H. B. 2950
(By Delegates H. White and Hrutkay)
[Introduced February 10, 2003
; referred to the
Committee on Banking and Insurance then the Judiciary.]
A BILL to amend and reenact article thirty-one, chapter
thirty-three of the code of West Virginia one thousand nine
hundred thirty-one, as amended, relating to captive insurance
companies; providing for sponsored cell captives; and
generally modernizing the captive insurance law.
Be it enacted by the Legislature of West Virginia:
That article thirty-one, chapter thirty-three of the code of
West Virginia, one thousand nine hundred thirty-one, as amended, be
amended and reenacted to read as follows:
ARTICLE 31. CAPTIVE INSURANCE.
§33-31-1. Definitions.
As used in this chapter, unless the context requires
otherwise:
(1) "Affiliated company" means any company in the same corporate system as a parent, an industrial insured, or a member
organization by virtue of common ownership, control, operation or
management.
(2) "Alien captive insurance company" means any insurance
company formed to write insurance business for its parents and
affiliates and licensed pursuant to the laws of an alien
jurisdiction which imposes statutory or regulatory standards in a
form acceptable to the commissioner on companies transacting the
business of insurance in such jurisdiction.
(2)(3) "Association" means any legal association of
individuals, corporations, partnerships or associations that has
been in continuous existence for at least one year, the member
organizations of which collectively and:
(A) The member organizations of which collectively, or which
does itself,
(A)(i) Own, control or hold with power to vote all of the
outstanding voting securities of an association captive insurance
company incorporated as a stock insurer; or
(B)(ii) Have complete voting control over an association
captive insurance company incorporated as a mutual insurer; or
(B) The member organizations of which collectively constitute
all of the subscribers of an association captive insurance company
formed as a reciprocal insurer.
(3)(4) "Association captive insurance company" means any
company that insures risks of the member organizations of the
association, and their affiliated companies.
(5) "Branch business" means any insurance business transacted
by a branch captive insurance company in this state.
(6) "Branch captive insurance company" means any alien captive
insurance company licensed by the commissioner to transact the
business of insurance in this state through a business unit with a
principal place of business in this state.
(7) "Branch operations" means any business operations of a
branch captive insurance company in this state.
(4)(8) "Captive insurance company" means any pure captive
insurance company, association captive insurance company, sponsored
captive insurance company or industrial insured captive insurance
company formed or licensed under the provisions of this chapter.
For purposes of this chapter, a branch captive insurance company
shall be a pure captive insurance company with respect to
operations in this state, unless otherwise permitted by the
commissioner.
(5)(9) "Commissioner" means the insurance commissioner of West
Virginia.
(10) "Controlled unaffiliated business" means any company:
(A) That is not in the corporate system of a parent and affiliated companies;
(B) That has an existing contractual relationship with a
parent or affiliated company; and
(C) Whose risks are managed by a pure captive insurance
company in accordance with section nineteen of this article.
(6)(11) "Industrial insured" means an insured:
(A) Who procures the insurance of any risk or risks by use of
the services of a full-time employee acting as an insurance manager
or buyer;
(B) Whose aggregate annual premiums for insurance on all risks
total at least twenty-five thousand dollars; and
(C) Who has at least twenty-five full-time employees.
(7)(12) "Industrial insured captive insurance company" means
any company that insures risks of the industrial insureds that
comprise the industrial insured group and their affiliated
companies.
(8)(13) "Industrial insured group" means any group that meets
the following criteria:
(A) Any group of industrial insureds that collectively:
(i) Own, control or hold Owns, controls or holds with power to
vote all of the outstanding voting securities of an industrial
insured captive insurance company incorporated as a stock insurer;
or
(ii) Have Has complete voting control over an industrial
insured captive insurance company incorporated as a mutual insurer,
or
(iii) Constitutes all of the subscribers of any industrial
insured captive insurance company formed as a reciprocal insurer.
(B) Any group which is created under the Product Liability
Risk Retention Act of 1986, 15 U.S.C. §3901 et seq., as amended, as
a corporation or other limited liability association taxable as a
stock insurance company or a mutual insurer under the law of the
state of West Virginia.
(9)(14) "Member organization" means any individual,
corporation, partnership or association that belongs to an
association.
(10)(15) "Parent" means a corporation, partnership or
individual that directly or indirectly owns, controls or holds with
power to vote more than fifty percent of the outstanding voting
securities of a pure captive insurance company.
(16) "Participant" means an entity as defined in section
twenty-three of this article, and any affiliates thereof, that are
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 one or more
protected cells identified in the participant contract.
(17) "Participant contract" means a contract by which a
sponsored captive insurance company insures the risks of a
participant and limits the losses of each participant to its pro
rata share of the assets of one or more protected cells identified
in the participant contract.
(18) "Protected cell" means a separate account established by
a sponsored captive insurance company formed or licensed under the
provisions of 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 to such participants as set forth in such
participant contracts.
(11)(19) "Pure captive insurance company" means any company
that insures risks of its parent and affiliated companies, or
controlled unaffiliated business.
(20) "Sponsor" means any entity that meets the requirement of
section twenty-two of this article and is approved by the
commissioner to provide all or part of the capital and surplus
required by applicable law and to organize and operate a sponsored
captive insurance company.
(21) "Sponsored captive insurance company" means 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 this
chapter;
(C) That insures the risks of separate participants through
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.
§33-31-2. Licensing; authority.
(a) Any captive insurance company, when permitted by its
articles of association or charter, may apply to the commissioner
for a license to do any and all insurance comprised in chapter
thirty-three of this code section ten, article one of this chapter
except as indicated in subdivision (4), subsection (a) of this
section: Provided, That said captive insurance company maintains
its principal office and principal place of business in this state:
Provided, however, That:
(1) No pure captive insurance company may insure any risks
other than those of its parent and affiliated companies;
(2) No association captive insurance company may insure any
risks other than those of the member organizations of its
association, and their affiliated companies; or controlled unaffiliated business;
(3) No industrial insured captive insurance company may insure
any risks other than those of the industrial insureds that comprise
the industrial insured group and their affiliated companies;
(4) No captive insurance company may provide personal motor
vehicle or homeowner's insurance coverage or any component thereof;
and
(5) No captive insurance company may accept or cede
reinsurance except as provided in section eleven hereof;
(6) No branch captive insurance company may write any business
in this state except insurance or reinsurance of the employee
benefit business of its parent and affiliated companies which is
subject to the provisions of the Employee Retirement Income
Security Act of 1974, as amended; and
(7) No sponsored captive insurance company may insure any
risks other than those of its participants.
(b) No captive insurance company may do any insurance business
in this state unless:
(1) It first obtains from the commissioner a license
authorizing it to do business in this state;
(2) Its board of directors, or in the case of a reciprocal
insurer its subscribers' advisory committee, holds at least one
meeting each year in this state;
(3) It maintains its principal place of business in this
state, or in the case of a branch captive insurance company,
maintains the principal place of business for its branch operations
in this state; and
(4) It appoints a registered agent to accept service of
process and to otherwise act on its behalf in this state. In case
of a captive insurance company:
(A) Formed as a corporation, whenever such registered agent
cannot with reasonable diligence be found at the registered office
of the captive insurance company, the secretary of state shall be
an agent of such captive insurance company upon whom any process,
notice, or demand may be served;
(B) Formed as a reciprocal insurer, whenever such registered
agent cannot with reasonable diligence be found at the registered
office of the captive insurance company, the secretary of state
shall be an agent of such captive insurance company upon whom any
process, notice, or demand may be served.
(c) Before receiving a license, a captive insurance company:
(1) Formed as a corporation shall file with the commissioner
a certified copy of its charter and bylaws, a statement under oath
of its president and secretary showing its financial condition, and
any other statements or documents required by the commissioner;
(2) Formed as a reciprocal insurer shall:
(i)(A) File with the commissioner a certified copy of the
power of attorney of its attorney-in-fact, a certified copy of its
subscribers' agreement, a statement under oath of its
attorney-in-fact showing its financial condition and any other
statements or documents required by the commissioner; and
(B) Submit to the commissioner for approval a description of
the coverages, deductibles, coverage limits, and rates, together
with any additional information as the commissioner may reasonably
require. In the event of any subsequent material change in any
item in the description, the reciprocal captive insurance company
shall submit to the copy of its charter and bylaws, a statement
under oath of its president and secretary showing its financial
condition, and any other statements or documents required by the
commissioner.
(3) In addition to the information required above, each
applicant captive insurance company shall file with the
commissioner evidence of the following:
(1)(A) The amount and liquidity of its assets relative to the
risks to be assumed;
(2)(B) The adequacy of the expertise, experience, and
character of the person or persons who will manage it;
(3)(C) The overall soundness of its plan of operation;
(4)(D) The adequacy of the loss prevention programs of its parent, member organizations, or industrial insureds as applicable;
and
(5)(E) Such Any other factors deemed considered relevant by
the commissioner in ascertaining whether the proposed captive
insurance company will be able to meet its policy obligations.
(4) In addition to the information required by subdivisions
(1), (2) and (3) of this subsection, each applicant sponsored
captive insurance company shall file with the commissioner the
following:
(A) A business plan 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 commissioner and
how it will report such experience to the commissioner;
(B) 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;
(C) All contracts or sample contracts between the sponsored
captive insurance company and any participants; and
(D) Evidence that expenses shall be allocated to each
protected cell in a fair and equitable manner.
(5) Information submitted pursuant to this subsection shall be and remain confidential, and may not be made public by the
commissioner or any employee or agent of the commissioner without
the written consent of the company, except that:
(A) The information may be discoverable by a party in a civil
action or contested case to which the captive insurance company
that submitted the information is a party, upon a showing by the
party seeking to discover the information that: (i) The
information sought is relevant to and necessary for the furtherance
of such action or case; (ii) the information sought is unavailable
from other nonconfidential sources; and (iii) a subpoena issued by
a judicial or administrative officer of competent jurisdiction has
been submitted to the commissioner: Provided, That, the provisions
of this subdivision (5) shall not apply to any industrial insured
captive insurance company insuring the risks of an industrial
insured group as defined in subdivision (13), section one of this
article; and
(B) The commissioner may, in his or her discretion, disclose
such information to a public officer having jurisdiction over the
regulation of insurance in another state, provided that: (i) The
public official agrees in writing to maintain the confidentiality
of the information; and (ii) the laws of the state in which the
public official serves require the information to be and to remain
confidential.
(d) Each captive insurance company shall pay to the
commissioner a nonrefundable fee of two hundred dollars for
examining, investigating, and processing its application for
license and the commissioner is authorized to retain legal,
financial and examination services from outside the department, the
reasonable costs of which may be charged against the applicant.
The provisions of subsection (r) of section nine, article two of
this chapter shall apply to examinations, investigations and
processing conducted under authority of this section. Upon
issuance of a license, an each captive insurance company shall pay
to the commissioner a nonrefundable annual license fee of three
hundred dollars. In addition, it shall pay fees and charges in
accordance with article three of this chapter.
(e) If the commissioner is satisfied that the documents and
statements that such the captive insurance company has filed comply
with the provisions of this chapter, he or she may grant a license
authorizing it to do insurance business in this state until April
first midnight on the thirty-first day of May, thereafter, which
license may thereafter be renewed.
§33-31-3. Names of companies.
No captive insurance company shall may adopt a name that is
the same, deceptively similar, or likely to be confused with or
mistaken for any other existing business name registered in the state of West Virginia.
§33-31-4. Minimum capital and surplus; letter of credit.
(a) No pure captive insurance company, association captive
insurance company incorporated as a stock insurer sponsored captive
insurance company or industrial insured captive insurance company
incorporated as a stock insurer shall may be issued a license
unless it shall possess possesses and thereafter maintain maintains
unimpaired paid-in capital and surplus of:
(1) In the case of a pure captive insurance company, not less
than one hundred thousand dollars capital and one hundred fifty
thousand dollars surplus;
(2) In the case of an association captive insurance company,
incorporated as a stock insurer not less than three hundred twenty
thousand dollars capital and two hundred eighty thousand dollars
surplus;
(3) In the case of an industrial insured captive insurance
company, incorporated as a stock insurer not less than one hundred
thousand dollars capital and two hundred forty thousand dollars
surplus; or
(4) In the case of a sponsored captive insurance company, not
less than five hundred thousand dollars capital and five hundred
thousand dollars surplus.
(b) Notwithstanding the requirements of subsection (a) of this section, no captive insurance company organized as a reciprocal
insurer under this chapter may be issued a license unless it
possesses and thereafter maintains free surplus of one million
dollars.
(c) The commissioner may prescribe additional capital and
surplus requirements based upon the type, volume, and nature of
insurance business transacted.
(d) Such Capital and surplus may must be in the form of cash
or an irrevocable letter of credit issued by a bank chartered by
the state of West Virginia or a member bank of the federal reserve
system and approved by the commissioner.
(e) In the case of a branch captive insurance company, as
security for the payment of liabilities attributable to the branch
operations, the commissioner shall require that a trust fund,
funded by an irrevocable letter of credit or other acceptable
asset, be established and maintained in the United States for the
benefit of United States policyholders and United States ceding
insurers under insurance policies issued or reinsurance contracts
issued or assumed, by the branch captive insurance company through
its branch operations. The amount of such security may be no less
than the capital and surplus required hereunder and the reserves on
such insurance policies or such reinsurance contracts, including
reserves for losses, allocated loss adjustment expenses, incurred but not reported losses and unearned premiums with regard to
business written through the branch operations; however, the
commissioner may permit a branch captive insurance company that is
required to post security for loss reserves on branch business by
its reinsurer to reduce the funds in the trust account required by
this section by the same amount so long as the security remains
posted with the reinsurer. If the form of security selected is a
letter of credit, the letter of credit must be established by, or
issued or confirmed by, a bank chartered in this state or a member
bank of the federal reserve system and approved by the
commissioner.
§33-31-5. Dividends.
No captive insurance company shall be issued a license unless
it shall possess and thereafter maintain free surplus of;
(1) In the case of a pure captive insurance company, not less
than one hundred fifty thousand dollars;
(2) In the case of an association captive insurance company
incorporated as a stock insurer, not less than two hundred eighty
thousand dollars;
(3) In the case of an industrial insured captive insurance
company incorporated as a stock insurer, not less than two hundred
forty thousand dollars;
(4) In the case of an association captive insurance company incorporated as a mutual insurer, not less than six hundred
thousand dollars; and
(5) In the case of an industrial insured captive insurance
company incorporated as a mutual insurer, not less than four
hundred thousand dollars.
Such surplus may be in the form of cash or an irrevocable
letter of credit issued by a bank chartered by the state of West
Virginia or member bank of the federal reserve system and approved
by the commissioner.
(a) No captive insurance company may pay a dividend except out
of the available surplus funds derived from realized net profits on
its business.
(b) No captive insurance company may pay a dividend out of, or
other distribution with respect to, capital or surplus, in excess
of the limitations set forth in subsection (d), section five,
article twenty-seven of this chapter, without the prior approval of
the commissioner. Approval of an ongoing plan for the payment of
dividends or other distributions shall be conditioned upon the
retention, at the time of each payment, of capital or surplus in
excess of amounts specified by, or determined in accordance with
formulas approved by, the commissioner.
§33-31-6. Formation of captive insurance companies in this state.
(a) A pure captive insurance company or a sponsored captive insurance company shall be incorporated as a stock insurer with its
capital divided into shares and held by the stockholders.
(b) An association captive insurance company or an industrial
insured captive insurance company may be: incorporated
(1) Incorporated as a stock insurer with its capital divided
into shares and held by the stockholders; or
(2) Incorporated as a mutual insurer without capital stock,
the governing body of which is elected by the member organizations
of its association; or
(3) Organized as a reciprocal insurer in accordance with
article twenty-one of this chapter.
(c) A captive insurance company incorporated or organized in
this state shall have at least one not less than three
incorporators who or two organizers of whom not less than one shall
be a resident of this state.
(d) In the case of a captive insurance company:
(d)(1) Before Formed as a corporation before the articles of
association incorporation are transmitted to the secretary of
state, the incorporators shall petition the commissioner to issue
a certificate setting forth his or her finding that the
establishment and maintenance of the proposed corporation will
promote the general good of the state. In arriving at such finding
the commissioner shall consider:
(1)(A) The character, reputation, financial standing and
purpose of the incorporators;
(2)(B) The character, reputation, financial responsibility,
insurance experience and business qualifications of the officers
and directors; and
(3)(C) Such Any other aspects as the commissioner deems
considers advisable.
The articles of association incorporation, such the
certificate and the organization fee shall be transmitted to the
secretary of state, who shall thereupon record both the articles of
incorporation and the certificate.
(2) Formed as a reciprocal insurer, the organizers shall
petition the commissioner to issue a certificate setting forth the
commissioner's finding that the establishment and maintenance of
the proposed association will promote the general good of the
state. In arriving at such a finding the commissioner shall
consider:
(A) The character, reputation, financial standing and purposes
of the organizers;
(B) The character, reputation, financial responsibility,
insurance experience, and business qualifications of the
attorney-in-fact; and
(C) Any other aspects as the commissioner considers advisable.
(3) 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. The alien captive insurance company may
register to do business in this state after the commissioner's
certificate is issued.
(f)(e) The capital stock of a captive insurance company
incorporated as a stock insurer shall be issued at not less than
may be authorized with no par value.
(f) In the case of a captive insurance company:
(g)(1) At Formed as a corporation, at least one of the members
of the board of directors of a (captive insurance company
incorporated in this state) shall be a resident of this state.
(2) Formed as a reciprocal insurer, at least one of the
members of the subscribers' advisory committee shall be a resident
of this state.
(h)(g) Captive insurance companies formed as corporations
under the provisions of this chapter shall have the privileges and
be subject to the provisions of the general corporation law as well as the applicable provisions contained in this chapter. Captive
insurance companies are subject to the provisions of article
thirty-three twenty-seven, article thirty-four, thirty-four-a,
article thirty-seven and article thirty-nine of this chapter. In
the event of conflict between the provisions of said general
corporation law and the provisions of this chapter, the latter
shall control.
§33-31-7. Reports and statements.
(a) Captive insurance companies shall not be required to make
any annual report except as provided in this chapter.
(b) On or before the first day of March first of each year,
each captive insurance company shall submit to the commissioner a
report of its financial condition, verified by oath of two of its
executive officers its president and secretary. Each association
captive insurance company shall file its report in the form
required by section fourteen, article three four of this chapter.
The commissioner shall by rule propose the form in which pure
captive insurance companies and industrial insured captive
insurance companies shall report.
§33-31-8. Examinations and investigations.
(a) At least once in three years, and whenever the
commissioner determines it to be prudent, he or she shall
personally, or by some competent person appointed by him or her, visit each captive insurance company and thoroughly inspect and
examine its affairs to ascertain its financial condition, its
ability to fulfill its obligations and whether it has complied with
the provisions of this chapter. The commissioner upon application,
in his or her discretion, may extend the aforesaid three-year
period to five years, provided said captive insurance company is
subject to a comprehensive annual audit during such period of a
scope satisfactory to the commissioner by independent auditors
approved by him or her. The captive insurance company shall be
subject to the provisions of section nine, article two of this
chapter in regard to the expense and conduct of the examination.
(b) The provisions of section nine, article two of this
chapter shall apply to examinations conducted under this section.
(c) All examination reports, preliminary examination reports
or results, working papers, recorded information, documents and
copies thereof produced by, obtained by or disclosed to the
commissioner or any other person in the course of any examination
made under this section are confidential and are not subject to
subpoena and may not be made public by the commissioner or an
employee or agent of the commissioner without the written consent
of the company, except to the extent provided in this subsection.
Nothing in this subsection shall prevent the commissioner from
using such information in furtherance of the commissioner's regulatory authority under this chapter. The commissioner may, in
his or her discretion, grant access to such information to public
officers having jurisdiction over the regulation of insurance in
any other state or country, or to law-enforcement officers of this
state or any other state or agency of the federal government at any
time, so long as such officers receiving the information agree in
writing to hold it in a manner consistent with this section.
(d)(1) The provisions of this section shall apply to all
business written by a captive insurance company; Provided, That
the examination for a branch captive insurance company shall be of
branch business and branch operations only, as long as the branch
captive insurance company provides annually to the commissioner a
certificate of compliance, or its equivalent, issued by or filed
with the licensing authority of the jurisdiction in which the
branch captive insurance company is formed, and demonstrates to the
commissioner's satisfaction that it is operating in sound financial
condition in accordance with all applicable laws and regulations of
such jurisdiction.
(2) As a condition of licensure, the alien captive insurance
company must grant authority to the commissioner for examination of
the affairs of the alien captive insurance company in the
jurisdiction in which alien captive insurance company is formed.
§33-31-9. Grounds and procedures for suspension or revocation of license.
(a) The license of a captive insurance company to do any
insurance business in this state may be suspended or revoked by the
commissioner for any of the following reasons:
(1) Insolvency or impairment of capital or surplus;
(2) Failure to meet the requirements of section four or five
of this article;
(3) Refusal or failure to submit an annual report, as required
by section seven of this article, or any other report or statement
required by law or by lawful order of the commissioner;
(4) Failure to comply with the provisions of its own charter
or bylaws or other organizational document;
(5) Failure to submit to examination or any legal obligation
relative thereto, as required by section eight of this article;
(6) Refusal or failure to pay the cost of examination as
required by section eight of this article;
(7) Use of methods that, although not otherwise specifically
prohibited by law, nevertheless render its operation detrimental or
its condition unsound with respect to the public or to its
policyholders; or
(8) Failure otherwise to comply with the laws of this state.
(b) If the commissioner finds, upon examination, hearing or
other evidence, that any captive insurance company has committed any of the acts specified in subsection (a) of this section, he or
she may suspend or revoke such license if he or she deems it in the
best interest of the public and the policyholders of such captive
insurance company, notwithstanding any other provision of this
title chapter.
§33-31-10. Legal investments.
(a) An association captive insurance company, sponsored
captive insurance company and an industrial insured captive
insurance company insuring the risks of an industrial insured group
defined in subdivision (13), section one of this article shall
comply with the investment requirements of the commissioner set
forth in article eight of this chapter; however compliance with
such investment requirements shall be waived for sponsored captive
insurance companies to the extent that credit for risks ceded to
reinsurers is allowed pursuant to section eleven of this article or
to the extent otherwise considered reasonable and appropriate by
the commissioner. Section eleven, article seven of this chapter
shall apply to association captives, sponsored captive insurance
companies and industrial insured captive insurance companies
insuring the risks of industrial insured groups defined in
subdivision (13), section one of this article except to the extent
it is inconsistent with approved accounting standards in use by the
association captive insurance company, sponsored captive insurance company or industrial insured captive insurance company insuring
the risks of an industrial insured group. Notwithstanding any
other provision of this chapter, the commissioner may approve the
use of alternative reliable methods of valuation and rating.
(b) No pure captive insurance company or industrial insured
captive insurance company may be insuring the risks of an
industrial insured group as defined in subdivision (13), section
one of this article shall be subject to any restrictions on
allowable investments whatever including those set forth in article
eight of this chapter. The commissioner may, however, prohibit or
limit any investment that threatens the solvency or liquidity of
any such company.
(c) Only a pure captive insurance company may make loans to
its parent company or affiliates. No loans to a parent company or
any affiliate will be permitted without prior written approval of
the commissioner and must be evidenced by a note in a form approved
by the commissioner. Loans of minimum capital and surplus funds
required by section four of this article are prohibited.
§33-31-11. Reinsurance.
A captive insurance company may procure reinsurance or issue
policies of reinsurance to other licensed insurers transacting like
kinds of insurance, pursuant to the provisions of section fifteen,
article four of this chapter.
(a) Any captive insurance company may provide reinsurance,
comprised in section fifteen-a, article four of this chapter, on
risks ceded by any other insurer.
(b) Any captive insurance company may take credit for reserves
on risks or portions of risks ceded to reinsurers complying with
the provisions of sections fifteen-a and fifteen-b, article four
of this chapter. Prior approval of the commissioner shall be
required for ceding or taking credit for reserves on risks or
portions of risks ceded to reinsurers not complying with sections
fifteen-a and fifteen-b, article four of this chapter except for
business written by an alien captive insurance company outside of
the United States.
(c) In addition to reinsurers authorized under the provisions
of sections fifteen-a and fifteen-b, article four of this chapter,
a captive insurance company may take credit for reserves on risks
or portions of risks ceded to a pool, exchange or association
acting as a reinsurer which has been authorized by the
commissioner. The commissioner may require any other documents,
financial information or other evidence that such a pool, exchange
or association will be able to provide adequate security for its
financial obligations. The commissioner may deny authorization or
impose any limitations on the activities of a reinsurance pool,
exchange or association that, in his judgment, are necessary and proper to provide adequate security for the ceding captive
insurance company and for the protection and consequent benefit of
the public at large.
(d) For all purposes of this chapter, insurance by a captive
insurance company of any workers' compensation qualified
self-insured plan of its parent and affiliates shall be deemed to
be reinsurance.
§33-31-12. Rating organizations; memberships.
No captive insurance company may be required to join a rating
organization.
§33-31-13. Exemption from compulsory associations.
No captive insurance company, including a captive insurance
company organized as a reciprocal insurer under article twenty of
this chapter may be permitted to join or contribute financially to
any plan, pool, association or guaranty or insolvency fund in this
state, nor may any captive insurance company, or its insured, or
its parent or any affiliated company, or any member organization of
its association, or in the case of a captive insurance company
organized as a reciprocal insurer, or any subscriber thereof,
receive any benefit from any such plan, pool, association or
guaranty or insolvency fund for claims arising out of the
operations of such captive insurance company.
§33-31-14. Tax on premiums collected.
(a) Each captive insurance company shall pay to the
commissioner on or before, in the month of February first day of
March of each year, a tax at the rate of five tenths of one two
percent on the gross amount of all premiums collected or contracted
for on policies or contracts of insurance covering property or
risks in this state and on risks and property situated elsewhere
upon which no premium tax is otherwise paid during the year ending
the thirty-first day of December thirty-first next preceding, after
deducting from the gross amount of premiums, subject to the tax,
the amount received as reinsurance premiums on business in the
state and the amount paid to policyholders as return premiums which
shall include dividends on unabsorbed premiums or premium deposits
returned or credited to policyholders. Each captive insurance
company shall also be subject to the additional premium taxes
levied by sections fourteen-a and fourteen-d of article three of
this chapter and the examination assessment fee levied by section
nine of article two of this chapter.
(b) The tax provided for in this section shall constitute all
taxes collectible under the laws of this state from any captive
insurance company, and no other premium tax or other taxes shall be
levied or collected from any captive insurance company by the state
or any county, city or municipality within this state, except ad
valorem taxes.
§33-31-15. Rules.
The commissioner may establish rules and from time to time
amend such rules relating to captive insurance companies as are
necessary to enable him or her to carry out the provisions of this
chapter.
§33-31-16. Laws applicable.
No provisions of this code, other than those contained in this
chapter or contained in specific references contained in this
chapter, may apply to captive insurance companies.
§33-31-17. Delinquency.
(a) Except as otherwise provided in this section, the terms
and conditions set forth in article ten of this chapter, pertaining
to insurance reorganizations, receiverships and injunctions, shall
apply in full to captive insurance companies formed or licensed
under this chapter.
(b) In the case of a sponsored captive insurance company:
(1) The assets of a protected cell may not be used to pay any
expenses or claims other than those attributable to the protected
cell; and
(2) Its capital and surplus shall at all times be available to
pay any expenses of or claims against the sponsored captive
insurance company.
§33-31-18. Rules for controlled unaffiliated business.
The commissioner shall adopt rules establishing standards to
ensure that a parent or affiliated company is able to exercise
control of the risk management function of any controlled
unaffiliated business to be insured by the pure captive insurance
company; however, until such time as rules under this section are
adopted, the commissioner may by temporary order grant authority to
a pure captive insurance company to insure such risks.
§33-31-19. Conversion to or merger with reciprocal insurer.
(a) An association captive insurance company or industrial
insured group formed as a stock or mutual corporation may be
converted to or merged with and into a reciprocal insurer in
accordance with a plan therefor and the provisions of this section.
(b) Any plan for such conversion or merger shall:
(1) Be fair and equitable to the shareholders, in the case of
a stock insurer, or the policyholders, in the case of a mutual
insurer; and
(2) Provide for the purchase of the shares of any
nonconsenting shareholder of a stock insurer or the policyholder
interest of any nonconsenting policyholder of a mutual insurer in
substantially the same manner and subject to the same rights and
conditions as are accorded a dissenting shareholder, in the case of
a stock insurer, or a dissenting policyholder, in the case of a
mutual insurer.
(c) In the case of a conversion authorized under subsection
(a) of this section:
(1) The conversion shall be accomplished under any reasonable
plan and procedure as may be approved by the commissioner, however
the commissioner may not approve any plan of conversion unless the
plan:
(A) Satisfies the provisions of subsection (b) of this
section;
(B) Provides for a hearing, of which notice has been given to
the insurer, its directors, officers and stockholders, in the case
of a stock insurer, or policyholders, in the case of a mutual
insurer, all of whom shall have the right to appear at the hearing,
except that the commissioner may waive or modify the requirements
for the hearing: Provided, That if a notice of hearing is
required, but no hearing is requested, the commissioner may cancel
the hearing;
(C) Provides for the conversion of existing stockholder or
policyholder interests into subscriber interests in the resulting
reciprocal insurer, proportionate to stockholder or policyholder
interests in the stock or mutual insurer; and
(D) Is approved:
(i) In the case of a stock insurer, by a majority of the
shares entitled to vote represented in person or by proxy at a duly called regular or special meeting at which a quorum is present; or
(ii) In the case of a mutual insurer, by at least two-thirds
of the voting interests of policyholders represented in person or
by proxy at a duly called regular or special meeting thereof at
which a quorum is present;
(2) The commissioner shall approve the plan of conversion if
the commissioner finds that the conversion will promote the general
good of the state in conformity with those standards set forth in
subdivision (2), subsection (d), section six of this article;
(3) If the commissioner approves the plan, the commissioner
shall amend the converting insurer's certificate of authority to
reflect conversion to a reciprocal insurer and issue the amended
certificate of authority to the company's attorney-in-fact;
(4) Upon the issuance of an amended certificate of authority
of a reciprocal insurer by the commissioner, the conversion shall
be effective; and
(5) Upon the effectiveness of the conversion, the corporate
existence of the converting insurer shall cease and the resulting
reciprocal insurer shall notify the secretary of state of such
conversion.
(d) A merger authorized under subsection (a) of this section
shall be accomplished substantially in accordance with the
procedures set forth in sections twenty-five and twenty-eight, article five of this chapter, except that, solely for purposes of
such merger:
(1) The plan of merger shall satisfy the provisions of
subsection (b) of this section;
(2) The subscribers' advisory committee of a reciprocal
insurer shall be equivalent to the board of directors of a stock or
mutual insurance company;
(3) The subscribers of a reciprocal insurer shall be the
equivalent of the policyholders of a mutual insurance company;
(4) If a subscribers' advisory committee does not have a
president or secretary, the officers of such committee having
substantially equivalent duties shall be considered the president
or secretary of the committee;
(5) The commissioner shall approve the articles of merger if
the commissioner finds that the merger will promote the general
good of the state in conformity with those standards set forth in
subdivision (2), subsection (d), section six of this article. If
the commissioner approves the articles of merger, the commissioner
shall indorse his or her approval thereon and the surviving insurer
shall present the same to the secretary of state at the secretary
of state's office;
(6) Notwithstanding section four of this article, the
commissioner may permit the formation, without surplus, of a captive insurance company organized as a reciprocal insurer, into
which an existing captive insurance company may be merged for the
purpose of facilitating a transaction under this section, however,
there may be no more than one authorized insurance company
surviving such merger; and
(7) An alien insurer may be a party to a merger authorized
under subsection (a) of this section; however the requirements for
a merger between a domestic and a foreign insurer under section
twenty-five, article five of this chapter shall apply to a merger
between a domestic and an alien insurer under this subsection.
Such alien insurer shall be treated as a foreign insurer under
section twenty-five, article five of this chapter and such other
jurisdictions shall be the equivalent of a state for purposes of
section twenty-five, article five of this chapter.
§33-31-20. Sponsored captive insurance companies.
(a) One or more sponsors may form a sponsored captive
insurance company under this chapter.
(b) A sponsored captive insurance company formed or licensed
under the provisions of 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;
(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 the
protected cell, net income or loss, dividends or other
distributions to participants, and any other factors as may be
provided in the participant contract or required by the
commissioner;
(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 or other transfer of assets 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 commissioner's approval and in no event may
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) Each sponsored captive insurance company shall annually
file with the commissioner any financial reports that 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 within ten 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 of any existing
protected cell shall constitute a change in the business plan
requiring the commissioner's prior written approval; and
(9) 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 a reinsurer authorized or approved by the
state of West Virginia; or
(C) 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 asset that is acceptable to the
commissioner. The amount of security provided by a trust fund
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 sponsored captive to increase the funding of any trust
as established under this subdivision. If the form of security in
the trust is a letter of credit, the letter of credit must be
established, issued or confirmed by a bank chartered in this state,
a member of the federal reserve system, or a bank chartered by
another state if such state chartered bank is acceptable to the
commissioner. A trust and trust instrument maintained pursuant to
this subdivision shall be established in a form and upon such terms
approved by the commissioner.
§33-31-21. Qualification of sponsors.
A sponsor of a sponsored captive insurance company must be an
insurer licensed under the laws of any state, a reinsurer
authorized or approved under the laws of any state or a captive
insurance company formed or licensed under this chapter. A risk
retention group shall not be either a sponsor or a participant of
a sponsored captive insurance company.
§33-31-22. Participants in sponsored captive insurance companies.
(a) Associations, corporations, limited liability companies,
partnerships, trusts and other business entities may be a
participant in any sponsored captive insurance company formed or
licensed under this chapter.
(b) A sponsor may be a participant in a sponsored captive
insurance company.
(c) A participant need not be a shareholder of the sponsored
captive insurance company or any affiliate thereof.
(d) A participant may insure only its own risks through a
sponsored captive insurance company.
NOTE: The purpose of this bill is to rewrite article
thirty-one, chapter thirty-three of the code, to provide for
sponsored cell captives and otherwise modernize our captive
insurance law to remain competitive with states which presently
contract such business.
Strike-through indicates language that would be stricken from
the present law, and underscoring indicates new language that would
be added.
§§33-31-17 through 22 are new; therefore, strike-throughs and
underscoring have been omitted.
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