GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2015
SESSION LAW 2015-99
HOUSE BILL 163
AN ACT to make various clarifying and technical changes to the North Carolina captive Insurance Act.
The General Assembly of North Carolina enacts:
SECTION 1. Part 9 of Article 10 of Chapter 58 of the General Statutes reads as rewritten:
"Part 9. Captive Insurance Companies.
"Subpart 1. General Provisions.
…
"§ 58‑10‑340. Definitions.
The following definitions apply in this Part:
(1) Affiliated Affiliate
or affiliated company. – Any company person in the same
corporate system as a parent, an industrial insured, or a member organization
organization, or a participant by virtue of common ownership,
control, operation, or management.
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(9) Captive insurance
company. – Any pure captive insurance company, association captive insurance
company, industrial insured captive insurance company, risk retention group,
protected cell captive insurance company, incorporated cell captive
insurance company, special purpose captive insurance company, or special
purpose financial captive insurance company formed or licensed under this Part.
…
(12) Controlled unaffiliated business. – A person meeting all of the following:
a. The person is not in
the corporate system of a parent and its affiliated companies in the case of a
pure captive insurance company or is not in the corporate system of an
industrial insured and its affiliated companies in the case of an industrial
insured captive insurance company.not an affiliate.
b. The person has an
existing contractual relationship with a parent or one of its affiliated
companies in the case of a pure captive insurance company or with an industrial
insured or one of its affiliated companies in the case of an industrial insured
captive insurance company.an affiliate.
c. The person's risks are
managed by a pure captive insurance company or an industrial insured
captive insurance company, as applicable,company, an affiliate of a captive
insurance company, a participant, or an affiliate of a participant in
accordance with G.S. 58‑10‑470.
(12a) Core. – A protected cell captive insurance company, excluding its protected cells.
…
(17) Incorporated protected
cell. – A protected cell of an incorporated cell captive insurance
company that is organized as a corporation or other legal entity separate
from the incorporated protected cell captive insurance company.company
of which it is a part.
(18) Incorporated
cell captive insurance company. – A protected cell captive insurance company
that is established as a corporation or other legal entity separate from its
incorporated cells that are also organized as separate legal entities.
(17a) Impairment. – When the assets of a captive insurance company or protected cell are less than the sum of its liabilities and required minimum capital and surplus.
…
(25) Mutual insurer. – A
company owned by its policyholders where no stock is available for purchase
on the stock exchanges.purchase.
(26) NAIC. – Defined in G.S. 58‑1‑5.
(27) Organizational documents.
– The documents that must be submitted pursuant to North Carolina law in order
to legally form a business in this State or to obtain a certificate of
authority license to transact business in this State.
(28) Parent. – An individual,
corporation, limited liability company, partnership, association, or other
entity, or individual that directly or indirectly owns, controls, or holds
with power to vote more than fifty percent (50%) of the outstanding voting of
any of the following interests:controls a captive insurance company.
a. Securities of
a pure captive insurance company organized as a stock corporation.
b. Membership
interests of a pure captive insurance company organized as a nonprofit
corporation.
c. Membership
interests of a pure captive insurance company organized as a limited liability
company.
d. Securities of
an SPFC.
(29) Participant. – A Any
person or an entity authorized to be a participant by G.S. 58‑10‑515,
and any affiliate or any controlled unaffiliated business of a
participant, such person that is insured by a protected cell captive
insurance company, if where the losses of the participant are limited
through a participant contract.
…
(32) Protected cell. – Either of the following:
a. A separate account
established by a protected cell captive insurance company formed or licensed
under this Part, in which an identified pool of assets and liabilities is
are segregated and insulated by means of this Part from the
remainder of the protected cell captive insurance company's assets and
liabilities, in accordance with the terms of one or more participant contracts
to fund the liability of the protected cell captive insurance company, with
respect to the participants as set forth in the participant contracts.
b. A separate account established and maintained by an SPFC for one SPFC contract and the accompanying insurance securitization with a counterparty.
(33) Protected cell assets. – All assets, contract rights, and general intangibles identified with and attributable to a specific protected cell of a protected cell captive insurance company.
(34) Protected cell captive insurance company. – Any captive insurance company meeting all of the following:
a. The minimum capital and surplus required by this Part are provided by one or more sponsors.
b. The company is formed
or licensed under this Part.
c. The company insures the risks of separate participants through participant contracts.
d. The company funds its liability to each participant through one or more protected cells and segregates the assets of each protected cell from the assets of other protected cells and from the assets of the protected cell captive insurance company's general account.
(35) Protected cell liabilities. – All liabilities and other obligations identified with and attributed to a specific protected cell of a protected cell captive insurance company.
(36) Pure captive insurance
company. – Any company that insures risks of its parent andparent,
affiliated companies or a companies, controlled unaffiliated business
or businesses.businesses, or any combination of these entities.
…
(39) SPFC or Special Purpose
Financial Captive. – A captive insurance company that has received a certificate
of authoritylicense from the Commissioner for the limited purposes
provided for in this Part.
…
(42) Sponsor. – Any person or
entity that is approved by the Commissioner to provide all or part of the
capital and surplus required by this Part and to organize and operate a
protected cell captive insurance company.
…
"§ 58‑10‑345. Licensing; authority; confidentiality.
(a) Any business entity, when permitted by its organizational documents, may apply to the Commissioner for a license to do any insurance comprised in G.S. 58‑7‑15; provided, however, that:
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(5) No captive insurance
company shall provide personal motor vehicle or homeowner's insurance coverage
or any component thereof.of those coverages on a direct basis.
(6) No captive insurance company shall accept or cede reinsurance except as provided in G.S. 58‑10‑445 and G.S. 58‑10‑605.
(7) No captive insurance company shall provide accident and health insurance on a direct basis.
(8) No captive insurance company shall provide workers' compensation and employer's liability insurance on a direct basis.
(9) No captive insurance company shall provide life insurance or annuities on a direct basis.
(10) A special purpose captive insurance company may provide insurance or reinsurance or both for risks as approved by the Commissioner.
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(h) If the Commissioner is
satisfied that the documents and statements filed by an applicant captive
insurance company business entity comply with this section, then the
Commissioner shall grant a license authorizing it to do insurance business in
this State.
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"§ 58‑10‑355. Organizational examination.
In addition to the processing of
the application, an organizational investigation or examination may be
performed before an applicant applicant business entity is
licensed. Such investigation or examination shall consist of a general survey
of the applicant's applicant business entity's corporate records,
including charters, bylaws, and minute books; verification of capital and
surplus; verification of principal place of business; determination of assets
and liabilities; and a review of such other factors as the Commissioner deems
necessary.
"§ 58‑10‑360. Designation of captive manager.
Before licensing, the applicant
business entity shall report in writing to the Commissioner the name and
address of the any captive manager designated to manage the
captive insurance company. The Commissioner shall approve the captive manager
and may require the submission of additional information regarding the proposed
captive manager in a form and manner as the Commissioner may designate.
…
"§ 58‑10‑370. Capital and surplus requirements.
(a) No applicant business entity shall be issued a license unless it possesses and maintains unimpaired paid‑in capital and surplus of:
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(6) In the case of a special
purpose captive insurance company, not less than two hundred fifty thousand
dollars ($250,000).($250,000) or such other amount determined by the
Commissioner.
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"§ 58‑10‑380. Formation of captive insurance companies.
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(c) A captive
insurance company incorporated or organized in this State shall have not less
than three incorporators or three organizers of whom not less than one shall be
a resident of this State.
(b1) A special purpose captive insurance company may be organized and operated in any form of business organization authorized by the Commissioner.
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(m) With the Commissioner's prior written approval, a captive insurance company may establish one or more separate accounts and may allocate to them amounts to provide for the insurance of risks of certain of its parents, affiliates, controlled unaffiliated businesses, or members, as the case may be, subject to the following:
(1) The income, gains, and losses, realized or unrealized, from assets allocated to a separate account shall be credited to or charged against the account, without regard to other income, gains, or losses of the captive insurance company.
(2) Amounts allocated to a separate account in the exercise of the power granted by this subsection are owned by the captive insurance company, and the captive insurance company may not be nor hold itself out to be a trustee with respect to such amounts.
(3) Unless otherwise approved by the Commissioner, assets allocated to a separate account shall be valued in accordance with the laws or rules otherwise applicable to the captive insurance company's assets.
(4) If and to the extent so provided under the applicable contracts, that portion of the assets of any such separate account equal to the reserves and other contract liabilities with respect to such account shall not be chargeable with liabilities arising out of any other business the captive insurance company may conduct.
(5) No sale, exchange, or other transfer of assets may be made by a captive insurance company between any of its separate accounts or between any other investment account and one or more of its separate accounts unless (i) in the case of a transfer into a separate account, the transfer is made solely to establish the account or to support the operation of the contracts with respect to the separate account to which the transfer is made; and (ii) such transfer, whether into or from a separate account, is made by a transfer of cash or by a transfer of securities having a readily determinable market value, provided that such transfer of securities is approved by the Commissioner. The Commissioner may approve other transfers among such accounts, if, in the Commissioner's opinion, such transfers would be equitable.
(6) To the extent deemed necessary by a captive insurance company in order to comply with any applicable federal or State laws, the captive insurance company, with respect to any separate account, including any separate account which is a management investment company or a unit investment trust, may provide for persons having an interest in the separate account appropriate voting and other rights and special procedures for the conduct of the business of such account, including special rights and procedures relating to investment policy, investment advisory services, selection of independent public accountants, and the selection of a committee, the members of which need not be otherwise affiliated with such company, to manage the business of such account.
"§ 58‑10‑385. Directors.
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(b) No director, officer,
or employee of a captive insurance company shall, except on behalf of the
captive insurance company, accept or be the beneficiary of, any fee, brokerage,
gift, or other compensation because of any investment, loan, deposit, purchase,
sale, payment, or exchange made by or for the captive insurance company,company
unless otherwise approved in advance by the Commissioner, but such person
may receive reasonable compensation for necessary services rendered to the
captive insurance company in his or her usual private, professional, or
business capacity.
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"§ 58‑10‑390. Conflict of interest.
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(b) Each officer, director,
and key employee shall file such disclosure with the Board of Directors
yearly.board of directors or other governing body of the captive
insurance company annually.
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"§ 58‑10‑405. Annual reports.
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(b) Prior to March 1 of
each year, and prior to March 15 of each year in the case of pure
captive insurance companies or industrial insured captive insurance companies, year,
each captive insurance company shall submit to the Commissioner a report of
its financial condition,condition on the preceding December 31,
verified by oath of two of its executive officers. Each captive insurance
company shall report using generally accepted accounting principles, unless the
Commissioner requires, approves, or accepts the use of statutory accounting
principles or other comprehensive basis of accounting. The Commissioner may
require, approve, or accept any appropriate or necessary modifications of the
statutory accounting principles or other comprehensive basis of accounting for
the type of insurance and kinds of insurers to be reported upon. The
Commissioner may require additional information to supplement such report.
Except as otherwise provided, each risk retention group and association captive
insurance company shall file its report in the form required by G.S. 58‑2‑165,
and each risk retention group shall comply with the requirements set forth in G.S. 58‑4‑5.
All other captive insurance companies shall report on forms adopted by the
Commissioner. G.S. 58‑10‑345(f) shall apply to each report
filed pursuant to this section. Branch captive insurance companies shall file
the report required by this section unless otherwise required by G.S. 58‑10‑545.
Special Purpose Financial Captive insurance companies shall report in
accordance with G.S. 58‑10‑625.
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(d) The Commissioner may require any captive insurance company to file a report on its financial condition semiannually, quarterly, monthly, or any other frequency determined by the Commissioner.
(e) The Commissioner may waive the filing of the annual report required by this section subject to the filing of the annual audit required by G.S. 58‑10‑415. A captive insurance company must make a written request for exemption from the annual report at least 30 days prior to the annual report due date. The Commissioner may not simultaneously exempt a captive insurance company from both the annual report and the annual audit requirements.
"§
58‑10‑415. Annual audit and statement of actuarial certification.opinion.
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(d) The annual audit shall consist of the following:
(1) Annual audited financial report. –The annual audited financial report shall include the following:
a. Financial statements. –
Financial statements shall be prepared in accordance with generally accepted
accounting principles, unless the Commissioner requires, approves, or accepts
the use of statutory accounting principles or other comprehensive basis of
accounting, with useful or necessary modifications or adaptations required, approved
approved, or accepted by the Commissioner, and shall be audited by
an independent certified public accountant in accordance with generally
accepted auditing standards as determined by the American Institute of
Certified Public Accountants. The Commissioner may require that the financial statement
statements be supplemented by additional information.
b. Notes to financial statements. – The notes to financial statements shall be those required by generally accepted accounting principles, or as otherwise approved by the Commissioner, and shall also include a reconciliation of differences, if any, between the audited financial report and the report of the captive insurance company's financial condition filed with the Commissioner in accordance with G.S. 58‑10‑405(b).
c. Related required auditor communications. – Copies of related required auditor communications in accordance with generally accepted auditing standards.
(2) Certified public
accountant's affirmation. – The certified public accountant shall furnish a
written statement in the engagement letter or other document submitted to the
captive insurance company that the certified public accountant is aware of of,
and will comply with with, the responsibilities imposed by G.S. 58‑10‑420(b)
and G.S. 58‑10‑420(c).
(5) Certification
of loss reserves and loss expense reserves. – The annual audited financial
report shall be filed with a Statement of Actuarial Opinion evaluating the
captive insurance company's loss reserves and loss expense reserves. The
individual who prepares the Statement of Actuarial Opinion shall be a Fellow of
the Casualty Actuarial Society, a member in good standing of the American
Academy of Actuaries, or an individual who has demonstrated competence in loss
reserve evaluation to the Commissioner. Certification shall be in such form as
the Commissioner deems appropriate.
(e) Every captive insurance company, unless otherwise exempted by the Commissioner, shall annually submit with the annual audited financial report the opinion of an appointed actuary entitled, "Statement of Actuarial Opinion," evaluating the captive insurance company's loss reserves and loss expense reserves. The individual who prepares the Statement of Actuarial Opinion shall be a Fellow of the Casualty Actuarial Society, a member in good standing of the American Academy of Actuaries, or an individual who has demonstrated to the Commissioner competence in loss reserve evaluation.
"§ 58‑10‑420. Independent certified public accountants.
(a) A captive insurance
company, after becoming subject to this Part, shall within 60 days days,
if not already disclosed at the time of application, report to the
Commissioner in writing, the name and address of the independent certified
public accountant retained to conduct the annual audit set forth in G.S. 58‑10‑415.
(b) A captive insurance company shall require its independent certified public accountant to immediately notify in writing an officer and all members of the board of directors or other governing body of the captive insurance company of any determination by the independent certified public accountant that the captive insurance company has materially misstated its financial condition in its report to the Commissioner as required in G.S. 58‑10‑405. A captive insurance company receiving a notification pursuant to this subsection shall forward a copy of the notification to the Commissioner within five business days after receipt of the notification and shall provide the independent certified public accountant with proof that the notification was forwarded to the Commissioner. If the independent certified public accountant fails to receive the proof within the five‑day period required by this subsection, the independent certified public accountant shall within the next five business days submit a copy of the notification to the Commissioner.
…
(d) The lead audit partner
may not act in that capacity for more than five consecutive years. For purposes
of this subsection, lead audit partner means the partner having primary
responsibility for the audit. The person shall be disqualified from acting in
that or similar capacity for the captive insurance company for a period of five
consecutive years. A captive insurance company may make application to the
Commissioner for relief from the above rotation requirement on the basis of
unusual circumstances. This application should be made at least 30 days before
the end of the calendar fiscal year. The Commissioner may
consider the following factors in determining if the relief should be granted:
(1) Number of partners, expertise of the partners, or the number of insurance clients in the firm;
(2) Premium volume of the captive insurance company; or
(3) Number of jurisdictions in which the insurer transacts business.
(e) Risk retention groups shall comply with Part 7 of Article 10 of this Chapter instead of this section.
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"§ 58‑10‑430. Examinations.
(a) Whenever the
Commissioner determines it to be prudent, the Commissioner shall visit a
captive insurance company and inspect and examine its a captive
insurance company's affairs to ascertain its financial condition, its
ability to fulfill its obligations, and whether it has complied with this Part.
The expenses and charges of the examination shall be paid by the captive
insurance company.
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"§ 58‑10‑440. Investment requirements.
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(b) No pure captive
insurance company, industrial insured captive insurance company, protected cell
captive insurance company, incorporated cell captive insurance company, special
purpose captive insurance company, or special purpose financial captive
insurance company shall be subject to any restrictions on allowable
investments, provided that the Commissioner may prohibit or limit any
investment that threatens the solvency or liquidity of any such company.
(c) No pure captive
insurance company or protected cell shall make a loan to or an
investment in its parent company or affiliates company, an affiliated
company, a controlled unaffiliated business, or a participant without prior
written approval of the Commissioner, and any such loan or investment shall be
evidenced by documentation approved by the Commissioner. Loans of minimum
capital and surplus funds required by G.S. 58‑10‑370 are
prohibited.
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"§ 58‑10‑465. Applicable provisions.
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(b) The Commissioner may exempt,
by rule, regulation, or order,exempt special purpose captive
insurance companies, on a case by casecase‑by‑case
basis, from provisions of this Chapter and any rules established under this
Chapter that the Commissioner determines to be inappropriate given the nature
of the risks to be insured.
"§ 58‑10‑470. Establishment of standards regarding risk management.
The Commissioner may adopt rules
establishing standards to ensureso that a parent or itscaptive
insurance company, a participant, or an affiliated company, or an
industrial insured or its affiliated company,company is able to
exercise control of the risk management function of any controlled unaffiliated
business to be insured by a pure captive insurance company or an
industrial insured captive insurance company, respectively;company;
provided, however, that until such time as rules under this section are
adopted, the Commissioner may approve the coverage of such risks by a pure captive
insurance company or an industrial insured captive insurance company.company
on a case‑by‑case basis.
"§ 58‑10‑475. Supervision; rehabilitation; liquidation.
Except as otherwise provided in
this Part, the terms and conditions set forth in Article 30 of this Chapter
shall apply in full to captive insurance companies formed or licensed
under this Part.
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"§ 58‑10‑485. Violations and penalties.
(a) If, after providing the
opportunity for a contested case hearing held in accordance with the provisions
of Article 3A of Chapter 150B of the General Statutes, the Commissioner finds
that any insurer, person, or entity required to be licensed, permitted,licensed
or authorized to transact the business of insurance under this Part has
violated any provision of this Part or any rule or regulation authorized by
this Part, the Commissioner may order:
(1) The insurer, person, or entity to cease and desist from engaging in the act or practice giving rise to the violation.
(2) Payment of a monetary penalty pursuant to G.S. 58‑2‑70.
(3) The suspension or revocation of the insurer's, person's, or entity's license.
…
"§ 58‑10‑490. Inactive captive insurance companies.
(a) As used in this section, unless the context requires otherwise, "inactive captive insurance company" means a captive insurance company which meets both of the following criteria:
(1) The company has ceased transacting the business of insurance.
(2) There are no remaining liabilities associated with policies written or assumed by the company.
(b) The Commissioner may declare a captive insurance company, other than a risk retention group, an inactive captive insurance company, if such captive insurance company meets the criteria of subsection (a) of this section.
(c) An inactive captive insurance company shall possess and maintain unimpaired capital and surplus in an amount determined by the Commissioner.
(d) An inactive captive insurance company shall not be subject to or liable for the payment of any tax under Article 8B of Chapter 105 of the General Statutes.
(e) The Commissioner may exempt an inactive captive insurance company from any of the filing and reporting requirements of this Part.
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"Subpart 2. Protected Cell Captive Insurance Companies.
…
"§ 58‑10‑505. Additional filing requirements for applicant protected cell captive insurance companies.
In addition to the information required by G.S. 58‑10‑345(c), each applicant protected cell captive insurance company shall file with the Commissioner all of the following:
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(3) All contracts or sample contracts between the applicant and any participants.
(4) Evidence thatA
statement describing how expenses shall be allocated to each protected cell
in a fair and equitable manner.
"§ 58‑10‑510. Establishment of protected cells.
(a) A protected cell
captive insurance company formed or licensed under this Part may
establish and maintain one or more incorporated or unincorporated protected
cells, to insure risks of one or more participants, subject to the following
conditions:
…
(5) An
incorporated protected cell may be organized and operated in any form of
business organization authorized by the Commissioner. Each incorporated
protected cell of a protected cell captive insurer shall be treated as a
captive insurer for purposes of this Part. Unless otherwise permitted by the
organizational documents of a protected cell captive insurer, each incorporated
protected cell of the protected cell captive insurer must have the same
directors, secretary, and registered office as the protected cell captive
insurer.
(6) All attributions of
assets and liabilities between a protected cell and the general account shall
be in accordance with the plan plans of operation and participant
contracts approved by the Commissioner. No other attribution of assets or
liabilities shall be made by a protected cell captive insurance company between
the protected cell captive insurance company's general account and its
protected cells. Any attribution of assets and liabilities between
the general account and a protected cell shall be in cash or in readily
marketable securities with established market values.
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(j) All attributions of
assets and liabilities to the protected cells and the general account shall be
in accordance with the plan of operation approved by the Commissioner. No other
attribution of assets or liabilities shall be made by a protected cell captive
insurance company between its general account and any protected cell, or
between any protected cells. The protected cell captive insurance company
shall attribute all insurance obligations, assets, and liabilities relating to
a reinsurance contract entered into with respect to a protected cell to such
protected cell. The performance under such reinsurance contract and any tax
benefits, losses, refunds, or credits allocated pursuant to a tax allocation
agreement to which the protected cell captive insurance company is a party,
including any payments made by or due to be made to the protected cell captive
insurance company pursuant to the terms of such agreement, shall reflect the
insurance obligations, assets, and liabilities relating to the reinsurance
contract that are attributed to such protected cell.
(k) In connection with the conservation,
rehabilitation,rehabilitation or liquidation of a protected cell
or a protected cell captive insurance company, the assets and liabilities
of a protected cell shall, to the extent the Commissioner determines they are
separable, at all times be kept separate from and shall not be commingled with
those of other protected cells and the protected cell captive insurance company.company's
general account.
(l) Each protected cell
captive insurance company shall annually file with the Commissioner such
financial reports as required by the Commissioner. Any such financial report
shall include without limitation accounting statementsa consolidating
schedule detailing the financial experience of each protected cell.
(m) Each protected cell
captive insurance company shall notify the Commissioner in writing within 10
business days of any protected cell that is insolventimpaired, insolvent,
or otherwise unable to meet its claim or expense obligations.
(n) No participant contract shall take effect without the Commissioner's prior written approval. The addition of each new protected cell, the withdrawal of any participant, or the termination of any existing protected cell shall constitute a change in the plan of operation requiring the Commissioner's prior written approval.
(o) The If
required by the Commissioner, the business written by a protected cell
captive insurance company, with respect to each protected cell, must be
secured by one of the following methods:cell shall be:
(1) Fronted by an insurance
company licensed under the laws of any state.approved by the
Commissioner.
(2) Reinsured by a reinsurer
authorized or approved by this State.the Commissioner.
(3) Secured by a trust fund
in the United States for the benefit of policyholders and claimants, funded by
an irrevocable letter of credit, or other arrangement that is acceptable to the
Commissioner. The amount of security provided shall be no less than the
reserves associated with those liabilities which are neither fronted nor
reinsured, including reserves for losses, allocated loss adjustment expenses,
incurred but not reported losses, and unearned premiums for business written
through the participant's protected cell. The Commissioner may require the
protected cell captive insurance company to increase the funding of any
security arrangement established under this subdivision. If the form of
security is a letter of credit, the letter of credit shall be issued by a bank
approved by the Commissioner. A trust maintained pursuant to this subdivision
shall be established in a form and upon such terms approved by the
Commissioner.
(p) Notwithstanding this
Chapter or other laws of this State, and in addition to G.S. 58‑10‑525,
in the event of an insolvency of a protected cell captive insurance company
where the Commissioner determines that one or more protected cells remain
solvent, the Commissioner may separate such cells from the protected cell captive
insurance company and may allow, on application of the protected cell captive
insurance company,company or a protected cell's participant, for
the conversion or transfer of such protected cells into one or more new
or existing protected cell captive insurance companies, or one or more other
captive insurance companies, pursuant to such plan or plans of operation
as the Commissioner deems acceptable.
(q) A protected cell of a protected cell captive insurance company may be transferred to another protected cell captive insurance company or may be converted into another captive insurance company upon the approval of a transfer agreement or conversion plan by the Commissioner. All assets and liabilities of the protected cell immediately before the transfer or conversion shall remain the assets and liabilities after the transfer or conversion. All actions and other legal proceedings which were pending by or against the protected cell immediately prior to the transfer or conversion may be continued by or against the protected cell or the captive into which the protected cell converts.
(r) A protected cell of a protected cell captive insurance company may enter into a contract with its protected cell captive insurance company or with another protected cell of the protected cell captive insurance company that shall be enforceable as if each protected cell of the protected cell captive insurance company were a separate legal entity, even if the protected cell is not organized as an incorporated protected cell.
"§ 58‑10‑512. Incorporated protected cells.
(a) A protected cell of a protected cell captive insurance company may be formed as an incorporated protected cell.
(b) The articles of incorporation or articles of organization of an incorporated protected cell shall refer to the protected cell captive insurance company for which it is a protected cell and shall state that the protected cell is incorporated or organized for the limited purposes authorized by the protected cell captive insurance company's license.
(c) An incorporated protected cell may be organized and operated in any form of business organization authorized by the Commissioner. Unless otherwise permitted by the organizational documents of a protected cell captive insurance company, each incorporated protected cell of the protected cell captive insurance company must have the same directors, secretary, and registered office as the protected cell captive insurance company.
(d) In addition to the information required to be filed pursuant to G.S. 58‑10‑510(a)(1), a protected cell captive insurance company shall meet the requirements of G.S. 58‑10‑345(c)(1) for each incorporated protected cell. Other documents related to the incorporated protected cell shall be filed with the Commissioner as required before issuing policies of insurance.
(e) It is the intent of the General Assembly under this section to provide protected cell captive insurance companies with the option to establish one or more protected cells as a separate corporation or other legal entity. This section shall not be construed to limit any rights or protections applicable to protected cells that are not incorporated protected cells.
(f) Subject to the prior written approval of the protected cell captive insurance company and of the Commissioner, an incorporated protected cell shall be entitled to enter into contracts and undertake obligations in its own name and for its own account. In the case of a contract or obligation to which the protected cell captive insurance company is not a party, either in its own name and for its own account or on behalf of a protected cell, the counterparty to the contract or obligation shall have no right or recourse against the protected cell captive insurance company and its assets other than against assets properly attributable to the incorporated protected cell that is a party to the contract or obligation.
"§ 58‑10‑513. Cell shares and cell dividends.
(a) A protected cell captive insurance company may create and issue shares from any of its protected cells, the proceeds of which shall be included in the assets attributable to the cell from which the cell shares were issued.
(b) The proceeds of the issue of shares other than cell shares created and issued by a protected cell captive insurance company shall be included in the protected cell captive insurance company's general account.
(c) A protected cell captive insurance company may pay dividends to cell shareholders from assets attributable to such cell in accordance with the provisions of G.S. 58‑10‑375.
"§
58‑10‑515. Participation Participants in a protected
cell captive insurance company.
(a) Associations,
corporations, limited liability companies, partnerships, trusts, and other
business entitiesAny person may be participants a
participant in any a protected cell captive insurance company
formed or licensed under this Part.
…
(d) A Except as
otherwise approved by the Commissioner, a participant shall insure only its
own risks and the risks of its affiliates and controlled unaffiliated
businesses through a protected cell captive insurance company.
"§ 58‑10‑517. Company to inform persons they are dealing with protected cell captive insurance company.
A protected cell captive insurance company shall inform any person with whom it transacts business that it is a protected cell captive insurance company, and for the purposes of that transaction, identify or specify the protected cell with which that person is transacting, unless that transaction is not a transaction with a particular protected cell, in which case it shall specify that the transaction is with the protected cell captive insurance company's core.
…
"§ 58‑10‑525. Application of supervision, rehabilitation, and liquidation provisions to protected cell captive insurance companies.
(a) Except as otherwise provided
in this Part, Article 30 of this Chapter shall apply to a protected cell
captive insurance company.company and to each protected cell of a
protected cell captive insurance company.
(b) Upon any order of
supervision, rehabilitation, or liquidation of a protected cell or a protected
cell captive insurance company, the Commissioner or receiver shall manage the
assets and liabilities of the protected cell captive insurance company company,
including assets and liabilities attributed to protected cells, pursuant to
this Part.
…
"Subpart 3. Branch Captive Insurance Companies.
…
"§ 58‑10‑535. Security for payment of branch captive insurance company liabilities.
…
(b) Subject to the prior approval of the Commissioner, the amounts required in subsection (a) of this section may be held in the form of:
(1) A trust formed under a trust agreement and funded by assets acceptable to the Commissioner.
(2) An irrevocable letter of
credit issued or confirmed by a bank approved by the Commissioner.
…
"§
58‑10‑540. Petition for certificate of authority.
In the case of an alien captive
insurance company seeking to become licensed as a branch captive insurance
company, the alien captive insurance company shall petition the Commissioner to
issue a certificate setting forth the Commissioner's finding that, after
considering the character, reputation, financial responsibility, insurance
experience, and business qualifications of the officers and directors of the
alien captive insurance company, the licensing and maintenance of the branch
operations will promote the general good of the State. After the Commissioner
issues a certificate of authorization, the alien captive insurance company
shall comply with all other applicable State statutes or common law.
…
"Subpart 4. Special Purpose Financial Captives.
…
"§ 58‑10‑560. Controlling provisions when conflict exists; exemptions.
…
(b) The Commissioner, by
rule, regulation, or order, Commissioner may exempt an SPFC or its
protected cells, on a case‑by‑case basis, from this Part if the
Commissioner determines regulation under this Part to be inappropriate given
the nature of the risks to be insured.
"§ 58‑10‑565. Application requirements.
…
(l) To ensure minimize
the likelihood that the proposed plan of operation is not hazardous
to any counterparty, the Commissioner may require reasonable safeguards in the
SPFC's plan of operation where applicable and appropriate in the circumstance,
including, without limitation, that certain assets of the SPFC be held in a
trust to secure the obligations of the SPFC to a counterparty under an SPFC
contract.
…
"§ 58‑10‑600. Asset management agreements.
An SPFC may enter into swap
agreements, or other forms of asset management agreements, including guaranteed
investment contracts, or other transactions that have the objective of leveling
timing differences in funding of up‑front or ongoing transaction
expenses, or managing asset, credit, or interest rate risk of the investments
to ensure minimize the likelihood that the investments are not
sufficient to assure payment or repayment of the securities, and related
interest or principal payments, issued pursuant to an SPFC insurance
securitization transaction, or the obligations of the SPFC under the SPFC
contract.
…
"§ 58‑10‑635. Supervision, rehabilitation, or liquidation of SPFC.
…
(e) Notwithstanding another
provision in this Chapter, rules adopted under this Chapter, or another
applicable law or regulation, upon any order of rehabilitation or liquidation
of a SPFC, or one or more of the SPFC's protected cells, the receiver shall
manage the assets and liabilities of the SPFC pursuant to the provisions of
this Part. The receiver shall ensure ascertain that the assets
linked to one protected cell are not applied to the liabilities linked to
another protected cell or to the SPFC generally, unless an asset or liability
is linked 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.
…
"Subpart 5. Other Provisions.
…
"§ 58‑10‑655. Commissioner to share information with Department of Revenue.
Notwithstanding any other provisions of Chapter 58 of the General Statutes, the Commissioner may share confidential and privileged documents, materials, or information with the Department of Revenue. The documents, materials, or information shared shall be considered tax information and subject to the provisions of G.S. 105‑259."
SECTION 2. G.S. 105‑259(b) is amended by adding the following new subdivision to read:
"(49) To exchange information concerning a tax imposed by Article 8B of this Chapter with the North Carolina Department of Insurance when the information is needed to fulfill a duty imposed on the Department."
SECTION 3. This act is effective when it becomes law.
In the General Assembly read three times and ratified this the 8th day of June, 2015.
s/ Daniel J. Forest
President of the Senate
s/ Tim Moore
Speaker of the House of Representatives
s/ Pat McCrory
Governor
Approved 10:06 a.m. this 19th day of June, 2015