TITLE 18

Insurance Code

Insurance

CHAPTER 69. CAPTIVE INSURANCE COMPANIES

Subchapter II. Sponsored Captive Insurance Companies


In addition to the provisions of subchapter I of this chapter, the provisions of this subchapter shall apply to sponsored captive insurance companies, and § 6922 of this title shall apply to each protected cell of a sponsored captive insurance company.

75 Del. Laws, c. 150, § 1.;

As used in this subchapter, unless the context requires otherwise:

(1) "Participant" means any person, including any counterparty as defined in § 6952(1) of this title, that is insured by a sponsored captive insurance company, where the losses of the participant are limited through a participant contract to the participant's pro rata share of the assets of 1 or more protected cells identified in the participant contract.

(2) "Participant contract" means a contract by which a sponsored captive insurance company insures the risks of 1 or more participants, and limits the losses of each participant to its pro rata share of the assets of 1 or more protected cells identified in the participant contract, including an SPFC contract as defined in § 6952 of this title.

(3) "Protected cell" means a separate and distinct account established and maintained by or on behalf of a sponsored captive insurance company in which assets, including assets invested pursuant to § 6937 of this title, are accounted for and recorded for 1 or more participants in accordance with the terms of 1 or more participant contracts to fund the liability of the sponsored captive insurance company assumed on behalf of the participants as set forth in the participant contracts.

(4) "Sponsor" means a person qualifying as a sponsor under § 6935 of this title.

(5) "Sponsored captive insurance company" means a captive insurance company, including a special purpose financial captive insurance company as defined in § 6952 of this title:

a. Of which the minimum capital and surplus required by this chapter is provided by 1 or more sponsors;

b. That is licensed under the provisions of this chapter;

c. That insures the risks of its participants only, through separate participant contracts; and

d. That funds its liability to each participant through 1 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.

75 Del. Laws, c. 150, § 1; 76 Del. Laws, c. 161, § 12.;

In addition to the information required by § 6903(c) of this title, each applicant sponsored captive insurance company shall file with the Commissioner the following:

(1) Materials demonstrating to the satisfaction of the Commissioner how the applicant will report to the Commissioner on, and account for, the loss and expense experience of each protected cell;

(2) A statement acknowledging that all financial records of the sponsored captive insurance company, including records pertaining to any protected cells, shall be made available for inspection or examination by the Commissioner or the Commissioner'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.

75 Del. Laws, c. 150, § 1.;

A sponsored captive insurance company may establish and maintain 1 or more protected cells to insure risks of 1 or more participants, subject to the following conditions:

(1) The owners 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 or interests to other persons on terms approved by the Commissioner;

(2) The assets of each protected cell shall be held and 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 of such protected cell, dividends or other distributions to participants of such protected cell, and such other factors regarding such protected cell as may be provided in the applicable participant contract or required by the Commissioner;

(3) The assets of a protected cell shall not be chargeable with liabilities of any other protected cell or, unless otherwise agreed in the applicable participant contract, of the sponsored captive insurance company generally;

(4) No sale, exchange, or transfer of assets, or dividend or other distribution, may be made with respect to a protected cell by such sponsored captive insurance company without the consent of the participants of each affected protected cell;

(5) No sale, exchange, or transfer of assets, or dividend or other distribution (other than a payment to a sponsor in accordance with the applicable participant contract), may be made with respect to a protected cell to a sponsor or a participant without the Commissioner's approval;

(6) Each sponsored captive insurance company shall annually file with the Commissioner such financial reports as the Commissioner shall require, which shall include, without limitation, accounting statements detailing the financial experience of each protected cell;

(7) Each sponsored captive insurance company shall notify the Commissioner in writing promptly and in any event within 10 business days of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations;

(8) No participant contract shall take effect without the Commissioner's prior written approval, and the addition of each new protected cell and withdrawal of any participant or termination of any existing protected cell shall constitute a change in the plan of operation of the sponsored captive insurance company requiring the Commissioner's prior written approval; and

(9) The business written by a sponsored captive insurance company, with respect to each protected cell, shall be:

a. Fronted by an insurance company licensed under the laws of this State or any other state;

b. Reinsured by a reinsurer authorized or approved by this State; or

c. Secured by a trust fund in this State for the benefit of policyholders and claimants or 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 such protected cell. The Commissioner may require the sponsored captive insurance company to increase the funding of any security arrangement established under this paragraph (9). If the form of security is a letter of credit, the letter of credit must be established, issued or confirmed by a financial institution chartered by or licensed or otherwise authorized to do banking business in this State, or by any other financial institution approved by the Commissioner. A trust maintained pursuant to this paragraph (9) shall be established in a form and upon such terms approved by the Commissioner.

75 Del. Laws, c. 150, § 1.;

A sponsor of a sponsored captive insurance company shall be an insurer (including a reinsurer) licensed under the laws of this State or any other state, a captive insurance company licensed under this chapter, or any other person approved by the Commissioner. A risk retention group shall not be a sponsor of a sponsored captive insurance company, and a risk retention group may be a participant of a sponsored captive insurance company only to the extent that it is the sole participant of 1 or more protected cells.

75 Del. Laws, c. 150, § 1.;

(a) Any person may be a participant in any sponsored captive insurance company.

(b) A sponsor may be a participant in a sponsored captive insurance company.

(c) A participant need not be an owner of the sponsored captive insurance company or any affiliate thereof.

(d) Except as otherwise approved by the Commissioner, a participant may insure through a sponsored captive insurance company only its own risks and the risks of its affiliates who are participants.

75 Del. Laws, c. 150, § 1.;

(a) Notwithstanding the provisions of § 6934 of this title, a sponsored captive insurance company may combine the assets of 2 or more protected cells for purposes of investing those assets. Such a combination of assets may not be construed as defeating the segregation of assets for purposes of §§ 6934 and 6938 of this title, or for accounting or other purposes. Sponsored captive insurance companies must comply with:

(1) The investment requirements contained in Chapter 13 of this title, as applicable; or

(2) Investment requirements as may be approved by the Commissioner upon application by a sponsored captive insurance company; or

(3) In the case of a sponsored captive insurance company that is also a special purpose financial captive insurance company, the investment requirements contained in § 6910(b) of this title.

(b) Compliance with the investment requirements set forth in paragraphs (a)(1) and (a)(2) of this section must be waived for sponsored captive insurance companies to the extent that credit for reinsurance ceded to reinsurers is allowed pursuant to § 6911 of this title or to the extent otherwise considered reasonable and appropriate by the Commissioner.

75 Del. Laws, c. 150, § 1; 76 Del. Laws, c. 161, § 13.;

The provisions of § 6918 of this title shall apply to a sponsored captive insurance company and to each protected cell of the sponsored captive insurance company, provided:

(1) The assets of a protected cell may not be used to pay any expenses or claims other than those attributable to such protected cell; and

(2) The minimum capital and surplus of the sponsored captive insurance company shall at all times be available to pay any expenses of or claims against the sponsored captive insurance company.

75 Del. Laws, c. 150, § 1; 77 Del. Laws, c. 252, § 12.;