§ 38a-91tt — Additional requirements for a sponsored captive insurance company licensed as a special purpose financial captive insurance company.

(a) The provisions of this section shall apply to a sponsored captive insurance company licensed as a special purpose financial captive insurance company. For purposes of this section, (1) “general account” means all assets and liabilities of a sponsored captive insurance company licensed as a special purpose financial captive insurance company not attributable to a protected cell, and (2) “special purpose financial captive insurance company” means a sponsored captive insurance company licensed as a special purpose financial captive insurance company. (b) Unless approved otherwise in advance by the commissioner, a participant in a special purpose financial captive insurance company shall be a ceding insurer. Any change in a participant shall require the commissioner's prior approval. (c) (1) A special purpose financial captive insurance company, on behalf of a protected cell, shall be entitled to assert the same claims and defenses in actions in law or equity as if the protected cell were a corporation established under chapter 601, including, but not limited to, claims and defenses in actions at law or equity alleging alter ego, corporate veil piercing, offset, substantive consolidation, equitable subordination or recoupment. (2) In connection with the conservation, rehabilitation or liquidation of a special purpose financial captive insurance company or one or more of its protected cells, such company shall keep the assets and liabilities of a protected cell separate at all times from, and shall not commingle with, those of other protected cells and of the special purpose financial captive insurance company. The assets of one protected cell shall not be used to satisfy the obligations or liabilities of another protected cell or of the special purpose financial captive insurance company based on legal or equitable claims or defenses, including, but not limited to, alter ego, piercing the corporate veil, offset, substantive consolidation, equitable subordination or recoupment, unless such claims or defenses would apply to such protected cell if it were a special purpose financial captive insurance company without separate cells. (d) (1) Notwithstanding subdivision (1) of subsection (a) of section 38a-91rr , a special purpose financial captive insurance company may issue securities of any person approved in advance by the commissioner. (2) (A) Any security issued by a special purpose financial captive insurance company with respect to a protected cell and any other contract or obligation of the special purpose financial captive insurance company with respect to a protected cell shall include the designation of such protected cell and shall include the following statement, or such other statement as may be required by the commissioner: (i) In the case of a security: “The holder of this security shall have no right or recourse against the special purpose financial captive insurance company and its assets other than against assets properly attributable to the designated protected cell and the special purpose financial captive insurance company's general account, to the extent permitted by Connecticut law.”; or (ii) In the case of a contract or obligation: “The counter party to this contract or obligation shall have no right or recourse against the special purpose financial captive insurance company and its assets other than against assets properly attributable to the designated protected cell and the special purpose financial captive insurance company's general account, to the extent permitted by Connecticut law.”. (B) The failure to include such disclosure, in whole or part, in such security, contract or obligation with respect to a protected cell shall not serve as the sole basis for a creditor, ceding insurer or any other person to have recourse against the general account of the special purpose financial captive insurance company in excess of the limitations provided under subsection (i) of this section, or against the assets of any other protected cell. (e) In addition to the provisions of subsections (c) and (d) of section 38a-91rr , a special purpose financial captive insurance company shall be subject to the following with respect to its protected cells: (1) A special purpose financial captive insurance company shall establish a protected cell only for the purpose of insuring or reinsuring risks of one or more reinsurance contracts with a ceding insurer or two or more affiliated ceding insurers, with the intent of facilitating an insurance securitization. A separate protected cell shall be established with respect to each separate securitization transaction; and (2) No special purpose financial captive insurance company shall make a sale, an exchange or another transfer of assets between or among any of its protected cells without the prior approval of the commissioner. (f) (1) Each special purpose financial captive insurance company shall attribute assets and liabilities to the protected cells and the general account in accordance with the plan of operation approved by the commissioner, and shall not attribute any other assets or liabilities between its general account and any protected cell or between any protected cells. (2) Each special purpose financial captive insurance company shall attribute all insurance obligations, assets and liabilities relating to a reinsurance contract entered into with respect to a protected cell and the related insurance securitization transaction, including any securities issued by such company as part of the insurance securitization, to such protected cell. The rights, benefits, obligations and liabilities of any securities attributable to such protected cell and the performance under such reinsurance contract and the related securitization transaction, and any tax benefits, losses, refunds or credits allocated pursuant to a tax allocation agreement to which the special purpose financial captive insurance company is a party, including any payments made by or due to be made to the special purpose financial captive insurance company pursuant to the terms of such agreement, shall reflect such obligations, assets and liabilities relating to such reinsurance contract and the insurance securitization transaction that are attributed to such protected cell. (g) (1) Except as otherwise specified in this section, the terms and conditions set forth in chapter 704c pertaining to administrative supervision of insurers and the conservation, rehabilitation, receiverships and liquidation of insurers shall apply to a special purpose financial captive insurance company or any of such company's protected cells independently and shall not cause or otherwise effect a conservation, rehabilitation, receivership or liquidation of the special purpose financial captive insurance company or another protected cell that is not otherwise insolvent. (2) For purposes of applying the provisions of chapter 704c to a special purpose financial captive insurance company, “insolvency” or “insolvent” means the special purpose financial captive insurance company (A) is unable to pay its obligations when they are due, unless those obligations are the subject of a bona fide dispute, or (B) has failed to meet all criteria and conditions for solvency of the special purpose financial captive insurance company established by the commissioner. In the case of a sponsored captive insurance company licensed as a special purpose financial captive insurance company, the definition of “insolvency” and “insolvent” shall be applied separately to each protected cell and to the special purpose financial captive insurance company's general account. (h) (1) The commissioner may file in the Superior Court of this state, without causing or otherwise effecting the conservation or rehabilitation of an otherwise solvent protected cell of a special purpose financial captive insurance company and subject to the provisions of subparagraph (E) of subdivision (1) of subsection (k) of this section, a petition to authorize the commissioner to conserve, rehabilitate or liquidate a special purpose financial captive insurance company on one or more of the following grounds: (A) Embezzlement, wrongful sequestration, dissipation or diversion of the special purpose financial captive insurance company's assets intended to be used to pay amounts owed to the ceding insurer or the holders of special purpose financial captive insurance company securities; (B) The special purpose financial captive insurance company is insolvent; or (C) The holders of a majority in outstanding principal amount of each class of special purpose financial captive insurance company securities attributable to each particular protected cell request or consent to conservation, rehabilitation or liquidation. (2) The commissioner may file in the Superior Court of this state, without causing or otherwise effecting a conservation, rehabilitation, receivership or liquidation of the special purpose financial captive insurance company generally or another of its protected cells, a petition to authorize the commissioner to conserve, rehabilitate or liquidate one or more of a special purpose financial captive insurance company's protected cells, independently, on one or more of the following grounds: (A) Embezzlement, wrongful sequestration, dissipation or diversion of the special purpose financial captive insurance company's assets attributable to the affected protected cell or cells intended to be used to pay amounts owed to the ceding insurer or the holders of special purpose financial captive insurance company securities of the affected protected cell or cells; (B) The affected protected cell is insolvent; or (C) The holders of a majority in outstanding principal amount of each class of special purpose financial captive insurance company securities attributable to that particular protected cell request or consent to conservation, rehabilitation or liquidation. (3) Except where consent is given as described in subparagraph (C) of subdivision (1) of this subsection and subparagraph (C) of subdivision (2) of this subsection, the court may not grant relief as provided under subdivision (1) or (2) of this subsection unless, after notice and a hearing, the commissioner, who shall have the burden of proof, establishes by clear and convincing evidence that relief must be granted. The court's order may be made in respect of one or more protected cells by name, rather than the special purpose financial captive insurance company generally. (i) (1) Upon the issuance by a court of any order of conservation, rehabilitation, or liquidation of a special purpose financial captive insurance company or one or more of the special purpose financial captive insurance company's protected cells, the receiver shall manage the assets and liabilities of the special purpose financial captive insurance company or the applicable protected cell in accordance with the provisions of this section and section 38a-91ss . (2) The assets attributable to one protected cell shall not be applied to the liabilities attributable to another protected cell unless an asset or liability is attributable to more than one protected cell, in which case the receiver shall deal with the asset or liability in accordance with the terms of any relevant governing instrument or contract. Recourse to the special purpose financial captive insurance company's general account in connection with the conservation, rehabilitation or liquidation of a protected cell shall be limited to the greater of the amount of assets in the general account as of the date such proceeding is commenced or the required minimum capital for the general account as of the date such proceeding is commenced. The assets attributable to one protected cell shall not be set off against the liabilities attributable to another protected cell, and assets attributable to the special purpose financial captive insurance company's general account shall not be set off against the liabilities attributable to any protected cell except to the extent provided in this subdivision. (3) Relief shall not be granted nor shall any order be issued based on equitable theories of recovery, including substantive consolidation, equitable subordination or recoupment, to attach or seize the assets of any solvent protected cell for the benefit of another protected cell or special purpose financial captive insurance company or to pierce the corporate veil of any protected cell, in connection with the conservation, rehabilitation or liquidation of a special purpose financial captive insurance company or one or more protected cells, unless such equitable theories, attachment, seizure or corporate veil piercing would apply to such cell if it were a special purpose financial captive insurance company without separate cells. (j) Notwithstanding any provision in the contracts or other documentation governing the special purpose financial captive insurance company insurance securitization, amounts recoverable by the receiver of a special purpose financial captive insurance company shall not be reduced or diminished as a result of the entry of an order of conservation, rehabilitation or liquidation with respect to the ceding insurer. (k) (1) Notwithstanding the provisions of chapter 704c: (A) An application, a petition, a temporary restraining order or an injunction issued pursuant to the provisions of chapter 704c with respect to a ceding insurer shall not prohibit (i) a special purpose financial captive insurance company from transacting business with the ceding insurer, including making any payment pursuant to a special purpose financial captive insurance company security with respect to a protected cell, or (ii) any action or proceeding against a special purpose financial captive insurance company or its assets; (B) The commencement of a summary proceeding or other interim proceeding commenced before a formal delinquency proceeding or the issuance of any order by the court with respect to a special purpose financial captive insurance company shall not prohibit such company from making payments or taking any action required to make such payments pursuant to a special purpose financial captive insurance company security with respect to a protected cell or a special purpose financial captive insurance company contract; (C) A receiver of a ceding insurer shall not void a nonfraudulent transfer by a ceding insurer to a special purpose financial captive insurance company of money or other property made pursuant to a reinsurance contract; (D) A receiver of a special purpose financial captive insurance company shall not void (i) a nonfraudulent transfer by the special purpose financial captive insurance company of money or other property made to a ceding insurer pursuant to a reinsurance contract or made to or for the benefit of any holder of a special purpose financial captive insurance company security with respect to a protected cell, or (ii) a special purpose financial captive insurance company security; (E) (i) In the event of an insolvency of a special purpose financial captive insurance company where one or more protected cells remain solvent, the commissioner shall separate such cells from such company and shall, on application of a sponsor, allow for the conversion of such cells into one or more special purpose financial captive insurance companies. The commissioner shall issue such orders as the commissioner deems necessary to protect the solvency of the remaining solvent protected cells. (ii) In the event of an insolvency of a protected cell, the special purpose financial captive insurance company's assets shall be accounted for and managed in accordance with subsection (i) of this section and other applicable laws of this state. (2) The provisions of subdivision (1) of this subsection shall not prohibit the commissioner from taking any action permitted under chapter 704c with respect only to the conservation or rehabilitation of a special purpose financial captive insurance company with protected cell or cells, provided the commissioner has sufficient grounds to seek to declare such company insolvent. In such case, with respect to the solvent protected cell or cells, the commissioner shall not prohibit such company from making payments or taking any action required to make such payments pursuant to a special purpose financial captive insurance company security, reinsurance contract or insurance securitization transaction that are attributable to such cell or cells. (l) Except for the fulfillment of the obligations under a special purpose financial captive insurance company contract, the assets of a special purpose financial captive insurance company, including assets held in trust, shall not be consolidated with or included in the estate of a ceding insurer in any delinquency proceeding against the ceding insurer for any purpose.

Legislative History

(Oct. Sp. Sess. P.A. 11-1, S. 72.) History: Oct. Sp. Sess. P.A. 11-1 effective July 1, 2012.