§ 31A-37-402 — Sponsored captive insurance companies -- Certificate of authority mandatory.

(1) A sponsor of a sponsored captive insurance company shall be:
(1)(a) an insurer authorized or approved under the laws of a state;
(1)(b) a reinsurer authorized or approved under the laws of a state;
(1)(c) a captive insurance company holding a certificate of authority under this chapter;
(1)(d) an insurance holding company that:
(1)(d)(i) controls an insurer licensed pursuant to the laws of a state; and
(1)(d)(ii) is subject to registration pursuant to the holding company system of laws of the state of domicile of the insurer described in Subsection (1)(d)(i);
(1)(e) an approved captive management firm in Utah or its affiliates; or
(1)(f) another person approved by the commissioner after finding that the approval of the person as a sponsor is not inconsistent with the purposes of this chapter.
(2) (2)(a) The business written by a sponsored captive insurance company with respect to a protected cell shall be fronted by the sponsored captive insurance company through a controlled unaffiliated contract or an insurer that is:
(2)(a)(i) authorized or approved:
(2)(a)(i)(A) under the laws of a state; or
(2)(a)(i)(B) under any jurisdiction if the insurance company is a wholly owned subsidiary of an insurance company licensed pursuant to the laws of a state;
(2)(a)(ii) reinsured by a reinsurer authorized or approved by this state; or
(2)(a)(iii) subject to Subsection (2)(b), secured by a trust fund:
(2)(a)(iii)(A) in the United States;
(2)(a)(iii)(B) for the benefit of policyholders and claimants;
(2)(a)(iii)(C) funded by an irrevocable letter of credit or other asset acceptable to the commissioner; and
(2)(a)(iii)(D) held by the sponsor as provided in Subsection 31A-17-404(1).
(2)(b) (2)(b)(i) The amount of security provided by the trust fund described in Subsection (2)(a)(iii) may not be less than the reserves associated with the liabilities of the trust fund, including:
(2)(b)(i)(A) reserves for losses;
(2)(b)(i)(B) allocated loss adjustment expenses;
(2)(b)(i)(C) incurred but unreported losses; and
(2)(b)(i)(D) unearned premiums for business written through the participant's protected cell.
(2)(b)(ii) The commissioner may require the sponsored captive insurance company to increase the funding of a trust established pursuant to this Subsection (2).
(2)(b)(iii) If the form of security in the trust described in Subsection (2)(a)(iii) is a letter of credit, the letter of credit shall be established, issued, or confirmed by a bank that is:
(2)(b)(iii)(A) chartered in this state;
(2)(b)(iii)(B) a member of the federal reserve system; or
(2)(b)(iii)(C) chartered by another state if that state-chartered bank is acceptable to the commissioner.
(2)(b)(iv) A trust and trust instrument maintained pursuant to this Subsection (2) shall be in a form and upon terms approved by the commissioner.
(3) The business written by a sponsored captive insurance company with respect to an incorporated cell may be:
(3)(a) fronted by the sponsored captive insurance company in accordance with Subsection (2)(a); or
(3)(b) with prior approval of the sponsored captive insurance company, written directly by the incorporated cell.
(4) A risk retention group may not be either a sponsor or a participant of a sponsored captive insurance company.

Legislative History

Amended by Chapter 175, 2025 General Session