§ 27-64-4. Establishment of protected cells.
(a) A protected cell company may establish one or more protected cells, with the prior
written approval of the commissioner of a plan of operation or amendments to it submitted
by the protected cell company with respect to each protected cell. Upon the written
approval of the commissioner of the plan of operation, which shall include, but not
be limited to, the specific business objectives and investment guidelines of the protected
cell, the protected cell company may, in accordance with the approved plan of operation,
attribute to the protected cell amounts both reflective of insurance obligations with
respect to its insurance business and obligations relating to the insurance securitization
and assets to fund the obligations. Each protected cell of a protected cell company
shall have its own distinct name or designation, which shall include the words "protected
cell.� The protected cell company shall transfer all assets attributable to each protected
cell to one or more separately established and identified protected cell accounts,
bearing the name or designation of that protected cell. Protected cell assets shall
be held in the protected cell accounts for the purpose of satisfying the obligations
of that protected cell.
(b) All attributions of assets and liabilities between a protected cell and the general
account shall be in accordance with the plan of operation approved by the commissioner
or shall be otherwise approved by the commissioner. Unless otherwise approved by the
commissioner, no other attribution of assets or liabilities may be made by a protected
cell company between the protected cell company's general account and one or more
of its protected cells. Any attribution of assets and liabilities between the general
account and a protected cell, or from investors in the form of principal on a debt
instrument issued by a protected cell company in connection with a protected cell
company securitization shall be in cash or readily marketable securities with established
market values unless otherwise approved in advance in writing by the commissioner.
(c) The creation of a protected cell does not create, in respect of that protected cell,
a legal person separate from the protected cell company. Amounts attributed to a protected
cell under this chapter, including assets transferred to a protected cell account,
are owned by the protected cell company and the protected cell company may not be,
nor hold itself out to be, a trustee with respect to those protected cell assets of
that protected cell account. Notwithstanding the foregoing, the protected cell company
may allow for a security interest to attach to protected cell assets or a protected
cell account when in favor of a creditor of the protected cell and otherwise allowed
under applicable law.
(d) Nothing in this chapter shall be construed to prohibit the protected cell company
from contracting with or arranging for an investment advisor, commodity trading advisor,
or other third party to manage the protected cell assets of a protected cell, provided
that all remuneration, expenses, and other compensation of the third-party advisor
or manager are payable from the protected cell assets of that protected cell and not
from the protected cell assets of other protected cells or the assets of the protected
cell company's general account. The contract shall clearly reference the protected
cell or cells for which the contract has been arranged and shall contain a nonrecourse
provision in favor of the company that prohibits the contracting party from seeking
recourse against, or attaching, the assets of the general account, or the assets of
another protected cell, to satisfy the obligations of any one or more protected cells
which are the subject of the contract.
(e) A protected cell company shall establish any administrative and accounting procedures
that are necessary to properly identify the one or more protected cells of the protected
cell company and the protected cell assets and protected cell liabilities attributable
to the protected cells. It shall be the duty of the directors of a protected cell
company to: (1) Keep protected cell assets and protected cell liabilities separate
and separately identifiable from the assets and liabilities of the protected cell
company's general account, and (2) Keep protected cell assets and protected cell liabilities
attributable to one protected cell separated and separately identifiable from protected
cell assets and protected cell liabilities attributable to other protected cells.
Notwithstanding the foregoing, and subject to the provisions of § 27-64-10, if this section is violated, the remedy of tracing shall be applicable to protected
cell assets when commingled with protected cell assets of other protected cells or
the assets of the protected cell company's general account. The remedy of tracing
shall not be construed as an exclusive remedy.
(f) Unless otherwise approved by the commissioner, the protected cell company shall, when
establishing a protected cell, attribute to the protected cell assets with a value
at least equal to the reserves and other insurance liabilities attributed to that
protected cell.