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

523 words·~2 min read·/ut/title-31a/chapter-37/31a-37-402

A research copy — for the controlling text, always check the official state or federal source. Not legal advice.

Effective 5/7/2025

(1)A sponsor of a sponsored captive insurance company shall be:

(a)an insurer authorized or approved under the laws of a state;

(b)a reinsurer authorized or approved under the laws of a state;

(c)a captive insurance company holding a certificate of authority under this chapter;

(d)an insurance holding company that:

(i)controls an insurer licensed pursuant to the laws of a state; and

(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) ;

(e)an approved captive management firm in Utah or its affiliates; or

(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.

(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:

(i)authorized or approved:

(A)under the laws of a state; or

(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;

(ii)reinsured by a reinsurer authorized or approved by this state; or

(iii)subject to Subsection (2)(b) , secured by a trust fund:

(A)in the United States;

(B)for the benefit of policyholders and claimants;

(C)funded by an irrevocable letter of credit or other asset acceptable to the commissioner; and

(D)held by the sponsor as provided in Subsection 31A-17-404(1) .

(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:

(A)reserves for losses;

(B)allocated loss adjustment expenses;

(C)incurred but unreported losses; and

(D)unearned premiums for business written through the participant's protected cell.

(ii)The commissioner may require the sponsored captive insurance company to increase the funding of a trust established pursuant to this Subsection

(2).

(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:

(A)chartered in this state;

(B)a member of the federal reserve system; or

(C)chartered by another state if that state-chartered bank is acceptable to the commissioner.

(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:

(a)fronted by the sponsored captive insurance company in accordance with Subsection (2)(a) ; or

(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.

Amended by Chapter 175 , 2025 General Session