
insurance company to become a protected cell captive insurance	995
company shall require approval by both of the following:	996

(1) Holders of two-thirds of the outstanding shares or	997
ownership interests of the captive insurance company, unless a	998
greater amount is required by the organizational document of the	999
captive insurance company;	1000

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

1001

(C) Notwithstanding division (B)(2) of this section, if the	1002
consent of all the creditors of the captive insurance company	1003
cannot be obtained, the amendment may be approved by the	1004
superintendent if the superintendent is satisfied that no creditor	1005
will be materially prejudiced by the amendment.	1006

(D) A protected cell captive insurance company may amend its	1007
organizational document to cease to be a protected cell captive	1008
insurance company.	1009

(E) The amendment of an organizational document of a	1010
protected cell captive insurance company to cease to be a	1011
protected cell captive insurance company shall require approval by	1012
all of the following:	1013

(1) The superintendent;

1014

(2) Holders of two-thirds of the outstanding shares or	1015
ownership interests of the protected cell captive insurance	1016
company, unless a greater amount is required by the organizational	1017
document of the protected cell captive insurance company;	1018

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

1019

(4) All the creditors of the protected cell captive insurance	1020
company and its protected cells.	1021

(F) Notwithstanding division (E)(4) of this section, if the	1022
consent of all the creditors of the captive insurance company and	1023
its protected cells cannot be obtained, the amendment may be	1024
approved by the superintendent upon being satisfied that no	1025
creditor will be materially prejudiced by the amendment.	1026

(G)(1) If a captive insurance company or protected cell	1027
captive insurance company seeks to change its status in accordance	1028
with this section, the captive insurance company or protected cell	1029
captive insurance company shall deliver both of the following to	1030
the superintendent:	1031

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

1032

(b) Evidence satisfactory to the superintendent that the	1033
requirements of division (B) or (E) of this section have been met.	1034

(2) If the documents required under division (G)(1) of this	1035
section are provided, the superintendent shall issue a license	1036
that is appropriate to the amended status of the company.	1037

(H) If a company changes its status in accordance with this	1038
section, the change of status shall take effect when the	1039
superintendent issues a new license.	1040

Sec. 3964.179.  (A) A protected cell of a protected cell	1041
captive insurance company may be transferred to another protected	1042
cell captive insurance company.	1043

(B) The protected cell captive insurance companies between	1044
which a protected cell is being transferred shall enter into a	1045
written agreement that sets forth the terms of the transfer.	1046

(C) A transfer of a protected cell shall be approved by the	1047
superintendent when all of the following are met:	1048

(1) The board of directors of each protected cell captive	1049
insurance company involved in the transfer have approved the	1050
transfer.	1051

(2) The transfer agreement is approved by the superintendent	1052
as an arrangement in accordance with this chapter.	1053

(3) One of the following applies:

1054

(a) The transfer agreement is consented to by at least	1055
two-thirds of the participants of the protected cell being	1056
transferred and all the creditors, if any, of that protected cell.	1057

(b) If the agreement of all the creditors of the protected	1058
cell cannot be obtained, the superintendent may approve the	1059
transfer upon being satisfied that no creditor of the protected	1060
cell will be materially prejudiced by the transfer.	1061

(D) Within thirty days after a transfer agreement is approved	1062
by the superintendent, the protected cell captive insurance	1063
company to which the protected cell is being transferred shall	1064
deliver both of the following to the superintendent:	1065

(1) A copy of the executed transfer agreement;

1066

(2) A declaration signed by the directors of the protected	1067
cell captive insurance company transferring the protected cell	1068
stating that each director has reason to believe all of the	1069
following:	1070

(a) The protected cell being transferred is able to discharge	1071
its liabilities as they become due.	1072

(b) There are no creditors of the protected cell captive	1073
insurance company from which the protected cell is being	1074
transferred whose interests will be unfairly prejudiced by the	1075
transfer.	1076

(c) The transfer agreement has been approved in accordance	1077
with this chapter.	1078

(E) If a protected cell captive insurance company fails to	1079
deliver the documents required under division (D) of this section	1080
within the required thirty-day period, the superintendent may void	1081
the transfer.	1082

(F) The superintendent may void a transfer and order the	1083
removal of any director who makes a declaration under division	1084
(D)(2) of this section without having the grounds to do so.	1085

(G) Upon fulfillment of the requirements of division (D) of	1086
this section, the superintendent shall do all of the following:	1087

(1) Record the transfer of the protected cell;

1088

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

1089

(3) Record that the protected cell has ceased to be a	1090
protected cell of the protected cell captive insurance company	1091
from which it was transferred.	1092

(H) Upon the issuance of the new license under this section	1093
all of the following shall apply:	1094

(1) The protected cell shall cease to be a protected cell of	1095
the protected cell captive insurance company from which it was	1096
transferred.	1097

(2) The protected cell becomes a protected cell of the	1098
protected cell captive insurance company to which it has been	1099
transferred.	1100

(3) All of the following shall apply:

1101

(a) All property and rights to which the protected cell was	1102
entitled immediately before the issue of the new license shall	1103
remain the property and rights of the protected cell.	1104

(b) All liabilities, contracts, debts, and other obligations	1105
to which the protected cell was subject immediately before the	1106
issue of the new license shall remain the liabilities, contracts,	1107
debts, and other obligations of the protected cell.	1108

(c) All actions and other legal proceedings that were pending	1109
by or against a protected cell immediately before the issue of the	1110
new license may be continued by or against the protected cell.	1111

(I) The operation of division (H) of this section shall not	1112
be regarded as any of the following:	1113

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

1114

(2) A breach of any contractual provision prohibiting,	1115
restricting, or regulating the assignment or transfer of rights or	1116
liabilities;	1117

(3) Giving rise to any remedy by a party to a contract or	1118
other instrument as an event of default under any contract or	1119
other instrument or as causing or permitting the termination of	1120
any contract, other instrument, obligation, or relationship.	1121

(J) Except as provided in this section, a protected cell	1122
shall not be transferred if the transfer would be inconsistent	1123
with the articles of incorporation, bylaws, code of regulations,	1124
or similar organizational document of the protected cell, the	1125
protected cell captive insurance company transferring the	1126
protected cell, or the protected cell captive insurance company to	1127
which the protected cell is to be transferred.	1128

Sec. 3964.1710.  (A) Any insurance company organized under	1129
Chapter 3925. of the Revised Code, and any captive insurance	1130
company that is not a protected cell captive insurance company,	1131
may become a protected cell of a protected cell captive insurance	1132
company, with the approval of the superintendent.	1133

(B)(1) A protected cell of a protected cell captive insurance	1134
company may apply to the superintendent to be incorporated as an	1135
insurance company, including a captive insurance company subject	1136
to the requirements of this chapter, independent from the	1137
protected cell captive insurance company of which it is currently	1138
a part.	1139

(2) If a protected cell is licensed as an independent	1140
insurance company, then all of the following apply:	1141

(a) All property and rights to which the protected cell was	1142
entitled immediately before its licensure as a new entity shall	1143
remain the property and rights of the new entity.	1144

(b) The protected cell shall remain subject to all criminal	1145
and civil liabilities and all contracts, debts, and other	1146
obligations to which the protected cell was subject immediately	1147
before its licensure as a new entity.	1148

(c) All contracts, debts, and other obligations of the	1149
protected cell shall remain the contracts, debts, and other	1150
obligations of the new entity.	1151

(d) All actions and other legal proceedings that, immediately	1152
before the licensure of the protected cell as a new entity, were	1153
pending by or against the protected cell may be continued by or	1154
against the new entity.	1155

(C) An application made under division (B) of this section	1156
shall be approved by two-thirds of the participants of the	1157
protected cell or, if the protected cell has more than one class	1158
of participants, two-thirds of each class of participant, unless	1159
the organizational document of the protected cell requires a	1160
greater percentage.	1161

(D)(1) If a protected cell makes an application under	1162
division (B) of this section, any participant of the protected	1163
cell who objects to the protected cell being incorporated as an	1164
independent insurance company may petition the superintendent for	1165
an order denying the application on the grounds that the	1166
incorporation, or the terms of the incorporation, unfairly	1167
prejudice the interests of the participant.	1168

(2) Such a petition shall be made within thirty days after an	1169
application has been made under division (B) of this section.	1170

(E) The operation of division (B)(2) of this section shall	1171
not be regarded as any of the following:	1172

(1) A breach of contract;

1173

(2) A breach of any contractual provision prohibiting,	1174
restricting, or regulating the assignment or transfer of rights or	1175
liabilities;	1176

(3) Giving rise to any remedy by a party to a contract or	1177
other instrument as an event of default under the contract or	1178
other instrument or as causing or permitting the termination of	1179
any contract, other instrument, obligation, or relationship.	1180

Sec. 3964.18.  (A) If a protected cell captive insurance	1181
company with one or more protected cells is being liquidated, the	1182
protected cell captive insurance company may be considered to have	1183
no assets and no liabilities only if the protected cell captive	1184
insurance company continues to have no protected cells.	1185

(B) In the course of liquidating a protected cell captive	1186
insurance company, each protected cell shall be dealt with one of	1187
the following ways:	1188

(1) Transfer to another protected cell captive insurance	1189
company;	1190

(2) Liquidation;

1191

(3) Continuation as a separate legal entity or protected cell	1192
under the law of another jurisdiction;	1193

(4) Incorporation, independent of the protected cell captive	1194
insurance company;	1195

(5) Merge with another insurance company.

1196

(C) If a protected cell captive insurance company is being	1197
liquidated, the liquidation shall not apply with respect to any	1198
protected cell of the protected cell captive insurance company.	1199

(D) If a protected cell of a protected cell captive insurance	1200
company is being liquidated, the liquidation shall not apply with	1201
respect to the protected cell captive insurance company or any	1202
other protected cell of the protected cell captive insurance	1203
company.	1204

(E) A court, upon application of a protected cell captive	1205
insurance company that is being liquidated, may determine, in	1206
accordance with this chapter, if a liability of the protected cell	1207
captive insurance company shall be satisfied by its general	1208
assets, by the cell assets of a specific protected cell of the	1209
protected cell captive insurance company, or by a combination of	1210
those assets.	1211

(F) Notwithstanding any statutory provision or rule of law to	1212
the contrary, in the disposition of a protected cell captive	1213
insurance company, the liquidator shall do both of the following:	1214

(1) Deal with the protected cell captive insurance company's	1215
assets only in accordance with the procedures set out in this	1216
section;	1217

(2) Apply the protected cell captive insurance company's	1218
assets to those entitled to have recourse to them under this	1219
section, in the discharge of the claims of creditors of the	1220
protected cell captive insurance company.	1221

(G)(1) A petition for a liquidation or rehabilitation order	1222
with respect to a protected cell of a protected cell captive	1223
insurance company may be made by any of the following:	1224

(a) The protected cell captive insurance company;

1225

(b) A majority of the directors of the protected cell captive	1226
insurance company;	1227

(c) Any creditor of that protected cell;

1228

(d) The superintendent.

1229

(2) Notice of a petition to the court for a liquidation or	1230
rehabilitation order with respect to a protected cell of a	1231
protected cell captive insurance company shall be served upon all	1232
of the following:	1233

(a) The protected cell captive insurance company;

1234

(b) The superintendent;

1235

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

1236

(H)(1) Except as otherwise provided in this section, the	1237
court may make a liquidation or rehabilitation order with respect	1238
to a protected cell if, in relation to a protected cell captive	1239
insurance company, the court is satisfied that both of the	1240
following are met:	1241

(a) The cell assets attributable to a particular protected	1242
cell of the protected cell captive insurance company and the	1243
general assets of the protected cell captive insurance company, in	1244
those cases where creditors of the protected cell are entitled to	1245
have recourse to the protected cell captive insurance company's	1246
general assets, are, or are likely to be, insufficient to	1247
discharge the claims of creditors with respect to that protected	1248
cell.	1249

(b) An order would achieve the purposes set forth in division	1250
(H)(3) of this section.	1251

(2) A liquidation or rehabilitation order may be made with	1252
respect to one or more protected cells.	1253

(3) A liquidation or rehabilitation order shall direct that	1254
the business and cell assets of, or attributable to, a protected	1255
cell shall be managed by a liquidator or rehabilitator specified	1256
in the order for the purpose of accomplishing both of the	1257
following:	1258

(a) The orderly closing or rehabilitation of the business of,	1259
or attributable to, the protected cell;	1260

(b) The distribution of the cell assets, or assets	1261
attributable to the protected cell, to those having recourse	1262
thereto.	1263

(I) All of the following apply to the liquidator or	1264
rehabilitator of a protected cell:	1265

(1) The liquidator or rehabilitator shall have all the	1266
functions and powers of the directors responsible for the business	1267
and cell assets of, or attributable to, the protected cell.	1268

(2) The liquidator or rehabilitator may at any time apply to	1269
the court for any of the following:	1270

(a) Directions as to the extent or exercise of any function	1271
or power;	1272

(b) The liquidation or rehabilitation order to be discharged	1273
or varied;	1274

(c) Any other order as to any matter occurring during the	1275
course of the liquidation or rehabilitation.	1276

(3) The liquidator or rehabilitator shall act as the agent of	1277
the protected cell and the protected cell captive insurance	1278
company and shall not incur personal liability except to the	1279
extent that the liquidator or rehabilitator acts fraudulently,	1280
recklessly, negligently, or in bad faith, except that where the	1281
superintendent is appointed liquidator or rehabilitator of a	1282
protected cell. If the superintendent is appointed liquidator,	1283
section 3903.07 of the Revised Code shall apply to the	1284
superintendent, any deputy liquidator, any employee of the	1285
department of insurance, any employee appointed by the	1286
superintendent as liquidator, and any employee who serves under	1287
the liquidator.	1288

(4) The liquidator or rehabilitator shall administer the	1289
assets pursuant to the provisions of this section and sections	1290
3903.01 to 3903.59 of the Revised Code.	1291

(J) Upon the filing of a petition for a liquidation or	1292
rehabilitation order, and during the period of operation of	1293
liquidation or rehabilitation, both of the following shall apply:	1294

(1) No proceedings shall be instituted or continued by or	1295
against the protected cell captive insurance company or protected	1296
cell in respect of which the liquidation or rehabilitation order	1297
was made.	1298

(2) No action shall be taken to enforce any security, and no	1299
action shall be taken in the execution of a legal process with	1300
respect to the business or cell assets of, or attributable to, the	1301
protected cell with respect to which the liquidation or	1302
rehabilitation order was made, except by leave of the court.	1303

(K) During the period of operation of a liquidation or	1304
rehabilitation both of the following shall apply:	1305

(1) The functions and powers of the directors shall cease	1306
with respect to the business of, or attributable to, any protected	1307
cell or cell assets for which the order was made.	1308

(2)(a) The liquidator or rehabilitator of the protected cell	1309
shall be entitled to be present at all meetings of the protected	1310
cell captive insurance company and protected cell in question and	1311
to vote at such meetings as if the liquidator or rehabilitator	1312
were a director of the protected cell captive insurance company.	1313

(b) The liquidator's or rehabilitator's voting authority	1314
shall include matters concerning the protected cell captive	1315
insurance company's general assets, unless there are no creditors	1316
that are entitled to have recourse to the protected cell captive	1317
insurance company's general assets.	1318

(L)(1) A court shall not discharge a liquidation or	1319
rehabilitation order issued pursuant to this section unless it	1320
appears to the court that the purpose for which the order was made	1321
has been achieved, substantially achieved, or is incapable of	1322
being achieved.	1323

(2) The court, on hearing a petition for the discharge or	1324
variation of a liquidation or rehabilitation order, may make any	1325
interim order, discharge the order, or continue the liquidation or	1326
rehabilitation unchanged.	1327

(3) Upon the court issuing an order discharging a liquidation	1328
or rehabilitation order for a protected cell on the ground that	1329
the purpose for which the order was made had been achieved or	1330
substantially achieved, the court may direct that any payment made	1331
by the liquidator or rehabilitator to any creditor of the	1332
protected cell captive insurance company, with respect to that	1333
protected cell, shall be considered full satisfaction of the	1334
liabilities of the protected cell captive insurance company to the	1335
creditor with respect to the protected cell. However, such an	1336
order or discharge shall not be considered a bar to a creditor's	1337
claims against the protected cell captive insurance company	1338
arising out of the protected cell captive insurance company's	1339
administrative, regulatory, or marketing activities on behalf of	1340
the protected cell in question.	1341

Sec. 3964.19.  (A) As used in sections 3964.19 to 3964.194 of	1342
the Revised Code:	1343

(1) "Counterparty" means a special purpose financial captive	1344
insurance company's parent or an affiliated entity that is an	1345
insurer domiciled in this state that cedes life insurance risks to	1346
the special purpose financial captive insurance company pursuant	1347
to a special purpose financial captive insurance company contract.	1348

(2) "Insolvency" or "insolvent" means that the special	1349
purpose financial captive insurance company is unable to pay its	1350
obligations when they are due, unless those obligations are the	1351
subject of a bona fide dispute.	1352

(3) "Insurance securitization" means a package of related	1353
risk transfer instruments, capital market offerings, and	1354
facilitating administrative agreements, for which a special	1355
purpose financial captive insurance company obtains proceeds,	1356
either directly or indirectly, through the issuance of securities,	1357
where the investment risk to the holders of the securities is	1358
contingent upon the obligations of the special purpose financial	1359
captive insurance company to the counterparty under the special	1360
purpose financial captive insurance company contract, in	1361
accordance with the transaction terms, and pursuant to this	1362
section. This includes situations where the securitization	1363
proceeds are held in trust to secure the obligations of the	1364
special purpose financial captive insurance company under one or	1365
more special purpose financial captive insurance company	1366
contracts.	1367

(4) "Organizational document" means the special purpose	1368
financial captive insurance company's articles of incorporation,	1369
bylaws, code of regulations, operating agreement, or other	1370
foundational documents that establish the special purpose	1371
financial captive insurance company as a legal entity.	1372

(5) "Securities" means debt obligations, equity investments,	1373
surplus certificates, surplus notes, funding agreements,	1374
derivatives, and other legal forms of financial instruments.	1375

(6) "Special purpose financial captive insurance company	1376
contract" means a contract between a special purpose financial	1377
captive insurance company and a counterparty pursuant to which the	1378
special purpose financial captive insurance company agrees to	1379
provide insurance or reinsurance protection to the counterparty	1380
for risks associated with the counterparty's insurance or	1381
reinsurance business, and includes a contract entered into under	1382
division (F) of this section.	1383

(7) "Special purpose financial captive insurance company	1384
securities" means the securities issued by a special purpose	1385
financial captive insurance company.	1386

(B) The requirements of this section shall not apply to a	1387
specific special purpose financial captive insurance company if	1388
the superintendent finds a specific requirement is inappropriate	1389
due to the nature of the risks to be insured by the special	1390
purpose financial captive insurance company and if the special	1391
purpose financial captive insurance company meets the criteria	1392
established by rules and regulations adopted and promulgated by	1393
the superintendent.	1394

(C)(1) A special purpose financial captive insurance company	1395
may not issue a contract for assumption of risk or indemnification	1396
of loss other than a special purpose financial captive insurance	1397
company contract. However, the special purpose financial captive	1398
insurance company may cede a risk assumed through a special	1399
purpose financial captive insurance company contract to a	1400
third-party reinsurer through the purchase of reinsurance or	1401
retrocession protection if approved by the superintendent.	1402

(2) A special purpose financial captive insurance company may	1403
enter into contracts and conduct other commercial activities	1404
related or incidental to and necessary to fulfill the purposes of	1405
special purpose financial captive insurance company contracts,	1406
insurance securitization, and this section. Those activities may	1407
include:	1408

(a) Entering into special purpose financial captive insurance	1409
company contracts;	1410

(b) Issuing securities of the special purpose financial	1411
captive insurance company in accordance with applicable securities	1412
law;	1413

(c) Complying with the terms of special purpose financial	1414
captive insurance company contracts or securities;	1415

(d) Entering into trust, swap, tax, administration,	1416
reimbursement, or fiscal agent transactions;	1417

(e) Complying with trust indenture, reinsurance,	1418
retrocession, and other agreements necessary or incidental to	1419
effectuate an insurance securitization in compliance with this	1420
section and in the plan of operation considered by the	1421
superintendent under division (F)(5) of section 3964.03 of the	1422
Revised Code.	1423

(D)(1) A special purpose financial captive insurance company	1424
may issue securities, subject to and in accordance with applicable	1425
law, its plan of operation considered by the superintendent under	1426
division (E) of section 3964.03 of the Revised Code, and its	1427
organizational documents.	1428

(2) A special purpose financial captive insurance company, in	1429
connection with the issuance of securities, may enter into and	1430
perform all of its obligations under any required contracts to	1431
facilitate the issuance of these securities.	1432

(3) The obligation to repay principal or interest, or both,	1433
on the securities issued by the special purpose financial captive	1434
insurance company shall reflect the risk associated with the	1435
obligations of the special purpose financial captive insurance	1436
company to the counterparty under the special purpose financial	1437
captive insurance company contract.	1438

(E)(1) A special purpose financial captive insurance company	1439
may enter into asset management agreements, including swap	1440
agreements, guaranteed investment contracts, or other transactions	1441
with the objective of reducing timing differences in the funding	1442
of upfront, or ongoing, transaction expenses, or managing asset,	1443
credit, prepayment, or interest rate risk of the investments of	1444
the special purpose financial captive insurance company to ensure	1445
that the investments are sufficient to assure payment or repayment	1446
of the securities, and related interest or principal payments,	1447
issued pursuant to a special purpose financial captive insurance	1448
company insurance securitization transaction or the obligations	1449
required under a special purpose financial captive insurance	1450
company contract or for any other purpose approved by the	1451
superintendent.	1452

(2) An asset management agreement shall not be entered into	1453
under this section by a special purpose financial captive	1454
insurance company unless it has been approved by the	1455
superintendent.	1456

(F)(1) If a special purpose financial captive insurance	1457
company has entered into a special purpose financial captive	1458
insurance company contract with a counterparty and the special	1459
purpose financial captive insurance company has conducted an	1460
insurance securitization that is made up, in part or in whole, of	1461
the risks of that contract, then the special purpose financial	1462
captive insurance company may enter into a second contract with	1463
the counterparty under which the counterparty is held liable for	1464
those losses or other obligations that were securitized.	1465

(2) Such obligations may be funded and secured with assets	1466
held in trust for the benefit of the counterparty pursuant to	1467
agreements contemplated by this section and invested in a manner	1468
that meet the criteria in sections 3907.14 and 3907.141 of the	1469
Revised Code.	1470

(G)(1) A special purpose financial captive insurance company	1471
may enter into agreements with affiliated companies and third	1472
parties and conduct business necessary to fulfill its obligations	1473
and administrative duties incidental to an insurance	1474
securitization and a special purpose financial captive insurance	1475
company contract entered into under division (F) of this section.	1476

(2) The agreements may include management and administrative	1477
services agreements and other allocation and cost sharing	1478
agreements, or swap and asset management agreements, or both, or	1479
agreements for other contemplated types of transactions provided	1480
in this section.	1481

(H) A special purpose financial captive insurance company	1482
contract entered into under division (F) of this section shall	1483
contain all of the following:	1484

(1) A requirement that the special purpose financial captive	1485
insurance company do either of the following:	1486

(a) Enter into a trust agreement specifying what recoverables	1487
or reserves, or both, the agreement is to cover and to establish a	1488
trust account for the benefit of the counterparty and the security	1489
holders;	1490

(b) Establish such other methods of security acceptable to	1491
the superintendent.	1492

(2) A stipulation that assets deposited in the trust account	1493
shall be valued in accordance with their current fair-market value	1494
and shall consist only of investments permitted by sections	1495
3907.14 and 3907.141 of the Revised Code;	1496

(3) A requirement that, if a trust arrangement is used, the	1497
special purpose financial captive insurance company, before	1498
depositing assets with the trustee, execute assignments, execute	1499
endorsements in blank, or take such actions as are necessary to	1500
transfer legal title to the trustee of all assets requiring	1501
assignment, in order that the counterparty, or the trustee upon	1502
the direction of the counterparty, may negotiate whenever	1503
necessary the assets without consent or signature from the special	1504
purpose financial captive insurance company or another entity;	1505

(4) A stipulation that, if a trust arrangement is used, the	1506
special purpose financial captive insurance company and the	1507
counterparty agree that the assets in the trust account	1508
established pursuant to the contract:	1509

(a) May be withdrawn by the counterparty, or the trustee on	1510
its behalf, at any time, but only in accordance with the terms of	1511
the contract;	1512

(b) Shall be utilized and applied by the counterparty,	1513
without diminution because of insolvency on the part of the	1514
counterparty or the special purpose financial captive insurance	1515
company, only for the purposes set forth in the credit for	1516
reinsurance laws and rules of this state. As used in this	1517
division, "counterparty" includes any successor of the	1518
counterparty by operation of law, including, subject to the	1519
provisions of this section, but without further limitation, any	1520
liquidator, rehabilitator, or receiver of the counterparty.	1521

(I) A special purpose financial captive insurance company	1522
contract entered into under division (F) of this section may	1523
contain provisions that give the special purpose financial captive	1524
insurance company the right to seek approval from the counterparty	1525
to withdraw from the trust all or part of the assets, or income	1526
from them, contained in the trust and to transfer the assets to	1527
the special purpose financial captive insurance company if such	1528
provisions comply with the credit for reinsurance laws and rules	1529
of this state.	1530

(J)(1) A special purpose financial captive insurance company	1531
contract entered into under division (F) of this section, meeting	1532
the requirements of this section, shall be granted credit for	1533
reinsurance treatment or otherwise qualify as an asset or a	1534
reduction from liability for reinsurance ceded by a domestic	1535
insurer to a special purpose financial captive insurance company	1536
as an assuming insurer for the benefit of the counterparty if both	1537
of the following apply:	1538

(a) The assets are held or invested in one or more of the	1539
forms allowed in sections 3907.14 and 3907.141 of the Revised	1540
Code.	1541

(b) The agreement is in compliance with section 3901.64 of	1542
the Revised Code.	1543

(2) The contract shall be granted credit or otherwise qualify	1544
as an asset or reduction from liability only to the extent of the	1545
value of the assets held in trust for, or letters of credit, that	1546
meet the requirements set forth in division (C) of section 3964.05	1547
of the Revised Code, or as approved by the superintendent, for the	1548
benefit of the counterparty under the special purpose financial	1549
captive insurance company contract.	1550

(K) A special purpose financial captive insurance company may	1551
make investments that meet the qualifications set forth in	1552
sections 3907.14 and 3907.141 of the Revised Code, however these	1553
investments shall not be subject to any limitations contained in	1554
such sections as to invested amounts. The superintendent may	1555
prohibit or limit any investment that threatens the solvency or	1556
liquidity of a special purpose financial captive insurance company	1557
or that is not made in accordance with the approved plan of	1558
operation.	1559

Sec. 3964.191.  (A) Notwithstanding the provisions of	1560
sections 3903.01 to 3903.59 of the Revised Code, the	1561
superintendent may apply to the court of common pleas of Franklin	1562
county for an order authorizing the superintendent to rehabilitate	1563
or liquidate a special purpose financial captive insurance company	1564
domiciled in this state on one or both of the following grounds:	1565

(1) There has been embezzlement, wrongful sequestration,	1566
dissipation, or diversion of the assets of the special purpose	1567
financial captive insurance company intended to be used to pay	1568
amounts owed to the counterparty or the holders of special purpose	1569
financial captive insurance company securities.	1570

(2) The special purpose financial captive insurance company	1571
is insolvent and the holders of a majority in outstanding	1572
principal amount of each class of special purpose financial	1573
captive insurance company securities request or consent to	1574
conservation, rehabilitation, or liquidation pursuant to the	1575
provisions of this section.	1576

(B) A court may not grant the relief provided by division (A)	1577
of this section unless, after notice and a hearing, the	1578
superintendent establishes that relief must be granted.	1579

(C) Notwithstanding any other applicable law or rule, upon	1580
any order of rehabilitation or liquidation of a special purpose	1581
financial captive insurance company, the receiver shall manage the	1582
assets and liabilities of the special purpose financial captive	1583
insurance company pursuant to the provisions of section 3964.193	1584
of the Revised Code.	1585

(D) With respect to amounts recoverable under a special	1586
purpose financial captive insurance company contract, the amount	1587
recoverable by the receiver shall not be reduced or diminished as	1588
a result of the entry of an order of conservation, rehabilitation,	1589
or liquidation with respect to the counterparty, notwithstanding	1590
any provision in the contracts or other documentation governing a	1591
special purpose financial captive insurance company insurance	1592
securitization.	1593

(E) An application or petition, or a temporary restraining	1594
order or injunction issued pursuant to sections 3903.01 to 3903.59	1595
of the Revised Code, with respect to a counterparty, does not	1596
prohibit the transaction of business by a special purpose	1597
financial captive insurance company, including any payment by a	1598
special purpose financial captive insurance company made pursuant	1599
to a special purpose financial captive insurance company security,	1600
or any action or proceeding against a special purpose financial	1601
captive insurance company or its assets.	1602

(F) Notwithstanding the provisions of any applicable law or	1603
rule, the commencement of a summary proceeding or other interim	1604
proceeding commenced before a formal delinquency proceeding with	1605
respect to a special purpose financial captive insurance company,	1606
and any order issued by the court, does not prohibit the payment	1607
by a special purpose financial captive insurance company made	1608
pursuant to a special purpose financial captive insurance company	1609
security or special purpose financial insurance company contract,	1610
and also does not prohibit the special purpose financial captive	1611
insurance company from taking any action required to make such	1612
payments.	1613

(G) Notwithstanding the provisions of any other applicable	1614
law or rule, both of the following shall apply:	1615

(1) A receiver of a counterparty may not void a nonfraudulent	1616
transfer by a counterparty to a special purpose financial captive	1617
insurance company of money or other property made pursuant to a	1618
special purpose financial captive insurance company contract.	1619

(2) A receiver of a special purpose financial captive	1620
insurance company may not void a nonfraudulent transfer by the	1621
special purpose financial captive insurance company of money or	1622
other property made to a counterparty pursuant to a special	1623
purpose financial captive insurance company contract or made to or	1624
for the benefit of any holder of a special purpose financial	1625
captive insurance company security on account of the special	1626
purpose financial captive insurance company security.	1627

(H) With the exception of the fulfillment of the obligations	1628
under a special purpose financial captive insurance company	1629
contract, and notwithstanding the provisions of any other	1630
applicable law or rule, the assets of a special purpose financial	1631
captive insurance company, including assets held in trust, shall	1632
not be consolidated with or included in the estate of a	1633
counterparty in any delinquency proceeding against the	1634
counterparty, pursuant to the provisions of this section, for any	1635
purpose, including distribution to creditors of the counterparty.	1636

Sec. 3964.193.  (A) Except as otherwise provided in this	1637
section, documents and information submitted by a company pursuant	1638
to sections 3964.19 to 3964.194 of the Revised Code are not	1639
subject to section 149.43 of the Revised Code, and are	1640
confidential, and may not be disclosed by the superintendent or	1641
any employee of the department of insurance without the written	1642
consent of the company.	1643

(B) Such documents and information may be discoverable in a	1644
civil action in which the company filing the material is a party	1645
upon a finding by a court of competent jurisdiction that the	1646
information sought is relevant and necessary to the case, and the	1647
information sought is unavailable from other, nonconfidential	1648
sources.	1649

(C) The superintendent may, at the superintendent's sole	1650
discretion, share documents that are the subject of this section	1651
with the chief deputy rehabilitator, the chief deputy liquidator,	1652
other deputy rehabilitators and liquidators, and any other person	1653
employed by, or acting on behalf of, the superintendent pursuant	1654
to Chapter 3901. or 3903. of the Revised Code, with other local,	1655
state, federal, and international regulatory and law enforcement	1656
agencies, with local, state, and federal prosecutors, and with the	1657
national association of insurance commissioners and its affiliates	1658
and subsidiaries provided that the recipient agrees to maintain	1659
the confidential or privileged status of the confidential or	1660
privileged work paper and has authority to do so.	1661

Sec. 3964.194.  (A) Notwithstanding any other section of the	1662
Revised Code, a counterparty may take credit for reinsurance ceded	1663
to a special purpose financial captive insurance company that is a	1664
subsidiary or affiliate of the counterparty, if assets valued	1665
using the basis of accounting applicable to the special purpose	1666
financial captive insurance company under division (E) of section	1667
3964.03 of the Revised Code at least equal to the reserves as	1668
determined under the basis elected under division (E) of section	1669
3964.03 of the Revised Code for the reinsurance are held directly	1670
by the ceding counterparty or in trust on behalf of the ceding	1671
counterparty, as security for payment of the obligations under the	1672
reinsurance contract with the reinsuring special purpose financial	1673
captive insurance company.	1674

(B) Such funds shall be held in compliance with the	1675
requirements of section 3901.63 of the Revised Code.	1676

(C) An Ohio domiciled counterparty in recording its	1677
investment in a special purpose financial captive insurance	1678
company domiciled in this state, shall value the investment using	1679
the special purpose financial captive insurance company's	1680
underlying audited statutory equity reflecting the reserves	1681
established pursuant to division (E) of section 3964.03 of the	1682
Revised Code.	1683

(D) Notwithstanding any other provision of the Revised Code	1684
that would otherwise apply, any change in surplus that may be	1685
recognized by any Ohio domiciled ceding counterparty pursuant to	1686
this chapter may be recognized in such ceding counterparty's	1687
calculation of its investment in a United States insurance	1688
subsidiary, controlled and affiliated entity investment, or any of	1689
its Ohio domiciled parents' calculations of their investment in a	1690
United Stated insurance subsidiary, controlled, and affiliated	1691
entities.	1692

Sec. 3964.20.  A captive insurance company organized under	1693
the laws of another state or jurisdiction may become a domestic	1694
captive insurance company pursuant to section 3913.40 of the	1695
Revised Code after complying with all the requirements of this	1696
chapter relative to the organization and formation of a domestic	1697
captive insurance company.	1698

Sec. 3964.21.  The superintendent may adopt rules in	1699
accordance with Chapter 119. of the Revised Code as are reasonably	1700
necessary for the implementation and operation of this chapter.	1701

Sec. 4123.351.  (A) The administrator of workers'	1702
compensation shall require every self-insuring employer, including	1703
any self-insuring employer that is indemnified by a captive	1704
insurance company granted a certificate of authority under Chapter	1705
3694. of the Revised Code, to pay a contribution, calculated under	1706
this section, to the self-insuring employers' guaranty fund	1707
established pursuant to this section. The fund shall provide for	1708
payment of compensation and benefits to employees of the	1709
self-insuring employer in order to cover any default in payment by	1710
that employer.	1711

(B) The bureau of workers' compensation shall operate the	1712
self-insuring employers' guaranty fund for self-insuring	1713
employers. The administrator annually shall establish the	1714
contributions due from self-insuring employers for the fund at	1715
rates as low as possible but such as will assure sufficient moneys	1716
to guarantee the payment of any claims against the fund. The	1717
bureau's operation of the fund is not subject to sections 3929.10	1718
to 3929.18 of the Revised Code or to regulation by the	1719
superintendent of insurance.	1720

(C) If a self-insuring employer defaults, the bureau shall	1721
recover the amounts paid as a result of the default from the	1722
self-insuring employers' guaranty fund. If a self-insuring	1723
employer defaults and is in compliance with this section for the	1724
payment of contributions to the fund, such self-insuring employer	1725
is entitled to the immunity conferred by section 4123.74 of the	1726
Revised Code for any claim arising during any period the employer	1727
is in compliance with this section.	1728

(D)(1) There is hereby established a self-insuring employers'	1729
guaranty fund, which shall be in the custody of the treasurer of	1730
state and which shall be separate from the other funds established	1731
and administered pursuant to this chapter. The fund shall consist	1732
of contributions and other payments made by self-insuring	1733
employers under this section. All investment earnings of the fund	1734
shall be credited to the fund. The bureau shall make disbursements	1735
from the fund pursuant to this section.	1736

(2) The administrator has the same powers to invest any of	1737
the surplus or reserve belonging to the fund as are delegated to	1738
the administrator under section 4123.44 of the Revised Code with	1739
respect to the state insurance fund. The administrator shall apply	1740
interest earned solely to the reduction of assessments for	1741
contributions from self-insuring employers and to the payments	1742
required due to defaults.	1743

(3) If the bureau of workers' compensation board of directors	1744
determines that reinsurance of the risks of the fund is necessary	1745
to assure solvency of the fund, the board may:	1746

(a) Enter into contracts for the purchase of reinsurance	1747
coverage of the risks of the fund with any company or agency	1748
authorized by law to issue contracts of reinsurance;	1749

(b) Require the administrator to pay the cost of reinsurance	1750
from the fund;	1751

(c) Include the costs of reinsurance as a liability and	1752
estimated liability of the fund.	1753

(E) The administrator, with the advice and consent of the	1754
board, may adopt rules pursuant to Chapter 119. of the Revised	1755
Code for the implementation of this section, including a rule,	1756
notwithstanding division (C) of this section, requiring	1757
self-insuring employers to provide security in addition to the	1758
contribution to the self-insuring employers' guaranty fund	1759
required by this section. The additional security required by the	1760
rule, as the administrator determines appropriate, shall be	1761
sufficient and adequate to provide for financial assurance to meet	1762
the obligations of self-insuring employers under this chapter and	1763
Chapter 4121. of the Revised Code.	1764

(F) The purchase of coverage under this section by	1765
self-insuring employers is valid notwithstanding the prohibitions	1766
contained in division (A) of section 4123.82 of the Revised Code	1767
and is in addition to the indemnity contracts that self-insuring	1768
employers may purchase pursuant to division (B) of section 4123.82	1769
of the Revised Code.	1770

(G) The administrator, on behalf of the self-insuring	1771
employers' guaranty fund, has the rights of reimbursement and	1772
subrogation and shall collect from a defaulting self-insuring	1773
employer or other liable person all amounts the administrator has	1774
paid or reasonably expects to pay from the fund on account of the	1775
defaulting self-insuring employer.	1776

(H) The assessments for contributions, the administration of	1777
the self-insuring employers' guaranty fund, the investment of the	1778
money in the fund, and the payment of liabilities incurred by the	1779
fund do not create any liability upon the state.	1780

Except for a gross abuse of discretion, neither the board,	1781
nor the individual members thereof, nor the administrator shall	1782
incur any obligation or liability respecting the assessments for	1783
contributions, the administration of the self-insuring employers'	1784
guaranty fund, the investment of the fund, or the payment of	1785
liabilities therefrom.	1786

Section 2. That existing section 4123.351 of the Revised Code	1787
is hereby repealed.	1788