Captive Insurers

KRS tit. XXV, ch. 304, subtit. 49

in effect

KRS 304.49-010 Definitions for KRS 304.49-010 to 304.49-230

304.49-010. Definitions for KRS 304.49-010 to 304.49-230 As used in KRS 304.49-010 to 304.49-230, 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) "Agency captive insurer" means a captive insurer that is owned by one (1) or more business entities that are licensed insurance producers and that only insure risks on policies placed through their owners; (3) "Captive insurer" means any pure captive insurer, consortium captive insurer, sponsored captive insurer, special purpose captive insurer, agency captive insurer, or industrial insured captive insurer formed or issued a certificate of authority under the provisions of KRS 304.49-010 to 304.49-230. For purposes of KRS 304.49-010 to 304.49-230, a branch captive insurer shall be a pure captive insurer with respect to operations in Kentucky, unless otherwise permitted by the commissioner; (4) "Consortium" means any bona fide legal association of individuals, corporations, limited liability companies, partnerships, associations, or other entities, the member organizations of which collectively, or which does itself: (a) Own, control, or hold with power to vote all of the outstanding voting securities or member interests of a consortium captive insurer incorporated as a stock insurer; or (b) Have complete voting control over a consortium captive insurer organized as a mutual insurer; or (c) The member organizations of which collectively constitute all of the subscribers of a consortium captive insurer formed as a reciprocal insurer; (5) "Consortium captive insurer" means any company that insures risks of the member organizations of the consortium and that also may insure the risks of affiliated companies of the member organizations and the risks associated with the consortium itself; (6) "Excess workers' compensation insurance" means, in the case of an employer that has insured or self-insured its workers' compensation risks in accordance with applicable state or federal law, insurance in excess of a specified per incident or aggregate limit established by the commissioner; (7) "Industrial insured" means an insured as defined in KRS 304.11-020(2); (8) "Industrial insured captive insurer" means any company that insures risks of the industrial insureds that comprise the industrial insured group, and their affiliated companies; (9) "Industrial insured group" means any group that meets either of the following criteria: (a) Any group of industrial insureds that collectively: 1. Own, control, or hold with power to vote all of the outstanding voting securities of an industrial insured captive insurer incorporated as a stock insurer; 2. Have complete voting control over an industrial insured captive insurer incorporated as a mutual insurer; or 3. Constitute all of the subscribers of an industrial insured captive insurer formed as a reciprocal insurer; or (b) Any group which is created under the Product Liability Risk Retention Act of 1981, 15 U.S.C. secs. 3901 et seq., as amended, as a corporation or other limited liability association; (10) "Member organization" means any individual, corporation, partnership, association, or other entity that belongs to a consortium; (11) "Parent" means a corporation, partnership, individual, or other entity that directly or indirectly owns, controls, or holds with power to vote more than fifty percent (50%) of the outstanding voting securities of a pure captive insurer; (12) "Pure captive insurer" means any company that insures risks of its parent and affiliated companies or controlled unaffiliated business; (13) "Controlled unaffiliated business" means any person: (a) That is not in the corporate system of a parent and its affiliated companies in the case of a pure captive, or that is not in the corporate system or an industrial insured and its affiliated companies in the case of an industrial insured captive insurance company; (b) That has an existing contractual relationship with a parent or affiliated companies in the case of a pure captive, or with an industrial insured or one (1) of its affiliated companies in the case of an industrial insured captive insurance company; and (c) Whose risk management function related to the covered risk of loss is controlled by an affiliate of a pure captive insurer or an industrial insured captive insurance company, as applicable, providing coverage or reinsurance; (14) "Foreign captive insurer" means any insurer formed to write insurance business for its parents and affiliates and licensed pursuant to the laws of any state other than Kentucky which imposes statutory or regulatory standards in a form acceptable to the commissioner on companies transacting the business of insurance in that jurisdiction. Under KRS 304.49-010 to 304.49-230, captive insurers formed under the laws of any jurisdiction other than a state of the United States shall be treated as a foreign captive insurer unless the context requires otherwise; (15) "Branch business" means any insurance business transacted by a branch captive insurer in Kentucky; (16) "Branch captive insurer" means any foreign captive insurer issued a certificate of authority by the commissioner to transact the business of insurance in Kentucky through a business unit with a principal place of business in Kentucky; (17) "Branch operations" means any business operations of a branch captive insurer in Kentucky; (18) "Participant" means an entity as defined in KRS 304.49-210, and any affiliates thereof, that are insured by a sponsored captive insurer, where the losses of the participant are limited through a participant contract to the assets of a protected cell; (19) "Participant contract" means a contract by which a sponsored captive insurer insures the risks of a participant and limits the losses of the participant to the assets of a protected cell; (20) "Protected cell" means a separate account established and maintained by a sponsored captive insurer for one (1) participant; (21) "Reciprocal insurer" means an insurer engaging in reciprocal insurance as defined by KRS 304.27-010; (22) "Special purpose captive insurer" means any person that is licensed under this chapter and designated as a special purpose captive insurer by the commissioner. A person may be designated as a special purpose captive insurer if it is established for one (1) specific purpose or transaction, and where it is desirable to isolate the purpose or transaction from the other activities of a party or parties involved in the transaction, or where the transaction dictates that the vehicle should not be treated as controlled or owned by any other party to that transaction; (23) "Sponsor" means any entity that meets the requirements of KRS 304.49-200 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 insurer; and (24) "Sponsored captive insurer" means any captive insurer: (a) In which the minimum capital and surplus required by applicable law is provided by one (1) or more sponsors; (b) That is formed or issued a certificate of authority under the provisions of this subtitle; (c) That insures the risks of separate participants through contract; and (d) That segregates each participant's liability through one (1) or more protected cells. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1606, effective July 15, 2010; and ch. 91, sec. 1, effective July 15, 2010. -- Amended 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 5, effective April 25, 2006. -- Created 2000 Ky. Acts ch. 434, sec. 1, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 91, which do not appear to be in conflict and have been codified together.

KRS 304.49-020 Certificate required for captive insurer -- Qualifications -- Restrictions on doing business -- Required documentation -- Confidentiality -- Fee

304.49-020. Certificate required for captive insurer -- Qualifications -- Restrictions on doing business -- Required documentation -- Confidentiality -- Fee (1) Any captive insurer, when permitted by its articles of incorporation, charter, or other organizational document, may apply to the commissioner for a certificate of authority to engage in any and all kinds of insurance defined in Subtitle 5 of this chapter; provided, however, that: (a) No pure captive insurer may insure any risks other than those of its parent and affiliated companies or controlled unaffiliated business; (b) No consortium captive insurer may insure any risks other than those of the member organizations of its consortium and their affiliated companies; (c) No industrial insured captive insurer may insure any risks other than those of the industrial insureds that comprise the industrial insured group and their affiliated companies; (d) No captive insurer may provide personal motor vehicle or homeowner's insurance coverage or any component thereof; (e) No captive insurer may accept or cede reinsurance except as provided in KRS 304.49-110; (f) No captive insurer that is issued an initial certificate of authority on or after July 1, 2006, shall directly provide workers' compensation insurance; however, any captive insurer may provide excess workers' compensation insurance to its parent and affiliated companies, unless prohibited by the laws of the state having jurisdiction over the transaction. Any captive insurer may reinsure workers' compensation of a qualified self-insured plan of its parent and affiliated companies; (g) Any captive insurer which insures risks described in KRS 304.5-020 and 304.5-040 shall comply with all applicable state laws; (h) No branch captive insurer may write any business in Kentucky 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 (i) No sponsored captive insurer may insure any risks other than those of its participants. (2) No captive insurer shall do any insurance business in Kentucky unless: (a) It first obtains from the commissioner a certificate of authority authorizing it to do insurance business in Kentucky; (b) Its board of directors, or in the case of a reciprocal insurer, its subscribers' advisory committee, holds at least one (1) meeting each year in Kentucky; and (c) It maintains its principal place of business in Kentucky or, in the case of a branch captive insurer, maintains the principal place of business for its branch operations in Kentucky. (3) Before receiving a certificate of authority, a captive insurer 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; (4) Before receiving a certificate of authority, a captive insurer formed as a reciprocal insurer shall: (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 a sample of the coverages, deductibles, coverage limits, and rates, together with any additional information required by the commissioner. In the event of any subsequent material change in any item in the samples, the reciprocal captive insurer shall submit to the commissioner for approval an appropriate revision. The reciprocal captive insurer shall not offer any coverage until the forms are approved by the commissioner. The reciprocal captive insurer shall not use any initial rate until it is approved by the commissioner and shall inform the commissioner of any material change in rates within thirty (30) days of the adoption of the change. (5) In addition to the information required by subsection (3) or (4) of this section, each applicant captive insurer shall file with the commissioner evidence of the following: (a) The amount and liquidity of its assets relative to the risks to be assumed; (b) The adequacy of the expertise, experience, and character of the person or persons who will manage it; (c) The overall soundness of its plan of operation; (d) The adequacy of the loss prevention programs of its parent, member organizations, or industrial insureds as applicable; and (e) Any other factors deemed relevant by the commissioner in ascertaining whether the proposed captive insurer will be able to meet its policy obligations. (6) In addition to the information required by subsections (3), (4), and (5) of this section, each applicant-sponsored captive insurer 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 the experience to the commissioner; (b) A statement acknowledging that all financial records of the sponsored captive insurer, including records pertaining to any protected cells, shall be made available for inspection or examination by the commissioner; (c) All contracts or sample contracts between the sponsored captive insurer and any participants; and (d) Evidence that expenses shall be allocated to each protected cell in a fair and equitable manner. (7) All portions of license applications reasonably designated confidential by the applicant, and all examination reports, preliminary examination reports, working papers, recorded information, other documents, and any copies of any of the foregoing, produced or obtained by or submitted or disclosed to the commissioner related to an examination pursuant to this subtitle shall, unless the prior written consent of the captive insurer to which it pertains has been obtained, be given confidential treatment, and shall not be subject to civil subpoena, made public by the commissioner, or provided or disclosed to any other person at any time except to: (a) The insurance department of any state, country, or alien jurisdiction; or (b) To a law enforcement official or agency of the Commonwealth of Kentucky, any other state, or alien jurisdiction, as long as the official or agency agrees in writing to hold it confidential and in a manner consistent with this section. (8) Each captive insurer shall pay to the commissioner a nonrefundable fee as stated in KRS 304.4-010 for examining, investigating, and processing its application for certificate of authority. The commissioner is authorized to retain legal, financial, and examination services from outside the department to assist in examining and investigating the applicant, the reasonable cost of which may be charged against the applicant. In addition, each captive insurer shall pay a certificate of authority fee for the year of registration and a renewal fee for each year thereafter. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1607, effective July 15, 2010. -- Amended 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 6, effective April 25, 2006. -- Created 2000 Ky. Acts ch. 434, sec. 2, effective July 14, 2000.

KRS 304.49-030 Name of captive insurer

304.49-030. Name of captive insurer Each captive insurer shall be named in accordance with KRS 304.3-100. Effective: July 14, 2000 History: Created 2000 Ky. Acts ch. 434, sec. 3, effective July 14, 2000.

KRS 304.49-040 Financial security requirements

304.49-040. Financial security requirements (1) No captive insurer shall be issued a certificate of authority unless it shall possess and thereafter maintain unimpaired paid-in capital and surplus of: (a) In the case of a pure captive insurer, not less than two hundred fifty thousand dollars ($250,000); (b) In the case of a consortium, sponsored, agency, or an industrial insured captive insurer, not less than five hundred thousand dollars ($500,000); and (c) In the case of a special purpose captive insurer, not less than two hundred fifty thousand dollars ($250,000), or another amount determined by the commissioner. (2) Notwithstanding the requirements of subsection (1) of this section, no captive insurer organized as a reciprocal insurer under KRS 304.49-010 to 304.49-230 shall be issued a certificate of authority unless it shall possess and thereafter maintain free surplus of not less than five hundred thousand dollars ($500,000). (3) The commissioner may prescribe additional capital and surplus based upon the type, volume, and nature of insurance business transacted. (4) Capital and surplus shall be in the form of cash, an irrevocable letter of credit issued by a bank approved by the commissioner and chartered by the Commonwealth of Kentucky or a member bank of the Federal Reserve System, a surplus note approved by the commissioner, or other assets as may be approved by the commissioner. A surplus note shall not be used for the initial minimum capital and surplus of a non-mutual captive insurer. (5) In the case of a branch captive insurer, as security for the payment of liabilities attributable to the branch operations, the commissioner shall require that a separate 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 insurer through its branch operations. The amount of this security may be no less than the capital and surplus required in this section and the reserves on the insurance policies or the 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; provided, however, the commissioner may permit a branch captive insurer 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 Kentucky or a member bank of the Federal Reserve System. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1608, effective July 15, 2010; and ch. 91, sec. 2, effective July 15, 2010. -- Amended 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 7, effective April 25, 2006. -- Created 2000 Ky. Acts ch. 434, sec. 4, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). A reference to the "executive director" of insurance in subsection (4) of this section, as amended by 2010 Ky. Acts ch. 91, sec. 2, has been changed in codification to the "commissioner" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. This change was made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 23, sec. 1938. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 91, which do not appear to be in conflict and have been codified together.

KRS 304.49-050 Payment of dividends -- Commissioner's approval required -- Limitations -- Rescinding approval

304.49-050. Payment of dividends -- Commissioner's approval required -- Limitations -- Rescinding approval No captive insurer may pay a dividend out of, or other distribution with respect to, capital or surplus, in excess of the limitations set forth in KRS 304.24-320 and 304.24-330 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. The commissioner may rescind approval of all or part of the dividend and may require repayment of all or part of the dividend amount if a dividend is paid without approval, made in excess of the approved amount, made in excess of the approved amount, or made in violation of the terms of the approval. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1609, effective July 15, 2010; and ch. 91, sec. 3, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 434, sec. 5, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). A reference to the "executive director" of insurance in this section, as amended by 2010 Ky. Acts ch. 91, sec. 3, has been changed in codification to the "commissioner" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. This change was made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 91, which do not appear to be in conflict and have been codified together.

KRS 304.49-060 Formation of captive insurers -- Applicability of KRS Chapters 271B, 273, and 275 -- Conditions for issuing certificate of authority -- Applicability of KRS Chapter 271B and Subtitles 27 and 45 -- Conflicts -- Owners and parent companies

304.49-060. Formation of captive insurers -- Applicability of KRS Chapters 271B, 273, and 275 -- Conditions for issuing certificate of authority -- Applicability of KRS Chapter 271B and Subtitles 27 and 45 -- Conflicts -- Owners and parent companies (1) A captive insurer shall be formed as a: (a) Stock insurer with its capital divided into shares and held by the stockholders; (b) Mutual insurer without capital stock in accordance with Subtitle 24 of this chapter; (c) Reciprocal insurer in accordance with Subtitle 27 of this chapter; (d) Limited liability company pursuant to KRS Chapter 275; (e) Business corporation pursuant to KRS Chapter 271B; (f) Nonstock, nonprofit corporation pursuant to KRS Chapter 273; or (g) Partnership, limited partnership, statutory business trust, or other legal person or entity other than a natural person in his or her individual capacity, with the approval of the commissioner upon a showing of demonstrated need. (2) A captive insurer formed as a corporation, limited liability company, or nonstock, nonprofit corporation shall have the privileges and be subject to the provisions of KRS Chapter 271B, 273, or 275 and the provisions of this subtitle. If there is a conflict between the provisions of KRS Chapter 271B, 273, or 275 and the provisions of this subtitle, the provisions of this subtitle shall control. (3) A captive insurer organized as a corporation may issue classes of shares and series of shares within a class pursuant to KRS Chapter 271B. (4) Captive insurance companies formed as corporations under the provisions of this subtitle shall have the privileges and be subject to the provisions of KRS Chapter 271B and the applicable provisions contained in this subtitle. The provisions of this chapter shall control if there is a conflict between the provisions of KRS Chapter 271B and the provisions of this chapter. The provisions of this chapter, pertaining to mergers, consolidations, conversions, mutualizations, and redomestications, shall apply in determining the procedures to be followed by captive insurance companies in carrying out any of the transactions described in Subtitles 24 and 37 of this chapter, except that: (a) The commissioner may, upon request of an insurer party to a merger authorized under this subsection, waive the requirement of KRS 304.24- 390(4); and (b) The commissioner may waive or modify the requirements for public notice and hearing in accordance with administrative regulations which may be promulgated by the commissioner addressing categories of transactions. If a notice of public hearing is required, but no one requests a hearing, the commissioner may cancel the hearing. (5) A risk retention group may take any form permitted under the Liability Risk Retention Act of 1986, 15 U.S.C. secs. 3901 et seq., as amended. (6) A captive insurer incorporated or organized in Kentucky shall have at least one (1) incorporator or organizer. (7) In the case of a captive insurer, the commissioner shall find, in order to issue a certificate of authority, that the establishment and maintenance of the proposed captive insurer 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 incorporators or organizers; (b) The character, reputation, financial responsibility, insurance experience, and business qualifications of the persons responsible for the conduct of the captive insurer's affairs; and (c) Any other aspects the commissioner deems advisable. (8) The capital stock of a captive insurer incorporated as a stock insurer may be authorized with no par value. (9) Captive insurance companies formed as reciprocal insurers under the provisions of KRS 304.49-010 to 304.49-230 shall have the privileges and be subject to the provisions of Subtitle 27 of this chapter in addition to the applicable provisions of this subtitle. In the event of a conflict between the provisions of Subtitle 27 of this chapter and the provisions of this subtitle, the latter shall control. To the extent a reciprocal insurer is made subject to other provisions of this subtitle pursuant to Subtitle 27 of this chapter, those provisions shall not be applicable to a reciprocal insurer formed under KRS 304.49-010 to 304.49-230 unless the provisions are expressly made applicable to captive insurance companies under KRS 304.49-010 to 304.49-230. (10) In addition to the provisions of subsection (9) of this section, captive insurance companies organized as reciprocal insurers that are industrial insured groups as defined in this subtitle shall have the privileges and be subject to the provisions of Subtitle 45 of this chapter, in addition to the applicable provisions of this subtitle. (11) The articles of incorporation or bylaws of a captive insurer formed as a corporation may authorize a quorum of a board of directors to consist of no fewer than one-third (1/3) of the fixed or prescribed number of directors. (12) The subscribers' agreement or other organizing document of a captive insurer formed as a reciprocal insurer may authorize a quorum of a subscribers' advisory committee to consist of no fewer than one-third (1/3) of the number of its members. (13) Each owner of an agency captive insurer shall be licensed as an insurance producer. (14) The parent of a pure captive insurer may include an employee benefit plan, employee stock ownership plan, or any legal or business trust approved by the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1610, effective July 15, 2010; and ch. 91, sec. 4, effective July 15, 2010. -- Amended 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 8, effective April 25, 2006. -- Created 2000 Ky. Acts ch. 434, sec. 6, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). References to the "executive director" of insurance in subsections (1), (4), and (14) of this section, as amended by 2010 Ky. Acts ch. 91, sec. 4, have been changed in codification to the "commissioner" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. These changes were made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 91. Where these Acts are not in conflict, they have been codified together. Where a conflict exists, Acts ch. 91, which was last enacted by the General Assembly, prevails under KRS 446.250.

KRS 304.49-070 Annual report of financial condition

304.49-070. Annual report of financial condition (1) Captive insurance companies shall not be required to make any annual report except as provided in KRS 304.49-010 to 304.49-230. (2) (a) On or before March 1 of each year, each captive insurer shall submit to the commissioner a report of its financial condition, verified by oath of two (2) of its executive officers. (b) Each captive insurer shall report using generally accepted accounting principles, unless the commissioner approves the use of statutory accounting principles or international accounting standards. The approved accounting method may contain any appropriate or necessary modifications or adaptations thereof required or approved or accepted by the commissioner for the type of insurance and kinds of insurers to be reported upon, and as supplemented by additional information required by the commissioner. Any captive insurer whose use of statutory accounting principles is approved by the commissioner may make modifications and adaptations as are necessary to record as admitted the full value of all investments by the captive insurer permitted under this subtitle and, subject to the commissioner's approval, to make its reports under this section consistent with the purposes of this subtitle. (c) Except as otherwise provided, all captive insurers, with the exception of those formed as a risk retention group, shall file reports on a form prescribed by the commissioner. An actuarial opinion summary shall not be required to be filed when a certification of loss and loss expense reserves and opinion of reserve adequacy is filed with the department by a captive insurer, unless otherwise requested by the commissioner. (d) A captive insurer formed as a risk retention group shall file reports pursuant to KRS 304.2-205 and an actuarial opinion summary pursuant to KRS 304.3- 242, with additional information or modification as the commissioner may prescribe. (e) The commissioner shall by administrative regulation propose the forms in which captive insurers shall report. (3) Any captive insurer may make written application for filing the required report on a fiscal year end. If an alternative reporting date is granted, the annual report is due sixty (60) days after the fiscal year end. (4) Sixty (60) days after the fiscal year end, a branch captive insurer shall file with the commissioner a copy of all reports and statements required to be filed under the laws of the jurisdiction in which the foreign captive insurer is formed, verified by oath of two (2) of its executive officers. If the commissioner is satisfied that the annual report filed by the foreign captive insurer in its domiciliary jurisdiction provides adequate information concerning the financial condition of the foreign captive insurer, the commissioner may waive the requirement for completion of the captive annual statement for business written in the foreign jurisdiction. Effective: July 12, 2012 History: Amended 2012 Ky. Acts ch. 74, sec. 20, effective July 12, 2012. -- Amended 2010 Ky. Acts ch. 24, sec. 1611, effective July 15, 2010; and ch. 91, sec. 5, effective July 15, 2010. -- Amended 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 9, effective April 25, 2006. -- Created 2000 Ky. Acts ch. 434, sec. 7, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). Under the authority of KRS 7.136(1)(e) and (h), a reference to "KRS 304.3-242(4)(a) and (d)" in subsection (2) of this statute, as amended by 2010 Ky. Acts ch. 91, sec. 5, has been changed in codification to "KRS 304.3-242(7)(a) and (d)" to reflect the insertion and deletion of various subsections in KRS 304.3-242 by 2010 Ky. Acts ch. 25, sec. 4, and the renumbering of the existing subsection (4) as subsection (7).

KRS 304.49-080 Examination of captive insurers

304.49-080. Examination of captive insurers (1) Any insurer holding a certificate of authority issued under this subtitle shall be subject to provisions of KRS 304.2-210 to 304.2-300 and provisions of Subtitle 2 of this chapter for determining market conduct and business practices. However, the commissioner upon application, in his or her discretion, may extend the period between examinations, provided the captive insurer is subject to a comprehensive annual audit during that period, of a scope satisfactory to the commissioner, by independent auditors approved by the commissioner. (2) The examination for a branch captive insurer shall be of branch business and branch operations only, as long as the branch captive insurer 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 insurer 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 that jurisdiction. (3) As a condition for issuance of a certificate of authority to a branch captive insurer, the foreign captive insurer shall grant authority to the commissioner for examination of the affairs of the foreign captive insurer in the jurisdiction in which the foreign captive insurer is formed. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1612, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 434, sec. 8, effective July 14, 2000.

KRS 304.49-090 Applicability of Subtitles 2 and 3 to captive insurers

304.49-090. Applicability of Subtitles 2 and 3 to captive insurers Insurers holding a certificate of authority issued under this subtitle shall be subject to the provisions of Subtitles 2 and 3 of this chapter to the extent applicable and not in conflict with the expressed provisions of this subtitle. Effective: July 14, 2000 History: Created 2000 Ky. Acts ch. 434, sec. 9, effective July 14, 2000.

KRS 304.49-100 Duties of captive insurer -- Investment plan -- Prohibited and permitted limitations on investments -- Applicability of investment requirements and limitations of Subtitle 7

304.49-100. Duties of captive insurer -- Investment plan -- Prohibited and permitted limitations on investments -- Applicability of investment requirements and limitations of Subtitle 7 (1) A captive insurer shall establish, monitor, and control its investment strategy prudently, setting clear guidelines with regard to the exposure to different investment types, levels of investment grade, and exposure to individual investments. This investment plan and any material amendments shall be filed with the commissioner. (2) A captive insurer shall not be subject to any restrictions on allowable investments in this chapter, including those limitations contained in Subtitle 7 of this chapter. (3) The commissioner may prohibit or limit any investment that threatens the solvency or liquidity of any company. (4) An industrial insured captive insurer insuring the risks of an industrial insured group defined in KRS 304.49-010(9)(b) shall comply with the investment requirements contained in Subtitle 7 of this chapter. Notwithstanding any other provision of this chapter, the commissioner may approve the use of alternative reliable methods of valuation and rating. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1613, effective July 15, 2010; and ch. 91, sec. 6, effective July 15, 2010. -- Amended 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 10, effective April 25, 2006. -- Created 2000 Ky. Acts ch. 434, sec. 10, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). References to the "executive director" of insurance in subsections (1) and (3) of this section, as amended by 2010 Ky. Acts ch. 91, sec. 6, have been changed in codification to the "commissioner" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. These changes were made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 91. Where these Acts are not in conflict, they have been codified together. Where a conflict exists, Acts ch. 91, which was last enacted by the General Assembly, prevails under KRS 446.250.

KRS 304.49-110 Reinsurance on risks ceded by other insurer or captive insurer authorized -- Powers of commissioner

304.49-110. Reinsurance on risks ceded by other insurer or captive insurer authorized -- Powers of commissioner (1) Any captive insurer may provide reinsurance, as provided in KRS 304.5-130, 304.5- 140, and 304.5-150, on risks ceded by any other insurer. (2) A captive insurer may provide reinsurance on risks ceded by any other insurer or captive insurer. (3) (a) Any captive insurer may take credit for reserves on risks or portions of risks ceded to reinsurers complying with the provisions of KRS 304.5-140. (b) A captive insurer shall not take credit for reserves on risks or portions of risks ceded to a reinsurer if the reinsurer is not in compliance with KRS 304.5-140. (c) Prior approval of the commissioner shall be required for ceding or taking credit for the reinsurance of risks or portions of risks ceded to reinsurers not complying with KRS 304.5-130, 304.5-140, and 304.5-150. (4) For all purposes of KRS 304.49-010 to 304.49-230, insurance by a captive insurer of any workers' compensation qualified self-insured plan of its parent and affiliates shall be deemed to be reinsurance. (5) A captive insurer may take credit for the reinsurance of risks or portions of risks ceded to a pool, exchange, or association acting as an insurer or a reinsurer which has been authorized by the commissioner. The commissioner may require any other documents, financial information, or other evidence that the 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 the commissioner's judgment are necessary and proper to provide adequate security for the ceding captive insurer or segregated account and for the protection and consequent benefit of the public at large. (6) The commissioner may impose any other requirements that he or she deems necessary before permitting credit for reinsurance under this section, including but not limited to requiring an approved funds-held agreement, letter of credit, trust or other acceptable collateral based on unearned premium, loss and loss adjustment expense reserves, and incurred but not reported reserves. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 91, sec. 7, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 434, sec. 11, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). References to the "executive director" of insurance in subsections (3), (5), and (6) of this section, as amended by 2010 Ky. Acts ch. 91, sec. 7, have been changed in codification to the "commissioner" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. These changes were made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938.

KRS 304.49-120 Rating organization membership not required

304.49-120. Rating organization membership not required No captive insurer shall be required to join a rating organization. Effective: July 14, 2000 History: Created 2000 Ky. Acts ch. 434, sec. 12, effective July 14, 2000.

KRS 304.49-130 Prohibition of contributions made and benefits received -- Exceptions

304.49-130. Prohibition of contributions made and benefits received -- Exceptions (1) No captive insurer, including a captive insurer organized as a reciprocal insurer under KRS 304.49-010 to 304.49-230, shall be permitted to join or contribute financially to any plan, pool, association, or guaranty or insolvency fund in Kentucky, nor shall any such captive insurer, or its insured, or its parent or any affiliated company, or any member organization of its consortium, or in the case of a captive insurer organized as a reciprocal insurer, 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 insurer. (2) Subsection (1) of this section shall not prohibit captive insurers from entering into reinsurance or pooling transactions in the normal course of business, in accordance with KRS 304.49-110. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 91, sec. 8, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 434, sec. 13, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). A reference to "Section 8 of this Act" in 2010 Ky. Acts ch. 91, sec. 8, subsec. 2, which became subsection (2) of this statute, has been codified as "KRS 304.49-110" (Section 7 of that Act) to correct a manifest oversight during the amendment process. House Floor Amendment 1 to House Bill 241, which became 2010 Ky. Acts ch. 91, deleted Section 2 in its entirety and renumbered the subsequent sections, but did not make the conforming change to the reference in subsection (2). This manifest clerical or typographical error has been corrected by the Reviser of Statutes under the authority of KRS 7.136(1).

KRS 304.49-140 Administrative regulations

304.49-140. Administrative regulations The commissioner may establish and from time to time amend administrative regulations relating to captive insurance companies that are necessary to enable the commissioner to carry out the provisions of KRS 304.49-010 to 304.49-230. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1614, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 434, sec. 14, effective July 14, 2000.

KRS 304.49-150 Exclusivity of KRS 304.49-010 to 304.49-230 to captive insurance companies -- Provisions applicable to industrial insured captive insurer

304.49-150. Exclusivity of KRS 304.49-010 to 304.49-230 to captive insurance companies -- Provisions applicable to industrial insured captive insurer (1) No provisions of this chapter, other than those contained in KRS 304.49-010 to 304.49-230 or contained in specific references contained in KRS 304.49-010 to 304.49-230, shall apply to captive insurance companies. (2) Any industrial insured captive insurer that is created under the Product Liability Risk Retention Act of 1981, 15 U.S.C. secs. 3901 et seq., as amended, shall be subject to the following provisions of this chapter and the administrative regulations promulgated thereunder, to the extent applicable and not in conflict with the express provisions of this subtitle: (a) Subtitle 1--Scope--General Definitions and Provisions; (b) Subtitle 2--Commissioner of the Department of Insurance; (c) Subtitle 3--Authorization of Insurers and General Requirements, including but not limited to: 1. KRS 304.3-400 to 304.3-430; and 2. KRS 304.3-500 to 304.3-570; (d) Subtitle 4--Fees and Taxes; (e) Subtitle 5--Kinds of Insurance--Limits of Risk--Reinsurance, including but not limited to KRS 304.5-120; (f) Subtitle 6--Assets and Liabilities; (g) Subtitle 7--Investments; (h) KRS 304.9-700 to 304.9-759--Reinsurance Intermediary Act; (i) Subtitle 33--Insurers Rehabilitation and Liquidation; (j) Subtitle 37--Insurance Holding Company Systems; and (k) Subtitle 99--Penalties. Effective: July 12, 2012 History: Amended 2012 Ky. Acts ch. 74, sec. 19, effective July 12, 2012. -- Created 2000 Ky. Acts ch. 434, sec. 15, effective July 14, 2000.

KRS 304.49-160 Rehabilitation, liquidation, and dissolution -- Applicability of Subtitle 33

304.49-160. Rehabilitation, liquidation, and dissolution -- Applicability of Subtitle 33 (1) Except as otherwise provided in this section, the terms and conditions set forth in Subtitle 33 of this chapter pertaining to insurance supervision, rehabilitation, and liquidation, shall apply in full to captive insurance companies formed or issued a certificate of authority under this subtitle. (2) In the case of a sponsored captive insurer: (a) 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 (b) Its capital and surplus shall at all times be available to pay any expenses of or claims against the sponsored captive insurer. (3) Stock or mutual captive insurers may voluntarily dissolve in accordance with KRS 304.24-430. (4) Reciprocal captive insurers may voluntarily dissolve in accordance with the provisions of Subtitle 27 of this chapter. Effective: July 14, 2000 History: Created 2000 Ky. Acts ch. 434, sec. 16, effective July 14, 2000.

KRS 304.49-170 Administrative regulations regarding risk management function

304.49-170. Administrative regulations regarding risk management function The commissioner may promulgate administrative regulations 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 insurer. The commissioner may approve the coverage of such risks by a pure captive insurance company. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1615, effective July 15, 2010; and ch. 91, sec. 9, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 434, sec. 17, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). A reference to the "executive director" of insurance in this section, as amended by 2010 Ky. Acts ch. 91, sec. 9, has been changed in codification to the "commissioner" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. This change was made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 91, which do not appear to be in conflict and have been codified together.

KRS 304.49-180 Conversion or merger of consortium captive insurer or industrial insurer group into reciprocal insurer -- Plan of conversion or merger -- Other conditions

304.49-180. Conversion or merger of consortium captive insurer or industrial insurer group into reciprocal insurer -- Plan of conversion or merger -- Other conditions (1) A consortium captive insurer or industrial insured group formed as a stock or mutual corporation or other legal or statutory entity may be converted to or merged with and into a reciprocal insurer in accordance with a plan therefor and the provisions of this section. (2) Any plan for such conversion or merger shall be fair and equitable to the shareholders, in the case of a stock insurer, or the policyholders, in the case of a mutual insurer. (3) In the case of a conversion authorized under subsection (1) of this section: (a) The conversion shall be accomplished under any reasonable plan and procedure approved by the commissioner, but the commissioner shall not approve any plan of conversion unless the plan: 1. Satisfies the provisions of subsection (2) of this section; 2. 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; 3. 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 4. Is approved: a. 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; b. In the case of a mutual insurer, by a majority of the voting interests of policyholders represented in person or by proxy at a duly called regular or special meeting at which a quorum is present; (b) 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 KRS 304.49-060(7); (c) 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 an amended certificate of authority to the company's attorney-in-fact; (d) Upon the issuance of an amended certificate of authority of a reciprocal insurer by the commissioner, the conversion shall be effective; and (e) 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 the conversion. (4) A merger authorized under subsection (1) of this section shall be accomplished substantially in accordance with the procedures set forth in KRS 304.24-390, except that, solely for purposes of the merger: (a) The plan of merger shall satisfy the provisions of subsection (2) of this section; (b) The subscribers' advisory committee of a reciprocal insurer shall be equivalent to the board of directors of a stock or mutual insurer; (c) The subscribers of a reciprocal insurer shall be the equivalent of the policyholders of a mutual insurer; (d) If a subscribers' advisory committee does not have a president or secretary, the officers of the committee having substantially equivalent duties shall be deemed the president or secretary of the committee; (e) The commissioner may, upon request of an insurer party to a merger authorized under subsection (1) of this section, waive the requirement of KRS 304.24-390(4); (f) 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 KRS 304.49-060(7). If the commissioner approves the articles of merger, the commissioner shall indorse his or her approval thereon and the surviving insurer shall present and file them with the Secretary of State; (g) Notwithstanding KRS 304.49-040, the commissioner may permit the formation, without surplus, of a captive insurer organized as a reciprocal insurer, into which an existing captive insurer may be merged for the purpose of facilitating a transaction under this section; however, there shall be no more than one (1) authorized insurer surviving the merger; and (h) An alien insurer may be a party to a merger authorized under subsection (1) of this section, provided that the requirements for a merger between a domestic and a foreign insurer under KRS 304.24-390 shall apply to a merger between a domestic and an alien insurer under this subsection. The alien insurer shall be treated as a foreign insurer under KRS 304.24-390 and the other jurisdictions shall be the equivalent of a state for purposes of KRS 304.24-390. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1616, effective July 15, 2010; and ch. 91, sec. 10, effective July 15, 2010. -- Amended 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 11, effective April 25, 2006. -- Created 2000 Ky. Acts ch. 434, sec. 18, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 91, which do not appear to be in conflict and have been codified together.

KRS 304.49-190 Formation of sponsored captive insurer -- Conditions

304.49-190. Formation of sponsored captive insurer -- Conditions (1) One (1) or more sponsors may form a sponsored captive insurer under KRS 304.49- 010 to 304.49-230. (2) A sponsored captive insurer formed or issued a certificate of authority under the provisions of KRS 304.49-010 to 304.49-230 may establish and maintain one (1) or more protected cells to insure risks of one (1) or more participants, subject to the following conditions: (a) The shareholders of a sponsored captive insurer shall be limited to its participants and sponsors; (b) Each protected cell shall be accounted for separately on the books and records of the sponsored captive insurer 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 provided in the participant contract or required by the commissioner; (c) The assets of a protected cell shall not be chargeable with liabilities arising out of any other insurance business the sponsored captive insurer may conduct; (d) No sale, exchange, or other transfer of assets may be made by the sponsored captive insurer between or among any of its protected cells without the consent of the protected cells; (e) 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, 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; (f) Each sponsored captive insurer shall annually file with the commissioner those financial reports required by the commissioner, which shall include, without limitation, accounting statements detailing the financial experience of each protected cell; (g) Each sponsored captive insurer shall notify the commissioner, in writing, within ten (10) business days, of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations; and (h) 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. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1617, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 434, sec. 19, effective July 14, 2000.

KRS 304.49-200 Certification requirements of sponsor of sponsored captive insurer

304.49-200. Certification requirements of sponsor of sponsored captive insurer A sponsor of a sponsored captive insurer shall be an insurer licensed under the laws of any state, a reinsurer authorized or approved under the laws of any state, or a captive insurer formed or issued a certificate of authority under KRS 304.49-010 to 304.49-230. A risk retention group shall not be either a sponsor or a participant of a sponsored captive insurer. Effective: July 14, 2000 History: Created 2000 Ky. Acts ch. 434, sec. 20, effective July 14, 2000.

KRS 304.49-210 Permissible participants in sponsored captive insurer

304.49-210. Permissible participants in sponsored captive insurer (1) Associations, corporations, limited liability companies, partnerships, trusts, and other business entities may be participants in any sponsored captive insurer formed or issued a certificate of authority under KRS 304.49-010 to 304.49-230. (2) A sponsor may be a participant in a sponsored captive insurer. (3) A participant need not be a shareholder of the sponsored captive insurer or any affiliate thereof. (4) A participant shall insure only its own risks through a sponsored captive insurer. Effective: July 14, 2000 History: Created 2000 Ky. Acts ch. 434, sec. 21, effective July 14, 2000.

KRS 304.49-220 Tax levied on premium receipts -- Rates -- Exclusivity of premium tax -- Distribution of revenue for administration of KRS 304.49-010 to 304.49-230

304.49-220. Tax levied on premium receipts -- Rates -- Exclusivity of premium tax -- Distribution of revenue for administration of KRS 304.49-010 to 304.49-230 (1) Every captive insurer holding a certificate of authority under KRS 304.49-010 to 304.49-230 shall return to the Department of Revenue a statement under oath of all premium receipts on business written by the captive insurer during the preceding year and shall pay, on or before March 1 in each year, a tax at the rate of four-tenths of one percent (0.4%) on the first twenty million dollars ($20,000,000), and three- tenths of one percent (0.3%) on the next twenty million dollars ($20,000,000), and two-tenths of one percent (0.2%) on the next twenty million dollars ($20,000,000), and seventy-five thousandths of one percent (0.075%) on each dollar thereafter on the direct premiums collected or contracted for on policies or contracts of insurance written by the captive insurer during the year ending December 31 next preceding, after deducting from the direct premiums subject to the tax the amounts paid to policyholders as return premiums, which shall include dividends on unabsorbed premiums or premium deposits returned or credited to policyholders. (2) Every captive insurer holding a certificate of authority under KRS 304.49-010 to 304.49-230 shall return to the Department of Revenue a statement under oath of all assumed reinsurance premium receipts during the preceding year and shall pay, on or before March 1 in each year, a tax at the rate of two hundred twenty-five thousandths of one percent (0.225%) on the first twenty million dollars ($20,000,000) of assumed reinsurance premiums, and one hundred fifty thousandths of one percent (0.150%) on the next twenty million dollars ($20,000,000), and fifty thousandths of one percent (0.050%) on the next twenty million dollars ($20,000,000), and twenty-five thousandths of one percent (0.025%) of each dollar thereafter. However, no reinsurance tax applies to premiums for risks or portions of risks which are subject to taxation on a direct basis pursuant to subsection (1) of this section. No reinsurance premium tax shall be payable in connection with the receipt of assets in exchange for the assumption of loss reserves and other liabilities of another insurer or self-insurer under common ownership and control if the transaction is part of a plan to discontinue the operations of the other insurer or self- insurer, and if the intent of the parties to the transaction is to renew or maintain the business with the captive insurer. (3) If the aggregate taxes to be paid by a captive insurer calculated under subsections (1) and (2) of this section amount to less than five thousand dollars ($5,000) in any year, the captive insurer shall pay a tax of five thousand dollars ($5,000) for such year. (4) Two (2) or more captive insurance companies under common ownership and control shall be taxed as though they were a single captive insurer. (5) For the purposes of this section, common ownership and control shall mean: (a) In the case of stock corporations, the direct or indirect ownership of eighty percent (80%) or more of the outstanding voting stock of two (2) or more corporations by the same shareholder or shareholders; and (b) In the case of mutual corporations, the direct or indirect ownership of eighty percent (80%) or more of the surplus and the voting power of two (2) or more corporations by the same member or members. (6) In the case of a branch captive insurer, the tax provided for in this section shall apply only to the branch business of the company. (7) The tax provided for in this section shall constitute all taxes collectible under the laws of Kentucky from any captive insurer, and the taxes imposed under this section shall be in lieu of all excise, license, occupational, or other taxes imposed by the state, county, city, or other taxing district. (8) The Kentucky Department of Revenue shall annually, on or before June 30 of each year, distribute ten percent (10%) of the premium tax revenues collected pursuant to this section to the Department of Insurance for the regulation of captive insurance companies under KRS 304.49-010 to 304.49-230. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1618, effective July 15, 2010; and ch. 91, sec. 11, effective July 15, 2010. -- Amended 2005 Ky. Acts ch. 85, sec. 680, effective June 20, 2005. -- Created 2000 Ky. Acts ch. 434, sec. 22, effective July 14, 2000. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 91, which do not appear to be in conflict and have been codified together.

KRS 304.49-222 Duties of captive insurers

304.49-222. Duties of captive insurers (1) A captive insurer shall engage a manager who is approved by the commissioner. (2) The captive manager shall maintain the books and records of the captive insurer's business, transactions, and affairs at a location that is in this state or shall make them available to the commissioner at a location that is in this state. (3) The captive manager shall promptly notify the commissioner of any failure of the captive insurer to comply with this section. (4) The commissioner may require a captive insurer to discharge a captive manager for failure to substantively fulfill the captive manager's duties under this subtitle. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1619, effective, July 15, 2010; and ch. 91, sec. 12, effective July 15, 2010. -- Created 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 1, effective April 25, 2006. Legislative Research Commission Note (7/15/2010). A reference to the "executive director" of insurance in subsection (1) of this section, as amended by 2010 Ky. Acts ch. 91, sec. 12, has been changed in codification to the "commissioner" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. This change was made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 91, which do not appear to be in conflict and have been codified together.

KRS 304.49-224 Minimum standards for special purpose and agency captive insurers to be set by administrative regulations

304.49-224. Minimum standards for special purpose and agency captive insurers to be set by administrative regulations The commissioner may promulgate administrative regulations to set minimum standards for the formation, structure, examination, and operation of a special purpose captive insurer or an agency captive insurer. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1620, effective July 15, 2010. -- Created 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 2, effective April 25, 2006.

KRS 304.49-226 Change that materially impacts financial condition or management -- Notification to and approval of commissioner to take material action -- Loans to parent company or affiliates

304.49-226. Change that materially impacts financial condition or management -- Notification to and approval of commissioner to take material action -- Loans to parent company or affiliates (1) If there is any change in the current operations or condition of a captive insurer that materially impacts the financial condition or management of the captive insurer, the captive insurer or captive manager shall notify the commissioner, in writing, within ten (10) business days of the change or event. (2) No captive insurer shall voluntarily take any of the following material actions without providing the commissioner at least thirty (30) days' prior written notice and receiving the commissioner's approval of the action within the thirty (30) day period: (a) The dissolution of the captive insurer; (b) Any sale, exchange, lease, mortgage, assignment, pledge, or other transfer of, or granting of a security interest in, all or substantially all of the assets of the captive insurer; (c) Any incurrence of material indebtedness by the captive insurer; (d) Any making of a material loan or other material extension of credit by the captive insurer; (e) Any payment or distribution that materially reduces capital and surplus; (f) Any merger or consolidation to which the captive insurer is a constituent party; (g) Any conversion of the captive insurer to another business form; (h) Any transfer to or domestication in any jurisdiction by the captive insurer; or (i) Any material amendment of the organizational documents of the captive insurer, including changes in the officers, directors, owners, captive manager, actuary, or auditor. (3) A captive insurer may make loans to its parent company or affiliates; however, no loans to a parent company or any affiliate shall be permitted without prior written approval of the commissioner and shall be evidenced by a note in a form approved by the commissioner. The loans shall be evaluated with regard to creditworthiness and collateral. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1621, effective July 15, 2010; and ch. 91, sec. 13, effective July 15, 2010. -- Created 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 3, effective April 25, 2006. Legislative Research Commission Note (7/15/2010). References to the "executive director" of insurance in subsection (3) of this section, as amended by 2010 Ky. Acts ch. 91, sec. 13, have been changed in codification to the "commissioner" of insurance to reflect the reorganization of certain parts of the Executive Branch, as set forth in Executive Order 2009-535 and confirmed by the General Assembly in 2010 Ky. Acts ch. 24. These changes were made by the Reviser of Statutes pursuant to 2010 Ky. Acts ch. 24, sec. 1938. Legislative Research Commission Note (7/15/2010). This section was amended by 2010 Ky. Acts chs. 24 and 91, which do not appear to be in conflict and have been codified together.

KRS 304.49-228 Establishment of protected cells by sponsored captive insurer -- Conditions

304.49-228. Establishment of protected cells by sponsored captive insurer -- Conditions A sponsored captive insurer may establish and maintain one (1) or more protected cells to insure risks of one (1) or more participants, subject to the following conditions: (1) The owners of a sponsored captive insurer shall be limited to its participants and sponsors, provided that a sponsored captive insurer 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 insurer to reflect the financial condition and results of operations of the protected cell, net income or loss of the protected cell, dividends or other distributions to participants of the protected cell, and other factors regarding the 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 insurer generally; (4) No sale or transfer of assets, or dividend or other distribution, may be made with respect to a protected cell by such sponsored captive insurer 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 insurer shall annually file with the commissioner 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 insurer shall notify the commissioner, in writing, within ten (10) business days of any protected cell that has become insolvent or is otherwise unable to meet its claim or expense obligations; (8) No participant contract shall take effect without the commissioner's prior written approval. 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 insurer requiring the commissioner's prior written approval; and (9) (a) The business written by a sponsored captive insurer, with respect to each protected cell, shall be: 1. Fronted by an insurance company licensed under the laws of this state or any other state; 2. Reinsured by a reinsurer authorized or approved by this state; 3. Secured by a trust fund in this state for the benefit of policyholders and claimants; or 4. Funded by an irrevocable letter of credit or other arrangement that is approved in writing by the commissioner. (b) 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 protected cell. (c) The commissioner may, for any reason, require the sponsored captive insurance company to increase the funding of any security arrangement established under this subsection in order to protect claimants or potential claimants. (d) If the form of security is a letter of credit, the letter of credit shall 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. (e) A trust maintained pursuant to this subsection shall be established in a form and upon such terms as approved by the commissioner. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1622, effective July 15, 2010. -- Created 2006 Ky. Acts ch. 252, Pt. XXXIV, sec. 4, effective April 25, 2006.

KRS 304.49-230 KRS 304.49-010 to 304.49-230 not applicable to foreign captive insurer in Kentucky before July 14, 2000 -- Exception

304.49-230. KRS 304.49-010 to 304.49-230 not applicable to foreign captive insurer in Kentucky before July 14, 2000 -- Exception This subtitle shall not apply to any foreign captive insurer lawfully transacting the business of insurance in Kentucky prior to July 14, 2000, unless the foreign captive insurer petitions the commissioner requesting that this subtitle be applicable to the foreign captive insurer. Effective: July 15, 2010 History: Amended 2010 Ky. Acts ch. 24, sec. 1623, effective July 15, 2010. -- Created 2000 Ky. Acts ch. 434, sec. 23, effective July 14, 2000.

Source: Kentucky Legislative Research Commission (legislature.ky.gov)URL: https://apps.legislature.ky.gov/law/statutes/chapter.aspx?id=38769Fetched: 10/20/2026