Missouri Revised Statutes § 379.1351 - Sponsored captive insurance companies, may be formed by whom — definitions — requirements

379.1351. Sponsored captive insurance companies, may be formed by whom — definitions — requirements. — 1. One or more sponsors may form a sponsored captive insurance company under sections 379.1300 to 379.1351. In addition to the general provisions of sections 379.1300 to 379.1351, the provisions of this section shall apply to sponsored captive insurance companies. A sponsored captive insurance company shall be incorporated as a stock insurer with its capital divided into shares and held by the stockholders, as a mutual corporation, as a nonprofit corporation with one or more members, or as a manager-managed limited liability company. 2. As used in this section, unless the context requires otherwise, the following terms shall mean: (1) "Incorporated protected cell", a protected cell that is established as a corporation or limited liability company separate from the sponsored captive insurance company, of which it is a part; (2) "Participant", an entity described in subsection 7 of this section and any affiliates thereof that is insured by a sponsored captive insurance company, where the losses of the participant are limited through a participant contract to such participant's pro rata share of the assets of one or more protected cells identified in such participant contract; (3) "Participant contract", a contract by which a sponsored captive insurance company insures the risks of a participant and limits the losses of each such participant to its pro rata share of the assets of one or more protected cells identified in such participant contract; (4) "Protected cell", a separate account established by a sponsored captive insurance company formed or licensed under this chapter in which assets are maintained for one or more participants in accordance with the terms of one or more participant contracts to fund the liability of the sponsored captive insurance company assumed on behalf of such participants as set forth in such participant contracts, and shall include an incorporated protected cell, as defined in this section; (5) "Sponsor", any entity that meets the requirements of subsection 6 of this section and is approved by the director to provide all or part of the capital and surplus required by applicable loss and to organize and operate a sponsored captive insurance company; (6) "Sponsored captive insurance company", any captive insurance company: (a) In which the minimum capital and surplus required by applicable law is provided by one or more sponsors; (b) That is formed or licensed under the provisions of sections 379.1300 to 379.1351; (c) That insures the risks only of its participants through separate participant contracts; and (d) That 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 sponsored captive insurance company's general account. 3. In addition to the information required by subsection 3 of section 379.1302, each applicant-sponsored captive insurance company shall file with the director the following: (1) Materials demonstrating how the applicant will account for the loss and expense experience of each protected cell at a level of detail found to be sufficient by the director, and how it will report such experience to the director; (2) A statement acknowledging that all financial records of the sponsored captive insurance company, including records pertaining to protected cells, shall be made available for inspection or examination by the director or the director's designated agent; (3) All contracts or sample contracts between the sponsored captive insurance company and any participants; and (4) Evidence that expenses shall be allocated to each protected cell in a fair and equitable manner. 4. A sponsored captive insurance company formed or licensed under this chapter may establish and maintain one or more protected cells to insure risks of one or more participants, subject to the following conditions: (1) The shareholders of a sponsored captive insurance company shall be limited to its participants and sponsors, provided that a sponsored captive insurance company may issue nonvoting securities to other persons on terms approved by the director; (2) Each protected cell shall be accounted for separately on the books and records of the sponsored captive insurance company to reflect the financial condition and results of operations of such protected cell, net income or loss, dividends, or other distributions to participants, and such other factors as may be provided in the participant contract or required by the director; (3) The assets of a protected cell shall not be chargeable with liabilities arising out of any other insurance business the sponsored captive insurance company may conduct; (4) No sale, exchange, transfer of assets, dividend, or distribution may be made by such sponsored captive insurance company between or among any of its protected cells without the consent of such protected cells; (5) No sale, exchange, transfer of assets, dividend, or distribution may be made from a protected cell to a sponsor or participant without the director's approval and in no event shall such approval be given if the sale, exchange, transfer, dividend, or distribution would result in insolvency or impairment with respect to a protected cell; (6) 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 director. No other attribution of assets or liabilities may be made by a sponsored captive insurance company between its general account and any protected cell or between any protected cells. The sponsored 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 under a tax allocation agreement to which the sponsored captive insurance company is a party, including any payments made by or due to be made to the sponsored captive insurance company under 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; (7) In connection with the conservation, rehabilitation, or liquidation of a sponsored captive insurance company, the assets and liabilities of a protected cell shall, to the extent the director determines they are separable, at all times be kept separate from and shall not be commingled with those of other protected cells and the sponsored captive insurance company; (8) The "general account" of a sponsored captive insurance company means all assets and liabilities of the sponsored captive insurance company not attributable to a protected cell; (9) Each sponsored captive insurance company shall annually file with the director such financial reports as the director shall require, which shall include, without limitation, accounting statements detailing the financial experience of each protected cell. Each sponsored captive insurance company shall be subject to the provisions of section 374.190 and sections 374.202 to 374.207, and to the extent applicable, sections 375.930 to 375.948 and sections 375.1000 to 375.1018; (10) Each sponsored captive insurance company shall notify the director in writing within ten business days of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations; (11) No participant contract shall take effect without the director's prior written approval, and the addition of each new protected cell and withdrawal of a participant or termination of any existing protected cell shall constitute a change in the business plan requiring the director's prior written approval. Each participant contract shall state that under section 379.1324 no benefit shall be paid to the participant or any other party from any state guaranty fund based on a claim against the assets of the participant's protected cell in which such assets are insufficient to satisfy the claim; (12) At the discretion of the director, the business written by a sponsored captive, with respect to each cell, shall be: (a) Fronted by an insurance company licensed under the laws of any state; (b) Reinsured by reinsurer authorized or approved by the state of Missouri; or (c) Secured by a trust fund in the United States for the benefit of policyholders and claimants or funded by an irrevocable letter of credit or other arrangement that is acceptable to the director. ­­­ (13) Notwithstanding the provisions of sections 375.1150 to 375.1246 or other laws of this state, and in addition to the provisions of subsection 9 of this section, in the event of an insolvency of a sponsored captive insurance company where the director determines that one or more protected cells remain solvent, the director may separate such cells from the sponsored captive insurance company, and may allow, on application of the sponsor, for the conversion of such protected cells into one or more new or existing sponsored captive insurance companies with a sponsor or sponsors, or one or more other captive insurance companies, under such plan or plans of operation as the director deems acceptable. 5. A protected cell of a sponsored captive insurance company may be formed as an incorporated protected cell, as described in subdivision (1) of subsection 4 of this section. The articles of incorporation or articles of organization of an incorporated protected cell shall refer to the sponsored 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 sponsored captive insurance company's license. A copy of the prior written approval of the director to add the incorporated protected cell, required by subdivision (11) of subsection 4 of this section, shall be attached to and filed with the articles of incorporation or articles of organization. It is the intent of the general assembly under this subsection to provide sponsored captive insurance companies with the option to establish one or more protected cells as a separate corporation formed under chapter 351 or limited liability company formed under chapter 347. This section shall not be construed to limit any rights or protections applicable to protected cells not established as corporations or limited liability companies. 6. A sponsor of a sponsored captive insurance company may be any person approved by the director in the exercise of the director's discretion, based on a determination that the approval of such person as sponsor is consistent with the purposes of sections 379.1300 to 379.1351. In evaluating the qualifications of a proposed sponsor, the director shall consider the type and structure of the proposed sponsor entity, its experience in financial operations, financial stability, and strength of business reputation and such other facts deemed relevant by the director. A risk retention group shall not be either a sponsor or a participant of a sponsored captive insurance company. 7. Associations, corporations, limited liability companies, partnerships, trusts, and other business entities may be participants in any sponsored captive insurance company formed or licensed under this chapter. A sponsor may be a participant in a sponsored captive insurance company. A participant need not be a shareholder of the sponsored captive insurance company or an affiliate thereof. A participant shall insure only its own risks through a sponsored captive insurance company. 8. Notwithstanding the provisions of subsection 4 of this section, the assets of two or more protected cells may be combined for purposes of investment and such combination shall not be construed as defeating the segregation of such assets for accounting or other purposes. Sponsored captive insurance companies shall comply with the investment requirements contained in sections 379.080 and 379.082, as applicable; provided, however, that compliance with such investment requirements shall be waived for sponsored captive insurance companies to the extent that credit for reinsurance ceded to reinsurers is allowed under section 379.1320 or to the extent otherwise deemed reasonable and appropriate by the director. The director shall exercise his or her discretion in approving the accounting standards in use by the company. Notwithstanding any other provision of this chapter, the director may approve the use of alternative reliable methods of valuation and rating. 9. Except as otherwise provided in this section, the provisions of sections 375.1150 to 375.1246 shall apply in full to a sponsored captive insurance company. Upon any order of supervision, rehabilitation, or liquidation of a sponsored captive insurance company, the receiver shall manage the assets and liabilities of the sponsored captive insurance company under this section. Notwithstanding the provisions of sections 375.1150 to 375.1246: (1) The assets of a protected cell shall not be used to pay any expense or claims other than those attributable to such protected cell; and (2) A sponsored captive insurance company's capital and surplus shall at all times be available to pay any expenses of or claims against the sponsored captive insurance company. (L. 2013 S.B. 287)