In addition to the terms defined in § 31-3931.01 , for the purposes of this subchapter, the term:
(A) “Control” (including the terms “controlling”, “controlled by”, and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person.
(B) Control shall be presumed to exist if a person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing 10% or more of the voting securities of another person, but this presumption may be rebutted by a showing that control does not exist.
(C) The fact that an SPFC exclusively provides reinsurance to a ceding insurer under an SPFC contract shall not by itself constitute common control between the SPFC and the ceding insurer.
(2) “Counterparty” means the insurer that cedes risk to an SPFC and which, unless otherwise approved by the Commissioner, is the parent or an affiliated company of the SPFC.
(3) “Fair value” means:
(A) As to cash, the amount of it; and
(B) As to an asset other than cash:
(i) The amount at which that asset could be bought or sold in a current transaction between arms-length, willing parties.
(ii) The quoted mid-market price for the asset in active markets must be used if available.
(iii) If a quoted mid-market price is not available, a value determined using the best information available considering values of similar assets and other valuation methods, such as present value of future cash flows, historical value of the same or similar assets, or comparison to values of other asset classes, the value of which have been historically related to the subject asset.
(4) “Insolvency” or “insolvent” means an inability to pay obligations when they are due, unless those obligations are the subject of a bona fide dispute.
(5) “Insurance securitization” means a package of related risk-transfer instruments, capital market offerings, and facilitating administrative agreements by which proceeds are obtained by an SPFC directly or indirectly through the issuance of securities, and which proceeds are held in trust pursuant to the provisions of this subchapter to secure the obligations of the SPFC under one or more SPFC contracts with a counterparty, where investment risk to the holders of these securities is contingent upon the obligations of the SPFC to the counterparty under the SPFC contract in accordance with the terms of the transaction.
(6) “Management” means the board of directors, managing board, or other individuals vested with overall responsibility for the management of the affairs of an SPFC, including the election and appointment of officers or other of those agents to act on behalf of the SPFC.
(7) “Organizational document” means the articles of incorporation, articles of organization, bylaws, operating agreement, or other foundational documents that establish an SPFC as a legal entity.
(8) “Permitted investments” means those investments that meet the qualifications set forth in § 31-3932.07 .
(9) “Qualified United States financial institution” means a financial institution that is eligible to act as a fiduciary of a trust and is:
(A) Organized or, in the case of a United States branch or agency office of a foreign banking organization, is licensed under the laws of the United States, any state of the United States, or the District of Columbia; and
(B) Regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies.
(10) “Securities” has the same meaning as the term “security” in § 31-5601.01(31) .
(11) “SPFC” or “Special Purpose Financial Captive” means a captive insurer that is formed for the purpose of an insurance securitization and that only insures or reinsures the risks of its counterparty.
(12) “SPFC contract” means a contract between an SPFC and the counterparty pursuant to which the SPFC agrees to provide insurance or reinsurance protection to the counterparty for risks associated with the counterparty’s insurance or reinsurance business.
(13) “SPFC securities” means securities issued by an SPFC.
(14) “Surplus note” means an unsecured subordinated debt obligation possessing characteristics consistent with paragraph 3 of the Statement of Statutory Accounting Principles No. 41, as amended, National Association of Insurance Commissioners.