Captive Insurance Companies

Del. Code tit. 18, ch. 69

in effect

Del. Code tit. 18, § 6901 Finding; purpose.

(a) It is determined and declared as a matter of legislative finding that captive insurance companies can serve a valuable risk management function, and that their responsible utilization and the growth of the captive insurance industry in the State of Delaware are in the best interests of this State. (b) It is further determined and declared that the purpose and policy of this chapter shall be: (1) To provide for the regulation of captive insurance companies consistent with their nature and purpose; (2) To provide flexibility and opportunity to captive insurance companies and to persons utilizing them; and (3) To foster economic development in this State through the growth of the captive insurance industry.

Del. Code tit. 18, § 6902 Definitions.

As used in this chapter, unless the context requires otherwise: (1) “Affiliated company” means any person (other than a natural person in that person’s individual capacity) in the same corporate system as a parent, an industrial insured, or an association member by virtue of common ownership, control, operation, or management. (2) “Agency captive insurance company” shall mean an insurance company described in paragraphs (2)a. and b. of this section: a. An insurance company that is owned or controlled by an insurance agency, brokerage or reinsurance intermediary, or an affiliate thereof, or under common ownership or control with such agency, brokerage or reinsurance intermediary, and that only insures the risks of insurance or annuity contracts placed by or through such agency, brokerage or reinsurance intermediary; or b. An insurance company that is owned or controlled by a marketer or producer of service contracts and/or warranties, and that only insures or reinsures the contractual liability arising out of such service contracts or warranties sold through such marketer or producer. c. For the purposes of this paragraph (2), “common ownership or control” shall mean ownership of 10 percent or more of the voting securities of a person or such other form of ownership or control as the Commissioner may approve. (3) “Alien” means formed under the laws of any country or jurisdiction other than the United States of America or any of its states, districts, commonwealths and possessions. (4) “Alien captive insurance company” means any captive insurance company formed to write insurance business of a nature that the Commissioner determines is otherwise permissible under this chapter and is 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. (5) “Association” means any legal association of persons that has been in continuous existence for at least 1 year or such lesser period of time approved by the Commissioner, the association members of which, or which does itself, whether or not in conjunction with some or all of the association members: a. Directly or indirectly, own, control or hold with power to vote all of the outstanding voting securities or other voting interests of, or have complete voting control over, an association captive insurance company; or b. Constitute all of the subscribers of an association captive insurance company organized as a reciprocal insurer. (6) “Association captive insurance company” means any captive insurance company that insures risks of the association members of the association and any of their affiliated companies. (7) “Association member” means any person that belongs to an association. (8) “Branch business” means any insurance business transacted by a branch captive insurance company in this State. (9) “Branch captive insurance company” means any foreign captive insurance company or alien captive insurance company that has been issued a certificate of authority 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, and has not otherwise been issued a certificate of authority by the Commissioner to transact insurance under this chapter. (10) “Branch operations” means any business operations of a branch captive insurance company in this State. (11) “Capital and surplus” means the amount by which the value of all of the assets of the captive insurance company exceeds all of the liabilities of the captive insurance company, as determined under the method of accounting utilized by the captive insurance company in accordance with the applicable provisions of this chapter. (12) “Captive insurance company” means any pure captive insurance company, association captive insurance company, agency captive insurance company, sponsored captive insurance company, industrial insured captive insurance company, special purpose captive insurance company, special purpose financial captive insurance company, series captive insurance company, or risk retention group, whether domestic, foreign or alien, or branch captive insurance company, licensed under the provisions of this chapter. (13) “Commissioner” means the Insurance Commissioner of this State. (14) “Controlled unaffiliated business” means any person (other than a natural person in that natural person’s individual capacity): a. That is not in the corporate system of a parent and its affiliated companies; b. That has an existing contractual relationship with such parent or any such affiliated company; and c. Whose risks are managed by a pure captive insurance company in accordance with § 6919 of this title. (15) “Department” has the meaning given such term in § 102 of this title. (16) “Domestic” means formed under the laws of this State. (17) “Dormant captive insurance company” means a captive insurance company which meets all of the following criteria for a continuous 12-month period: a. The company did not do all of the following: 1. Contract for, or collect, any direct premium. 2. Contract for, or assume, any reinsurance premium. b. The company was not obligated as an insurance company of any type under any contract of insurance or reinsurance issued or entered into during any year in which it is a dormant captive insurance company. c. The company has provided written notice to the Commissioner of its intention to be treated as a dormant captive insurance company and certifies to the matters set forth in paragraphs (17)a. and b. of this section. (18) “Excess workers’ compensation insurance” means, in the case of an employer that has insured its workers’ compensation risks in accordance with applicable law, insurance in excess of a specified per-incident or aggregate limit established by the Commissioner. Notwithstanding the foregoing, the per-incident and aggregate limit to be utilized by the Commissioner in establishing the excess workers compensation threshold for employers that are authorized under applicable law to self insure their workers compensation risks shall be $0.00. (19) “Foreign” means formed under the laws of any state. (20) “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 $25,000; and c. Who has at least 25 full-time employees. (21) “Industrial insured captive insurance company” means any captive insurance company that insures risks of the industrial insureds that comprise the industrial insured group and any of their affiliated companies. (22) “Industrial insured group” means any group of industrial insureds that collectively: a. Directly or indirectly, own, control, or hold with power to vote all of the outstanding voting securities or other voting interests of, or have complete voting control over, an industrial insured captive insurance company; or b. Constitute all of the subscribers of an industrial insured captive insurance company organized as a reciprocal insurer. (23) “Insurance” has the meaning given such term in § 102 of this title. (24) “Insurer” has the meaning given such term in § 102 of this title. (25) “Mutual insurer” has the meaning given such term in § 502 of this title. A captive insurance company incorporated as a nonstock corporation, in which the policyholders are the members, is a mutual insurer. (26) “Parent” means a person that directly or indirectly owns, controls, or holds with power to vote more than 50 percent of the outstanding voting securities or other voting interests of a pure captive insurance company. (27) “Person” means a natural person, partnership (whether general or limited), trust, estate, association, corporation, limited liability company, statutory trust, business trust, custodian, nominee or any other individual or entity in its own or any representative capacity, in each case whether domestic, foreign, or alien. (28) “Protected cell” has the meaning given such term in § 6932(3) of this title. (29) “Pure captive insurance company” means a captive insurance company that insures risks of 1 or more of the following: a. Its parent. b. Its parent’s affiliated companies. c. A controlled unaffiliated business. (30) “Reciprocal insurer” has the meaning given such term in § 503 of this title. (31) “Risk retention group” means a risk retention group formed pursuant to the Liability Risk Retention Act of 1986, 15 U.S.C. § 3901 et seq., as amended. (32) “Series” means a series established under § 17-218(b), § 18-215(b), or § 18-218 of Title 6, § 3804(a) of Title 12, or corresponding law of another state. (33) “Series captive insurance company” means a series which has received a certificate of authority pursuant to this chapter. (34) “Special purpose captive insurance company” means any person that is licensed under this chapter and designated as a special purpose captive insurance company by the Commissioner. (35) “Special purpose financial captive insurance company” means a captive insurance company that is granted a certificate of authority under subchapter III of this chapter of this title. (36) “Sponsored captive insurance company” has the meaning given such term in § 6932(5) of this title. (37) “State” means the State of Delaware, and “state” means any other state, district, commonwealth or possession of the United States of America. (38) “Transacting insurance” has the meaning given such term in § 103 of this title.

Del. Code tit. 18, § 6903 License application; certificate of authority.

(a) Any person complying with § 6906 of this title may apply to the Commissioner for a certificate of authority to do any and all insurance business comprised in §§ 902-905, 906(a)(1),(2), (4)-(15) and (b), 907 and 908 of this title and to issue annuities as defined in § 2902 of this title; provided, however, that: (1) No pure captive insurance company may directly insure any risks other than those of any 1 or more of the following: a. Its parent. b. Its parent’s affiliated companies. c. A controlled unaffiliated business. (2) No association captive insurance company: a. Organized as a reciprocal insurer may insure any risks that a reciprocal insurer is not permitted to insure under Chapter 57 of this title; and b. May insure any risks other than those of the association members of its association and their affiliated companies, provided that an association captive insurance company may insure risks of any other person if the insurance for such other persons satisfies each of the following requirements: 1. The insurance lines for such other persons must be the same as are authorized by the Commissioner to be written by the association captive insurance company for its association members; 2. Such other persons conduct the same or a related or similar business as that of the association members of the association captive insurance company; and 3. The maximum amount of premiums received in any year from all such other persons cannot without the express written consent of the Commissioner exceed 50% of the gross direct premiums received by the association captive insurance company from its association members in its preceding financial year; (3) No industrial insured captive insurance company: a. Organized as a reciprocal insurer may insure any risks that a reciprocal insurer is not permitted to insure under Chapter 57 of this title; and b. May insure any risks other than those of the industrial insureds of its industrial insured group and their affiliated companies, provided that an industrial insured captive insurance company may insure risks of any other person (other than a natural person in his or her individual capacity) if the insurance for such other persons satisfies each of the following requirements: 1. The insurance lines for such other persons must be the same as are authorized by the Commissioner to be written by the industrial insured captive insurance company for its industrial insureds; 2. Such other persons conduct the same or a related or similar business as that of the industrial insureds of the industrial insured captive insurance company; and 3. The maximum amount of premiums received in any year from all such other persons cannot without the express written consent of the Commissioner exceed 50% of the gross direct premiums received by the industrial insured captive insurance company from its industrial insureds in its preceding financial year; (4) No risk retention group may insure any risks other than risks that may be insured by a risk retention group under Chapter 80 of this title; (5) A special purpose captive insurance company may, in addition to the authority set forth in this section for captive insurance companies, provide insurance or reinsurance, or both, for such other risks as approved by the Commissioner; (6) No captive insurance company may provide personal motor vehicle or homeowner’s insurance coverage or any component thereof; (7) No captive insurance company may accept or cede reinsurance except as provided in § 6911 of this title; (8) Any captive insurance company may provide excess workers’ compensation insurance to its parent and affiliated companies, unless prohibited by federal law or laws of this State or any other state having jurisdiction over the transaction, and any captive insurance company, unless prohibited by federal law, may reinsure workers’ compensation of a qualified self-insured plan of its parent and affiliated companies; and (9) A series may elect to apply for a certificate of authority as a pure, agency, association, industrial insured, or special purpose captive insurance company; or a series may elect to be licensed as a series captive insurance company. (b) No captive insurance company shall do any insurance business in this State unless: (1) It is authorized by the Commissioner to do insurance business in this State under 1 of the following: a. A certificate of authority under subsection (f) of this section; or b. A conditional certificate of authority under subsection (g) of this section; (2) Its board of directors, members, partners, managers, committee of managers or other governing body, or in the case of a reciprocal insurer, its subscribers’ advisory committee, holds at least 1 meeting each year in this State, provided that this requirement shall not apply to: a. A branch captive insurance company; or b. A captive insurance company that has 5 or more full-time employees each of whom has that employee’s principal place of employment in this State; (3) It maintains its principal place of business in this State or, in the case of a branch captive insurance company, it maintains in this State a principal place of business in accordance with the provisions of § 6972(c) of this title; and (4) It identifies in its application for a certificate of authority its registered office in this State and its registered agent located at such office to accept service of process on its behalf and to otherwise act as its registered agent in this State, provided that whenever such registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the Commissioner shall be an agent of such captive insurance company upon whom any process, notice or demand may be served. (c) (1) Before receiving a certificate of authority, an applicant captive insurance company shall file with the Commissioner a certified copy of its organizational documents, a statement under oath of its president or other authorized person showing its financial condition, and any other statements or documents required by the Commissioner. (2) Each applicant captive insurance company shall also 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 insureds; and e. Such other factors deemed relevant by the Commissioner in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations. (d) (1) Each applicant captive insurance company shall pay to the Commissioner a nonrefundable application fee of $300 for reviewing its application to determine its completeness, and a nonrefundable processing fee of $3,200 for examining, investigating, and processing its application for a certificate of authority. (2) The Commissioner may retain legal, financial and examination services, and other expert services from outside the Department and may charge the applicant the reasonable cost of these services. (3) The provisions of § 330 of this title apply to reviews, examinations, investigations, and processing conducted under this section. (4) In addition to any other fee imposed or cost assessed under this section, each captive insurance company shall pay a nonrefundable license fee for the year of registration and a nonrefundable renewal fee for each year thereafter of $400. (5) A captive insurance company that files an application for a conditional certificate of authority under subsection (g) of this section must pay the Commissioner a fee of $100. (e) For conducting regulatory reviews, investigations, or processing, the Commissioner is authorized to retain legal, financial and examination services and other expert services from outside the Department, the reasonable cost of which may be charged against the applicant or captive insurance company. (f) If the Commissioner is satisfied that the documents and statements that such captive insurance company has filed comply with the provisions of this chapter, the Commissioner may grant a certificate of authority authorizing it to do insurance business in this State until April 1 thereafter, which certificate of authority may be renewed. (g) (1) Before the completion of the Commissioner's review of a captive insurance company's application materials, the Commissioner may issue a conditional certificate of authority upon the Commissioner's receipt of all of the following: a. Satisfactory evidence of the captive insurance company's possession of the minimum required capital and surplus set forth in § 6905 of this title; and b. The application materials required by this chapter; and c. A statement of compliance signed by the owner of the captive insurance company stating that to the best of the owner's belief the business plan and other documents filed with the application for a conditional certificate of authority comply with all of the following: 1. All licensing requirements mandated by this chapter; and 2. Any additional requirements the Commissioner establishes by regulation or rule. (2) The Commissioner may summarily revoke a conditional certificate of authority without legal recourse by the captive insurance company if 1 of the following applies: a. The Commissioner is unable to verify within 6 months of the issuance of the conditional certificate of authority that the captive insurance company possesses the minimum required capital and surplus indicated on the form submitted to the Department for issuance of the conditional certificate of authority; or b. The Commissioner determines that the business plan or other documents filed with the application for a certificate of authority do not comply with all of the following: 1. All licensing requirements mandated by this chapter; and 2. Any additional requirements the Commissioner establishes by regulation or rule. (3) Upon the issuance of a conditional certificate of authority under this subsection, the captive insurance company shall comply with and be subject to this chapter.

Del. Code tit. 18, § 6904 Company name.

No captive insurance company shall adopt a name that is the same as, deceptively similar to, or likely to be confused with or mistaken for, any other existing business name registered in this State.

Del. Code tit. 18, § 6905 Minimum capital and surplus; letter of credit.

(a) No captive insurance company shall be issued a certificate of authority unless it shall possess and thereafter maintain capital and surplus of: (1) In the case of a pure captive insurance company, not less than $250,000; (2) In the case of an association captive insurance company, not less than $750,000; (3) In the case of an industrial insured captive insurance company, not less than $500,000; (4) In the case of an agency captive insurance company, not less than $250,000; (5) In the case of a risk retention group, not less than $1,000,000; (6) In the case of a sponsored captive insurance company, not less than $500,000; (7) In the case of a special purpose captive insurance company, not less than $250,000 or such other amount determined by the Commissioner; (8) In the case of a branch captive insurance company, not less than $250,000 or such other amount determined by the Commissioner; (9) In the case of a special purpose financial captive insurance company that is also a sponsored captive insurance company, not less than $500,000, and in the case of a special purpose financial captive insurance company that is not also a sponsored captive insurance company, not less than $250,000; and (10) In the case of a series captive insurance company, the minimum capital and surplus shall be an amount as specified by the Commissioner. (b) In connection with the issuance of a certificate of authority, the Commissioner may prescribe additional minimum capital and surplus based upon the type, volume, and nature of insurance business transacted. (c) (1) Minimum capital and surplus described in this section shall be maintained in the form of cash, an irrevocable letter of credit issued 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, or such other assets as may be approved by the Commissioner. (2) Minimum capital and surplus described in this section held in the form of cash or other assets approved by the Commissioner shall be maintained in a financial institution approved by the Commissioner and in compliance with any condition imposed by the Commissioner. (d) Notwithstanding the foregoing, the minimum capital and surplus funds may be proceeds received by the captive insurance company resulting from the issuance by the captive insurance company of a surplus note as approved by the Commissioner.

Del. Code tit. 18, § 6906 Formation of captive insurance companies.

(a) A pure captive insurance company may be any of the following: (1) Incorporated as a stock corporation or as a nonstock corporation. (2) Formed as a limited liability company, partnership, limited partnership, series, or statutory trust, including a limited liability company, limited partnership, or statutory trust having 1 or more series. (b) An association captive insurance company or an industrial insured captive insurance company may be any of the following: (1) Incorporated as a stock corporation or as a nonstock corporation. (2) Formed as a limited liability company, partnership, limited partnership, statutory trust, or series. (3) Organized as a reciprocal insurer. (c) A special purpose captive insurance company, special purpose financial captive insurance company, agency captive insurance company, or branch captive insurance company may be any of the following: (1) Incorporated as a stock corporation or as a nonstock corporation. (2) Formed as a limited liability company, partnership, limited partnership, or statutory trust, including a limited liability company, limited partnership, or statutory trust having 1 or more series. (3) Such other person, other than a natural person in that natural person’s individual capacity, approved by the Commissioner. (d) A sponsored captive insurance company, including a sponsored captive insurance company that is also a special purpose financial captive insurance company, may be any of the following: (1) Incorporated as a stock corporation or as a nonstock corporation. (2) Formed as a limited liability company, partnership, limited partnership, or statutory trust, including a limited liability company, limited partnership, or statutory trust having 1 or more series. (e) A risk retention group may take any form permitted under the Liability Risk Retention Act of 1986, 15 U.S.C. § 3901 et seq., as amended. (f) In the case of a captive insurance company other than a branch captive insurance company: (1) Formed as a corporation, at least 1 of the members of the board of directors or other governing body shall be a resident of, or have that member’s principal place of business in, this State; (2) Formed as a reciprocal insurer, at least 1 of the members of the subscribers’ advisory committee shall be a resident of, or have its principal place of business in, this State; (3) Formed as a limited liability company, at least 1 member, manager or person in whom management of the limited liability company is vested or to whom rights and powers to manage and control the business and affairs of the limited liability company have been delegated shall be a resident of, or have its principal place of business in, this State; (4) Formed as a partnership, at least 1 partner or person in whom management of the partnership is vested or to whom rights and powers to manage and control the business and affairs of the partnership have been delegated shall be a resident of, or have its principal place of business in, this State; (5) Formed as a limited partnership, at least 1 general partner or person in whom management of the limited partnership is vested or to whom rights and powers to manage and control the business and affairs of the limited partnership have been delegated shall be a resident of, or have its principal place of business in, this State; and (6) Formed as a statutory trust, at least 1 trustee or person in whom management of the statutory trust is vested or to whom rights and powers to manage and control the business and affairs of the statutory trust have been delegated shall be a resident of, or have its principal place of business in, this State. (g) A captive insurance company incorporated, formed or organized under the laws of this State or under the laws of another jurisdiction that is licensed under the provisions of this chapter shall have the privileges and be subject to the provisions of the laws of this State or the laws of such other jurisdiction, as applicable, under which such captive insurance company is incorporated, formed or organized as well as the applicable provisions contained in this chapter. In the event of conflict between the provisions of the laws of this State or the laws of such other jurisdiction, as applicable, under which such captive insurance company is incorporated, formed or organized, and the provisions of this chapter, the latter shall control.

Del. Code tit. 18, § 6907 Annual reports.

(a) Captive insurance companies shall not be required to make any annual report to the Commissioner except as provided in this chapter. (b) Prior to April 15 of each year, each captive insurance company other than a branch captive insurance company for which the Commissioner has waived any of the requirements of this section pursuant to § 6974 of this title, shall submit to the Commissioner a report of its financial condition, verified by oath of 2 of its executive officers or authorized persons. Each captive insurance company shall report using generally accepted accounting principles, unless the Commissioner approves the use of statutory accounting principles or international accounting standards, with 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 insurance company whose use of statutory accounting principles is approved by the Commissioner may make such modifications and adaptations thereof as are necessary: (1) To record, as “admitted,” the full value of all investments by such captive insurance company permitted under this chapter; and (2) Subject to the Commissioner’s approval, to make its reports under this section consistent with the purposes of this chapter. The Commissioner shall by rule propose the forms in which captive insurance companies shall report. (c) Any captive insurance company may make written application to the Commissioner for filing the required report on a fiscal year-end. If an alternative reporting date is granted by the Commissioner: (1) The annual report is due 60 days after the fiscal year-end; and (2) In order to provide sufficient detail to support the premium tax return, the captive insurance company shall file prior to April 15 of each year for each calendar year-end such form or information as the Commissioner shall by rule prescribe, verified by oath of 2 of its executive officers or other authorized persons.

Del. Code tit. 18, § 6908 Examinations and investigations.

At least once in 3 years, and whenever the Commissioner determines it to be prudent, the Commissioner or the Commissioner’s examiner shall personally visit each captive insurance company and thoroughly inspect and examine its affairs to ascertain its financial condition, its ability to fulfill its obligations and its compliance with the provisions of this chapter. The Commissioner may enlarge the aforesaid 3-year period to 5 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 the Commissioner. The expenses and charges of the examination shall be paid to this State by the company or companies examined.

Del. Code tit. 18, § 6909 Suspension or revocation of certificate of authority.

(a) A captive insurance company’s certificate of authority to do an insurance business in this State may be suspended or revoked by the Commissioner for any of the following reasons: (1) Insolvency; (2) Failure to meet the requirements of § 6905 of this title; (3) Refusal or failure to submit an annual report, as required by § 6907 of this title, 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 organizational documents; (5) Failure to pay any tax or fee, or to submit to or pay the cost of examination or any legal obligation relative thereto, as required by this chapter; (6) 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 its policyholders; or (7) 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, the Commissioner may suspend or revoke such company’s certificate of authority if the Commissioner deems it in the best interest of the public and the policyholders of such captive insurance company, notwithstanding any other provision of this title. (c) Although issued and delivered to the captive insurance company, the certificate of authority at all times shall be the property of this State. Upon any expiration, suspension or termination thereof, the captive insurance company shall promptly deliver the certificate of authority to the Commissioner. (d) Suspension of a captive insurance company’s certificate of authority shall be for such period as the Commissioner specifies in the order of suspension. During the suspension period the Commissioner may rescind or shorten the suspension by further order. (e) During the suspension period the captive insurance company may not solicit or write any new business but must file annual statements, pay fees and taxes as required under this chapter, and, unless otherwise provided in the order of suspension, may service its business already in force as if the certificate of authority had continued in full force. (f) If the certificate of authority has not terminated within the suspension period, then upon expiration of the suspension period, the captive insurance company’s certificate of authority shall automatically be reinstated, unless the Commissioner finds that 1 or more causes of the suspension are continuing or that the captive insurance company is otherwise not in compliance with the requirements of this chapter, of which finding the Commissioner shall give the captive insurance company notice not less than 30 days in advance of expiration of the suspension period. If not automatically reinstated, and if not already terminated, the certificate of authority terminates at the end of the suspension period.

Del. Code tit. 18, § 6910 Legal investments; management of assets.

(a) Association captive insurance companies, special purpose captive insurance companies, series captive insurance companies, and risk retention groups shall comply with: (1) The investment requirements contained in Chapter 13 of this title, as applicable; or (2) Such investment requirements as may be approved by the Commissioner upon application by any such captive insurance company. (b) No pure captive insurance company, industrial insured captive insurance company, agency captive insurance company, special purpose financial captive insurance company or branch captive insurance company shall be subject to any restrictions on allowable investments whatsoever, including those limitations contained in this title; provided, however, that the Commissioner may prohibit or limit any investment that threatens the solvency or liquidity of any such captive insurance company. (c) Loans of minimum capital and surplus funds required by § 6905 of this title are prohibited. Notwithstanding the foregoing, the minimum capital and surplus funds may be received by the issuance by the captive insurance company of a surplus note as approved by the Commissioner. (d) Subject to subsections (a) and (b) of this section and § 6937 of this title, as applicable, a captive insurance company may own securities of or other interests in another captive insurance company, whether voting or nonvoting.

Del. Code tit. 18, § 6911 Reinsurance.

(a) Any captive insurance company may provide reinsurance, on risks ceded by any other insurer, in accordance with § 910 of this title. (b) With the exception of a risk retention group, any captive insurance company may take credit or a reduction from liability for the reinsurance of risks or portions of risks ceded to reinsurers in accordance with subchapter III of Chapter 9 of this title, or as otherwise approved by the Commissioner. (c) A risk retention group may take credit or a reduction from liability for the reinsurance of risks or portions of risks ceded to reinsurers only in accordance with subchapter III of Chapter 9 of this title.

Del. Code tit. 18, § 6912 Rating organization membership.

No captive insurance company shall be required to join a rating organization.

Del. Code tit. 18, § 6913 Prohibited associations.

No captive insurance company shall be permitted to join or contribute financially to any plan, pool, association, or guaranty or insolvency fund in this State, nor shall any such captive insurance company, or any insured or affiliate 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.

Del. Code tit. 18, § 6914 Tax on premiums collected.

(a) Each captive insurance company, other than a sponsored captive insurance company (including a sponsored captive insurance company that is also a special purpose financial captive insurance company), and each protected cell of a sponsored captive insurance company shall pay to the Commissioner no later than April 15 of each year a tax at the rate of 2 / 10 of 1% on each dollar of direct premiums collected or contracted for, during the year ending December 31 next preceding, on policies or contracts of insurance written by the captive insurance company, after deducting from the direct premiums subject to the tax the amounts paid to policyholders as return premiums with respect to such preceding year only, which amounts shall include only dividends or distributions of unabsorbed premiums or premium deposits returned or credited to policyholders, up to a maximum tax for such year of $200,000; provided however, that no tax shall be due or payable as to consideration received for annuity contracts. (b) Each captive insurance company, other than a sponsored captive insurance company (including a sponsored captive insurance company that is also a special purpose financial captive insurance company), and each protected cell of a sponsored captive insurance company shall pay to the Commissioner no later than April 15 of each year a tax at the rate of 1 / 10 of 1% on each dollar of assumed reinsurance premiums collected or contracted for, during the year ending December 31 next preceding, on policies or contracts of insurance written by the captive insurance company, up to a maximum tax for such year of $110,000; provided, however, that no such tax applies to premiums for risks or portions of risks which are subject to taxation on a direct basis pursuant to subsection (a) of this section, and no such 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 under common ownership and control if such transaction is part of a plan to discontinue the operations of such other insurer and if the intent of the parties to such transaction is to renew or maintain such business with the captive insurance company. (c) (1) Except for a series captive insurance company, the annual minimum aggregate tax to be paid by a captive insurance company or a protected cell of a sponsored captive insurance company under subsections (a) and (b) of this section shall be $5,000 and the annual maximum aggregate tax to be paid by a captive insurance company or a protected cell of a sponsored captive insurance company under subsections (a) and (b) of this section shall be $200,000, provided, that the tax to be paid by a captive insurance company under subsections (a) and (b) of this section and this subsection is subject to subsections (d), (e) and (f) of this section. Each series captive insurance company shall pay an annual minimum aggregate tax of $3,500. The aggregation of the tax paid by more than 1 series captive insurance company formed within a limited liability company or statutory trust established under § 17-218(b), § 18-215(b) of Title 6, § 3804(a) of Title 12, or corresponding law of another state shall not be restricted by the annual maximum premium tax limitations under subsections (a) and (b) of this section. (2) Any series captive insurance company that assumes reinsurance premiums from a captive insurance company or protected cell subject to taxation under subsection (a) or (b) of this section may elect to assume the liability for the payment of the tax otherwise payable by such ceding captive insurance company or protected cell on such premium pursuant to subsection (a) or (b) of this section at the rate otherwise applicable to such premium if it had remained in such captive insurance company or protected cell, and such ceding captive insurance company or protected cell shall have no liability under subsections (a) or (b) of this section to the extent of such assumption. Nothing in this paragraph (c)(2) shall affect the application of the minimum tax imposed on the ceding captive insurance company or the series captive insurance company assuming such reinsurance premium and tax liability pursuant to paragraph (c)(1) of this section. (3) A special purpose captive insurance company formed as a limited liability company or statutory trust established under § 17-218(b), § 18-215(b) of Title 6, § 3804(a) of Title 12, or corresponding law of another state that has established 1 or more series licensed as captive insurance companies shall not be subject to the tax imposed under subsection (a) or (b) of this section only if, during the entire calendar year for which the tax shall be imposed, the special purpose captive insurance company: a. Did not contract for nor collect any direct premium; b. Did not contract for nor assume any reinsurance premium; and c. Was not obligated as an insurance company of any type under any contract of insurance or reinsurance. (d) 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 occupation tax or other taxes shall be levied on or collected from any captive insurance company by this State or any county, city or municipality within this State, except ad valorem taxes on real and personal property used in the production of income. (e) The tax provided for in this section shall be calculated on an annual basis, notwithstanding that policies or contracts of insurance or contracts of reinsurance are issued on a multiyear basis. In the case of multiyear policies or contracts, the premium shall be prorated for purposes of determining the tax under this section. (f) A captive insurance company that has 25 or more separate qualified individuals throughout a given tax year and that otherwise would be liable under this section for tax for such year in an amount exceeding $50,000 shall pay to the Commissioner under this section a tax for such year in the amount of $50,000. For purposes of this subsection, “qualified individual” means a natural person employed in this State on a regular basis of 35 or more hours per week either by such captive insurance company, or by a wholly-owned subsidiary of such captive insurance company that provides captive insurance company management, operating, investment or related services exclusively to such captive insurance company. For purposes of this subsection only, if at least 1 of 2 or more captive insurance companies under common ownership and control has 25 qualified individuals, then all captive insurance companies under common ownership and control shall be taxed as though they were a single captive insurance company. For purposes of this subsection only, “common ownership and control” means the direct or indirect ownership of 80% or more of the outstanding voting securities or other voting interests of 2 or more captive insurance companies by the same person or persons.

Del. Code tit. 18, § 6915 Rules and regulations; in general.

The Commissioner may establish and from time to time amend such rules and regulations relating to captive insurance companies as are necessary to enable the Commissioner to carry out the provisions of this chapter.

Del. Code tit. 18, § 6915A Exemption from rules and regulations; special purpose captive insurance companies.

The Commissioner, on a case by case basis, may by order exempt a special purpose captive insurance company from the provisions of this chapter and any rule or regulation established by the Commissioner pursuant to § 6915 of this title that, as reasonably determined by the Commissioner based on such factors deemed relevant by the Commissioner consistent with the purposes of this chapter, are inappropriate to apply to such special purpose captive insurance company.

Del. Code tit. 18, § 6916 Applicable laws.

(a) Only the following provisions of this title apply to a captive insurance company: (1) Chapter 3 of this title, except for § § 331, 332, and 333 of this title. (2) Sections 2702, 2703, 2706, and 2716 of this title. (3) This chapter. (4) Provisions of this title specifically referenced in this chapter. (b) Subchapter V of Chapter 11, Chapters 16, 16A, 18, 50, 58 and § 909 of this title shall apply to risk retention groups.

Del. Code tit. 18, § 6917 Captive insurance regulatory and supervision fund.

(a) There is hereby created a fund to be known as the captive insurance regulatory and supervision fund for the purpose of providing the financial means for the Commissioner to administer this chapter. All of the tax under § 6914 of this title and all other amounts received by the Department pursuant to this chapter shall be credited to this fund. (b) At the end of each fiscal year, the balance in the captive insurance regulatory and supervision fund, in excess of such amount reasonably necessary to finance the Commissioner’s administration of this chapter during the upcoming fiscal year, shall be transferred to the General Fund. (c) Within 30 days after the end of each fiscal year, the Commissioner shall submit to the Secretary of Finance of this State a written report stating: (1) The total amount of taxes and other amounts paid to the Department pursuant to this chapter during such fiscal year, and the total amount of the Commissioner’s costs and expenses to administer this chapter during such fiscal year; and (2) The Commissioner’s estimate of the total amount of the Commissioner’s costs and expenses to administer this chapter during the current fiscal year.

Del. Code tit. 18, § 6918 Delinquency.

To the extent not inconsistent with this chapter, the provisions of Chapter 59 of this title shall apply to captive insurance companies licensed under this chapter (including for this purpose individual protected cells of sponsored captive insurance companies as set forth in § 6938 of this title).

Del. Code tit. 18, § 6919 Rules for controlled unaffiliated business.

The Commissioner may adopt rules establishing standards to ensure that a pure captive insurance company’s parent or any of its affiliated companies is able to exercise control of the risk management function of any controlled unaffiliated business to be insured by the pure captive insurance company; provided, however, that, until such time as rules under this section are adopted, the Commissioner may approve the coverage of such risks by a pure captive insurance company, on a case by case basis.

Del. Code tit. 18, § 6920 Confidentiality.

All portions of license applications reasonably designated confidential by or on behalf of an applicant captive insurance company, all information and documents, and any copies of the foregoing, produced or obtained by or submitted or disclosed to the Commissioner pursuant to subchapter III of this chapter of this title that are reasonably designated confidential by or on behalf of a special purpose financial captive insurance company, 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 that are related to an examination pursuant to this chapter must, unless the prior written consent (which may be given on a case-by-case basis) of the captive insurance company to which it pertains has been obtained, be given confidential treatment, are not subject to subpoena, may not be made public by the Commissioner, and may not be provided or disclosed to any other person at any time except: (1) To the insurance department of any state or of any country or jurisdiction other than the United States of America; or (2) To a law-enforcement official or agency of this State, any other state or the United States of America so long as such official or agency agrees in writing to hold it confidential and in a manner consistent with this section.

Del. Code tit. 18, § 6921 Material changes in information; continued licensure.

In the event of any material change in the financial condition or management of a captive insurance company, the captive insurance company shall notify the Commissioner in writing promptly of any such change and in any event within 10 business days thereof.

Del. Code tit. 18, § 6922 Material transactions; prior notice.

No captive insurance company shall voluntarily take any of the following actions without providing the Commissioner at least 30 days prior written notice or receiving the Commissioner’s approval of any such action within such 30 day period: (1) The dissolution of the captive insurance company; (2) 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 insurance company; (3) Any incurrence of material indebtedness by the captive insurance company; (4) Any making of a material loan or other material extension of credit by the captive insurance company; (5) Any material payment out of capital and surplus; (6) Any merger or consolidation to which the captive insurance company is a constituent party; (7) Any conversion of the captive insurance company to another business form; (8) Any transfer to or domestication in any jurisdiction by the captive insurance company; or (9) Any material amendment of the organizational documents of the captive insurance company.

Del. Code tit. 18, § 6923 Books and records.

(a) Unless otherwise approved by the Commissioner, a captive insurance company shall maintain its books, records, documents, accounts, vouchers and agreements in this State. A captive insurance company shall make its books, records, documents, accounts, vouchers and agreements available for inspection by the Commissioner at any time. A captive insurance company shall keep its books, records, documents, accounts, vouchers and agreements in such manner that its financial condition, affairs and operations can be readily ascertained and in such manner that the Commissioner may readily verify its financial statements and determine its compliance with this chapter. (b) Unless otherwise approved by the Commissioner, all original books, records, documents, accounts, vouchers and agreements of a captive insurance company must be preserved and kept available in this State for the purpose of examination and inspection until the Commissioner approves the destruction or other disposition of the books, records, documents, accounts, vouchers and agreements. If the Commissioner approves the preservation and keeping of the foregoing outside this State, the captive insurance company shall maintain a complete and true copy of each such original in the State. Books, records, documents, accounts, vouchers and agreements may be photographed, reproduced on film or stored and reproduced electronically.

Del. Code tit. 18, § 6924 Dormant captive insurance companies.

(a) A dormant captive insurance company shall possess and maintain unimpaired capital and surplus in an amount of $25,000 or such other amount as determined by the Commissioner. (b) A dormant captive insurance company shall not be subject to or liable for the payment of any premium tax under § 6914 of this title. (c) A dormant captive insurance company shall not be required to do any of the following: (1) File annual statements with the Commissioner. (2) Prepare audited financial statements. (3) Obtain statements of actuarial opinion. (d) A dormant captive insurance company shall be subject to examination under § 6908 of this title for any year when it did not qualify as a dormant captive insurance company under § 6902 of this title. At the Commissioner’s discretion, it shall be subject to examination for any year in which it does qualify as a dormant captive insurance company under § 6902 of this title. (e) The Commissioner may, upon application, declare a captive insurance company to be dormant for purposes of this section even if such captive insurance company retains liabilities associated with policies written or assumed by the company; provided that the captive insurance company has otherwise ceased the transacting of insurance business. (f) A dormant captive insurance company shall not resume transacting the business of insurance until such time as the dormant captive insurance company has provided written notice to the Commissioner of its intention to resume assuming risk through the issuance of insurance policies, reinsurance contracts, or both, and accepting premium, whether direct, assumed via reinsurance, or both, at which time such captive insurance company shall no longer be considered a dormant captive insurance company and shall thereafter comply with all provisions of this chapter and regulations issued pursuant to this chapter applicable to such captive insurance company. (g) If, after a period of 5 years from the date of the written notice being sent to the Commissioner, a dormant captive insurance company has not resumed transacting the business of insurance by assuming risk through the issuance of insurance policies, reinsurance contracts, or both, and accepting premium, whether direct, assumed via reinsurance, or both, the nonrefundable license renewal fee payable under § 6903(d) of this title shall be increased to $25,000 for the sixth year of dormancy and $5,000 for every year of dormancy thereafter. (h) At the Commissioner’s discretion, a dormant captive insurance company may continue as a dormant captive insurance company for a period in excess of 5 years without incurring the additional fees set forth in subsection (g) of this section upon good reason shown and acceptable to the Commissioner. (i) A dormant captive insurance company may continue to adjudicate and settle insurance claims brought under any contract of insurance or reinsurance issued during any year in which it was not a dormant captive insurance company. The effective date of such a contract of insurance or reinsurance must be before the dormant captive insurance became a dormant captive insurance company.

Del. Code tit. 18, § 6931 General.

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

Del. Code tit. 18, § 6932 Definitions.

As used in this subchapter, unless the context requires otherwise: (1) “Participant” means any person, including any counterparty as defined in § 6952(1) of this title, that is insured by a sponsored captive insurance company, where the losses of the participant are limited through a participant contract to the participant’s pro rata share of the assets of 1 or more protected cells identified in the participant contract. (2) “Participant contract” means a contract by which a sponsored captive insurance company insures the risks of 1 or more participants, and limits the losses of each participant to its pro rata share of the assets of 1 or more protected cells identified in the participant contract, including an SPFC contract as defined in § 6952 of this title. (3) “Protected cell” means a separate and distinct account established and maintained by or on behalf of a sponsored captive insurance company in which assets, including assets invested pursuant to § 6937 of this title, are accounted for and recorded for 1 or more participants in accordance with the terms of 1 or more participant contracts to fund the liability of the sponsored captive insurance company assumed on behalf of the participants as set forth in the participant contracts. (4) “Sponsor” means a person qualifying as a sponsor under § 6935 of this title. (5) “Sponsored captive insurance company” means a captive insurance company, including a special purpose financial captive insurance company as defined in § 6952 of this title: a. Of which the minimum capital and surplus required by this chapter is provided by 1 or more sponsors; b. That is licensed under the provisions of this chapter; c. That insures the risks of its participants only, through separate participant contracts; and d. That funds its liability to each participant through 1 or more protected cells and segregates the assets of each protected cell from the assets of other protected cells and from the assets of the sponsored captive insurance company’s general account.

Del. Code tit. 18, § 6933 Supplemental license application materials.

In addition to the information required by § 6903(c) of this title, each applicant sponsored captive insurance company shall file with the Commissioner the following: (1) Materials demonstrating to the satisfaction of the Commissioner how the applicant will report to the Commissioner on, and account for, the loss and expense experience of each protected cell; (2) A statement acknowledging that all financial records of the sponsored captive insurance company, including records pertaining to any protected cells, shall be made available for inspection or examination by the Commissioner or the Commissioner’s designated agent; (3) All contracts or sample contracts between the sponsored captive insurance company and any participants; and (4) Evidence that expenses shall be allocated to each protected cell in a fair and equitable manner.

Del. Code tit. 18, § 6934 Protected cells.

A sponsored captive insurance company may establish and maintain 1 or more protected cells to insure risks of 1 or more participants, subject to the following conditions: (1) The owners of a sponsored captive insurance company shall be limited to its participants and sponsors, provided that a sponsored captive insurance company may issue nonvoting securities or interests to other persons on terms approved by the Commissioner; (2) The assets of each protected cell shall be held and accounted for separately on the books and records of the sponsored captive insurance company to reflect the financial condition and results of operations of such protected cell, net income or loss of such protected cell, dividends or other distributions to participants of such protected cell, and such other factors regarding such protected cell as may be provided in the applicable participant contract or required by the Commissioner; (3) The assets of a protected cell shall not be chargeable with liabilities of any other protected cell or, unless otherwise agreed in the applicable participant contract, of the sponsored captive insurance company generally; (4) No sale, exchange, or transfer of assets, or dividend or other distribution, may be made with respect to a protected cell by such sponsored captive insurance company without the consent of the participants of each affected protected cell; (5) No sale, exchange, or transfer of assets, or dividend or other distribution (other than a payment to a sponsor in accordance with the applicable participant contract), may be made with respect to a protected cell to a sponsor or a participant without the Commissioner’s approval; (6) Each sponsored captive insurance company shall annually file with the Commissioner such financial reports as the Commissioner shall require, which shall include, without limitation, accounting statements detailing the financial experience of each protected cell; (7) Each sponsored captive insurance company shall notify the Commissioner in writing promptly and in any event within 10 business days of any protected cell that is insolvent or otherwise unable to meet its claim or expense obligations; (8) No participant contract shall take effect without the Commissioner’s prior written approval, and the addition of each new protected cell and withdrawal of any participant or termination of any existing protected cell shall constitute a change in the plan of operation of the sponsored captive insurance company requiring the Commissioner’s prior written approval; and (9) The business written by a sponsored captive insurance company, with respect to each protected cell, shall be: a. Fronted by an insurance company licensed under the laws of this State or any other state; b. Reinsured by a reinsurer authorized or approved by this State; or c. Secured by a trust fund in this State for the benefit of policyholders and claimants or funded by an irrevocable letter of credit or other arrangement that is acceptable to the Commissioner. The amount of security provided shall be no less than the reserves associated with those liabilities which are neither fronted nor reinsured, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses and unearned premiums for business written through such protected cell. The Commissioner may require the sponsored captive insurance company to increase the funding of any security arrangement established under this paragraph (9). If the form of security is a letter of credit, the letter of credit must be established, issued or confirmed by a financial institution chartered by or licensed or otherwise authorized to do banking business in this State, or by any other financial institution approved by the Commissioner. A trust maintained pursuant to this paragraph (9) shall be established in a form and upon such terms approved by the Commissioner.

Del. Code tit. 18, § 6935 Qualification of sponsors.

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

Del. Code tit. 18, § 6936 Participants in sponsored captive insurance companies.

(a) Any person may be a participant in any sponsored captive insurance company. (b) A sponsor may be a participant in a sponsored captive insurance company. (c) A participant need not be an owner of the sponsored captive insurance company or any affiliate thereof. (d) Except as otherwise approved by the Commissioner, a participant may insure through a sponsored captive insurance company only its own risks and the risks of its affiliates who are participants.

Del. Code tit. 18, § 6937 Investments by sponsored captive insurance companies.

(a) Notwithstanding the provisions of § 6934 of this title, a sponsored captive insurance company may combine the assets of 2 or more protected cells for purposes of investing those assets. Such a combination of assets may not be construed as defeating the segregation of assets for purposes of §§ 6934 and 6938 of this title, or for accounting or other purposes. Sponsored captive insurance companies must comply with: (1) The investment requirements contained in Chapter 13 of this title, as applicable; or (2) Investment requirements as may be approved by the Commissioner upon application by a sponsored captive insurance company; or (3) In the case of a sponsored captive insurance company that is also a special purpose financial captive insurance company, the investment requirements contained in § 6910(b) of this title. (b) Compliance with the investment requirements set forth in paragraphs (a)(1) and (a)(2) of this section must be waived for sponsored captive insurance companies to the extent that credit for reinsurance ceded to reinsurers is allowed pursuant to § 6911 of this title or to the extent otherwise considered reasonable and appropriate by the Commissioner.

Del. Code tit. 18, § 6938 Delinquency of sponsored captive insurance companies.

The provisions of § 6918 of this title shall apply to a sponsored captive insurance company and to each protected cell of the sponsored captive insurance company, provided: (1) The assets of a protected cell may not be used to pay any expenses or claims other than those attributable to such protected cell; and (2) The minimum capital and surplus of the sponsored captive insurance company shall at all times be available to pay any expenses of or claims against the sponsored captive insurance company.

Del. Code tit. 18, § 6951 Purpose.

This subchapter provides for the authorization of special purpose financial captive insurance companies empowered to issue securities and otherwise access financial markets and alternative sources of capital through securitizations and other transactions. The intent of this subchapter is to provide for an authorization process for special purpose financial captive insurance companies that is both thorough and swift, and for the ongoing regulation of such companies that recognizes and accommodates the special purpose nature of such entities.

Del. Code tit. 18, § 6952 Definitions.

As used in this subchapter, unless the context requires otherwise: (1) “Counterparty” means a person, other than a natural person, which may but need not be the parent or an affiliate of the special purpose financial captive insurance company, that enters into an SPFC contract with a special purpose financial captive insurance company. (2) “Insolvency” or “insolvent” means: a. A person’s inability to pay its obligations when they are due, unless those obligations are the subject of a bona fide dispute; or b. The liabilities of a person exceed the value of all of the assets of the person. In the case of a special purpose financial captive insurance company, liabilities and assets are determined under the method of accounting used by the special purpose financial captive insurance company in accordance with § 6962 of this title. (3) “Organizational document” means the certificate of incorporation, articles of organization, bylaws, limited liability company agreement or other documents pursuant to which a special purpose financial captive insurance company or a special purpose financial captive insurance company applicant, as the case may be, is formed. (4) “Permitted investments” means those investments that meet the qualifications set forth in § 6910(b) of this title. (5) “Securities” has the same meaning as defined in § 73-103(a)(23) of Title 6, and also includes any form of debt obligation, equity, surplus certificate, surplus note, funding agreement, derivative or other financial instrument that the Commissioner designates, by rule or order, as “securities” for purposes of this subchapter. (6) “Special purpose financial captive insurance company” means a captive insurance company that is granted a certificate of authority under this subchapter. (7) a. “Special purpose financing transaction” means: 1. A transaction or a group of related transactions, which may include but are not limited to capital market offerings and securitizations, by which: A. Proceeds are obtained by a special purpose financial captive insurance company through the issuance of securities by the special purpose financial captive insurance company or by any other person, and all or any part of such proceeds are used to fund the special purpose financial captive insurance company’s obligations under 1 or more SPFC contracts; or B. A person provides 1 or more letters of credit or other assets to or for the benefit of the special purpose financial captive insurance company, which the Commissioner authorizes the special purpose financial captive insurance company to treat as admitted assets for purposes of the special purpose financial captive insurance company’s annual report, and all or any part of those letters of credit or other assets, as applicable, are used to fund the special purpose financial captive insurance company’s obligations under 1 or more SPFC contracts; or 2. Other financing arrangements as the Commissioner may approve. b. “Special purpose financing transaction” does not include the issuance of a letter of credit to satisfy all or part of the special purpose financial captive’s minimum capital and surplus requirements under § 6905 of this title. (8) “SPFC contract” means a contract or group of related contracts between a special purpose financial captive insurance company and a counterparty or counterparties pursuant to which insurance risk is transferred by the counterparty or counterparties to the special purpose financial captive insurance company. An SPFC contract may include 1 or more other parties. (9) “Surplus note” means an unsecured subordinated debt obligation treated as surplus and not debt in accordance with § 6956 of this title.

Del. Code tit. 18, § 6953 Application of subchapter.

(a) Except as otherwise provided, subchapters I, II, and IV of this chapter apply under this subchapter to special purpose financial captive insurance companies. (b) The Commissioner, by rule or order, at the Commissioner’s discretion and on a case-by-case basis, may exempt a special purpose financial captive insurance company, or 1 or more protected cells of a special purpose financial captive insurance company that is also a sponsored captive insurance company, from 1 or more of the provisions of this chapter. (c) This subchapter is not intended to limit the transactions in which a captive insurance company other than a special purpose financial captive insurance company may engage, and this subchapter does not apply to any such other captive insurance company.

Del. Code tit. 18, § 6954 Application requirements.

In addition to the items required under § 6903 of this title and, as applicable, under § 6933 of this title, a special purpose financial captive insurance company’s plan of operation must include the following: (1) A description of the contemplated special purpose financing transaction and the SPFC contract; (2) Copies, or, at the discretion of the Commissioner, a written summary, of all material agreements, instruments or documents, including, without limitation, opinions of Delaware legal counsel regarding compliance of the SPFC contract and the special purpose financing transaction with the requirements of this chapter, that are to be entered into or required to effectuate the SPFC contract and the special purpose financing transaction, which must include: a. The name of the counterparty; b. The nature of the risks being assumed; c. The proposed use of protected cells, if any; and d. The amounts, purpose, nature and interrelationships of the various transactions required to effectuate the SPFC contract and the special purpose financing transaction; (3) The proposed investment policy of the special purpose financial captive insurance company and a description of its proposed investment strategy; (4) A description of the underwriting, reporting, and claims payment methods by which losses covered by the SPFC contract are to be reported, accounted for, and settled; and (5) Pro forma balance sheets, income statements, and other financial projections demonstrating the performance of the special purpose financial captive insurance company pursuant to the SPFC contract under such stress case scenarios as may be required by the Commissioner.

Del. Code tit. 18, § 6955 Certificate of authority and order.

(a) Upon a determination by the Commissioner that the requirements in § 6954 of this title have been met, the Commissioner may grant a certificate of authority and, at the discretion of the Commissioner, an order imposing the conditions, limitations or other terms that the Commissioner considers appropriate. (b) As soon as reasonably practicable after the closing of each SPFC contract or special purpose financing transaction, and, in any event, within 30 days after such closing, the special purpose financial captive insurance company shall provide to the Commissioner a final executed copy of all material agreements, instruments or documents, including, without limitation, opinions of Delaware legal counsel regarding compliance of the SPFC contract and the special purpose financing transaction with the requirements of this chapter, that have been entered into or that have been required to effectuate the SPFC contract or the special purpose financing transaction. (c) Any material change of the special purpose financial captive insurance company’s plan of operation requires prior approval of the Commissioner. The following are not considered material changes: (1) If approved in the plan of operation, securities subsequently issued or entered into to continue the activities of the special purpose financial captive insurance company either before or after expiration, redemption or satisfaction of part or all of the securities issued or entered into pursuant to the initial special purpose financing transaction; and (2) If a swap transaction has been approved in the plan of operation, a change or substitution of a swap counterparty, if, at the time of the change or substitution, the replacement swap counterparty carries the same or a higher rating than its predecessor from 2 or more nationally recognized rating agencies. (d) Upon termination or cancellation of all of the SPFC contracts and all related special purpose financing transactions set forth in a plan of operation, unless otherwise approved by the Commissioner, the certificate of authority granted by the Commissioner terminates, and the special purpose financial captive insurance company may not enter into any further or additional SPFC contracts or special purpose financing transactions. (e) In the case of a special purpose financial captive insurance company organized as a sponsored captive insurance company, upon termination or cancellation of all of the SPFC contracts and all related special purpose financing transactions set forth in the plan of operation with respect to a protected cell, unless otherwise approved by the Commissioner, the authority granted by the Commissioner with respect to that particular cell terminates, and the protected cell may not enter into any further or additional SPFC contracts or special purpose financing transactions. (f) A special purpose financial captive insurance company that is organized as a sponsored captive insurance company may add or eliminate 1 or more protected cells under a single certificate of authority upon approval by the Commissioner of a plan of operation specific to the protected cells. (g) At the request of a special purpose financial captive insurance company, a certificate of authority or an order granted under this section, or both, may be amended by the Commissioner.

Del. Code tit. 18, § 6956 Securities of special purpose financial captive insurance companies.

(a) A special purpose financial captive insurance company may: (1) Subject to the approval of the Commissioner, account for the proceeds of surplus notes issued by the special purpose financial captive insurance company as surplus and not as debt for purposes of statutory accounting; and (2) Submit to the Commissioner periodic written requests for the advance approval by the Commissioner of the special purpose financial captive insurance company’s making payments of interest on and repayments of principal of surplus notes. (b) The Commissioner may approve, in advance, ongoing interest payments or principal repayments, or both, by the special purpose financial captive insurance company, provided that the interest payments or principal repayments, or both, are made in accordance with the plan of operation and formulas contained in the plan of operation. (c) Notwithstanding the provisions of subsection (b) of this section, payment of interest or repayment of principal may not be made without the approval of the Commissioner if the operation or financial condition of the special purpose financial captive insurance company deviates from the formula approved by the Commissioner pursuant to subsection (b) of this section or if the payment of interest or repayment of principal threatens the solvency or liquidity of the special purpose financial captive insurance company. (d) A security issued by a special purpose financial captive insurance company is not subject to regulation as an insurance contract. An investor in these securities or a holder of these securities is not considered to be transacting the business of insurance in this State solely by reason of having an interest in these securities. The underwriter’s placement or selling agents and their partners, commissioners, officers, members, managers, employees, agents, representatives, and advisors involved in a special purpose financing transaction by a special purpose financial captive insurance company are not considered to be insurance producers or to be conducting business as an insurance company or as an insurance agency, brokerage, intermediary, advisory, or consulting business solely by virtue of their underwriting activities in connection with the special purpose financing transaction.

Del. Code tit. 18, § 6957 Authorized contracts and activities.

(a) A special purpose financial captive insurance company may insure only the risks of a counterparty. A special purpose financial captive insurance company may cede risks assumed through an SPFC contract to third-party reinsurers through the purchase of reinsurance or retrocession protection as set forth in the plan of operation. (b) A special purpose financial captive insurance company may enter into agreements with affiliated companies and third parties and conduct other commercial activities related or incidental to, or necessary to fulfill, the purposes of an SPFC contract and special purpose financing transaction contemplated by the plan of operation approved by the Commissioner. The agreements may include management and administrative services agreements and other allocation, including tax allocation, and cost-sharing agreements. (c) A special purpose financial captive insurance company may enter into asset management agreements as provided for in a plan of operation. These agreements may include, but are not limited to, swap agreements, hedge agreements, guarantee agreements, guaranteed investment contracts, or other investment contracts. (d) An SPFC contract must: (1) Obligate the special purpose financial captive insurance company to indemnify the counterparty for losses or otherwise to make payments to the counterparty with respect to the insurance risk transferred thereunder; and (2) Make provision satisfactory to the Commissioner for payment of obligations of the special purpose financial captive insurance company under the SPFC contract. (e) Without limiting the means by which the requirements of paragraph (d)(2) of this section may be satisfied, an SPFC contract is considered to satisfy those requirements if it: (1) Requires the special purpose financial captive insurance company to: a. To enter into a trust agreement that meets the criteria set forth in this section and in any regulations issued by the Commissioner applicable to this subsection and that specifies the recoverables or reserves, or both, to be covered; and b. To establish a trust account for the benefit of the counterparty; (2) Stipulates that assets deposited in the trust account are valued according to their current fair value and consist only of permitted investments; (3) Requires the special purpose financial captive insurance company, before depositing assets with the trustee, to execute assignments or endorsements in blank, or both, or to transfer legal title to the trustee of all shares, obligations, or any other assets requiring assignments, in order that the counterparty, or the trustee upon the direction of the counterparty, may transfer the assets whenever necessary without consent or signature from the special purpose financial captive insurance company or another entity; (4) Requires that all settlements of account between the counterparty and the special purpose financial captive insurance company, unless otherwise approved by the Commissioner, be made in cash or its equivalent; and (5) Stipulates that the special purpose financial captive insurance company and the counterparty agree that the assets in the trust account, established pursuant to the provisions of the SPFC contract: a. May be withdrawn by the counterparty at any time, notwithstanding any other provisions in the SPFC contract; and b. Must be used and applied by the counterparty or any successor by operation of law of the counterparty, including any liquidator, rehabilitator, receiver, or conservator of the counterparty, without diminution because of insolvency on the part of the counterparty or the special purpose financial captive insurance company, only for the following purposes: 1. To transfer all of the assets into 1 or more trust accounts for the benefit of the counterparty pursuant to and in accordance with the terms of the SPFC contract and in compliance with the provisions of this title; and 2. To pay any other incurred and paid amounts that the counterparty claims are due pursuant to and under the terms of the SPFC contract and in compliance with this title. (f) An SPFC contract may allow the special purpose financial captive insurance company to seek approval from the counterparty to withdraw all or part of the assets supporting payment of obligations of the special purpose financial captive insurance company under the SPFC contract, or income from them, and to transfer the assets to the special purpose financial captive insurance company; provided, that, (1) At the time of the withdrawal, the special purpose financial captive insurance company replaces the withdrawn assets, excluding any income withdrawn, with other permitted investments having a fair value equal to the fair value of the assets withdrawn; (2) After giving effect to the withdrawal and replacement, the fair value of the assets supporting payment of obligations of the special purpose financial captive insurance company under the SPFC contract satisfies the requirements of paragraph (d)(2) of this section; and (3) The approval of the counterparty is received, which approval may not be unreasonably or arbitrarily withheld. (g) The assets of a special purpose financial captive insurance company must be preserved and administered by or on behalf of the special purpose financial captive insurance company to satisfy the liabilities and obligations of the special purpose financial captive insurance company incident to the SPFC contract and the special purpose financing transaction. (h) Unless otherwise permitted by this subchapter or approved by the Commissioner, a special purpose financial captive insurance company may not: (1) Issue or administer primary insurance policies; (2) Enter into an SPFC contract with a counterparty that is an insurer if the insurer is required to be, but is not, licensed or otherwise authorized to transact the business of insurance or reinsurance in at least its state or country of domicile; (3) Assume or retain exposure to insurance or reinsurance losses for its own account that is not funded or to be funded, in whole or in part, by proceeds from a special purpose financing transaction that complies with the provisions of this subchapter; (4) Have any direct obligation to policyholders or reinsureds of a counterparty; or (5) Lend to, receive a capital contribution from, invest or place in custody, trust, or under management any of its assets with, or receive a loan or advance from, other than by issuance of the securities pursuant to a special purpose financing transaction, anyone convicted of a felony, or anyone convicted of a criminal offense or found civilly liable for an offense involving the conversion or misappropriation of fiduciary funds or insurance accounts, theft, deceit, fraud, misrepresentation, or corruption.

Del. Code tit. 18, § 6958 Dividends and distributions.

(a) A special purpose financial captive insurance company may declare and pay dividends or other distributions to equity holders if the dividends or other distributions do not violate the provisions of this chapter, or jeopardize the fulfillment of the obligations of the special purpose financial captive insurance company pursuant to the special purpose financing transaction or the SPFC contract, or threaten the solvency or liquidity of the special purpose financial captive insurance company. (b) A special purpose financial captive insurance company may not declare or pay any dividend or other distribution to equity holders if the dividend or distribution violates the terms of the special purpose financing transaction, and may not declare or pay any dividend or other distribution to equity holders which decreases the capital and surplus of the special purpose financial captive insurance company below the minimum amount required under § 6905 of this title. (c) The Commissioner may approve, in advance, a special purpose financial captive insurance company’s declaring and paying, on an ongoing basis, dividends or other distributions, or both, to equity holders, provided that each dividend or other distribution is made in accordance with the plan of operation and formulas contained in the plan.

Del. Code tit. 18, § 6959 Delinquency.

(a) Sections 6918 and 6938 of this title apply to any special purpose financial captive insurance company except as otherwise provided in this section. (b) Any delinquency proceeding pursuant to Chapter 59 of this title, or any temporary restraining order or injunction issued pursuant thereto with respect to a counterparty, may not prohibit the transaction of business by a special purpose financial captive insurance company, including its performance of its obligations under a special purpose financing transaction, or any action or proceeding against a special purpose financial captive insurance company or its assets. (c) The commencement of a summary proceeding with respect to a special purpose financial captive insurance company, and any order issued by the court in such a summary proceeding, may not prohibit payments by the special purpose financial captive insurance company or any action required to make the payment, provided that the payments: (1) Are made pursuant to a special purpose financing transaction or an SPFC contract: and (2) Are consistent with the special purpose financial captive insurance company’s plan of operation, its certificate of authority, and any order issued in connection therewith, as they may be amended from time to time. (d) Notwithstanding any other provisions of this title or other laws of this State: (1) A receiver of a counterparty may not take action seeking to void, and has no authority to void, a nonfraudulent transfer by a counterparty to a special purpose financial captive insurance company of money or other property made pursuant to an SPFC contract; and (2) A receiver of a special purpose financial captive insurance company may not take action seeking to void, and has no authority to void, a nonfraudulent transfer by the special purpose financial captive insurance company of money or other property made to a counterparty pursuant to an SPFC contract or made pursuant to a special purpose financing transaction. (e) Notwithstanding any other provision of this title or other laws of this State, the assets of a special purpose financial captive insurance company, including assets held in trust for the benefit of the counterparty, may not be consolidated with or included in the estate of a counterparty in any bankruptcy, insolvency, delinquency, or similar proceeding against the counterparty.

Del. Code tit. 18, § 6960 Discount on reserves; report on reserves.

(a) A special purpose financial captive insurance company shall file annually with the Commissioner an actuarial opinion on reserves provided by an approved independent actuary. (b) A special purpose financial captive insurance company may discount its reserves in accordance with the actuarial opinion filed under this section, subject to review by the Commissioner.

Del. Code tit. 18, § 6961 Certain actions by the Commissioner.

Other than under § 6959 of this title, the Commissioner shall notify a special purpose financial captive insurance company not less than 30 days before suspending, revoking, amending, or modifying its certificate of authority or any order issued in connection therewith. The notice must state the basis for the suspension, revocation, amendment, or modification. The special purpose financial captive insurance company must be afforded the opportunity for a hearing and all rights provided pursuant to the provisions of the Administrative Procedures Act, Chapter 101 of Title 29.

Del. Code tit. 18, § 6962 Books and records.

Notwithstanding § 6907 of this title, a special purpose financial captive insurance company shall calculate reserves and otherwise report using statutory accounting principles, unless the Commissioner requires, approves, or accepts the use of generally accepted accounting principles or international accounting standards, in either case with any appropriate or necessary modifications or adaptations thereof required or approved or accepted by the Commissioner, and as supplemented by additional information required by the Commissioner.

Del. Code tit. 18, § 6971 Establishment of a branch captive.

A branch captive may be established in this State in accordance with the provisions of this chapter to write any line of business for which captive insurance companies are authorized under § 6903(a) of this title. In addition to the general provisions of this chapter, the provisions of this subchapter shall apply to branch captive insurance companies.

Del. Code tit. 18, § 6972 Definitions.

As used in this subchapter, unless the context require otherwise: (1) “Alien captive insurance company” means any insurance company formed to write insurance business of a nature that the Commissioner determines is otherwise permissible under this chapter and is 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) “Branch business” means any insurance business transacted by a branch captive insurance company in this State. (3) “Branch captive insurance company” means any alien captive insurance company that has been issued a certificate of authority 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, and has not otherwise been issued a certificate of authority by the Commissioner to transact insurance under this chapter. (4) “Branch operations” means any business operations of a branch captive insurance company in this State.

Del. Code tit. 18, § 6973 Security required.

(a) No branch captive insurance company shall be issued a license unless it shall possess and thereafter maintain, as security for the payment of liabilities attributable to the branch operations: (1) Minimum capital and surplus as set forth in § 6905 of this title; and (2) Reserves on such insurance policies or such reinsurance contracts as may be issued or assumed by the branch captive insurance company through its branch operations, 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 insurance company to credit against any such reserve requirement either of the following: a. Assets belonging to the branch captive insurance company that are in trust for, or otherwise segregated and controlled by, a ceding company, that secure the reinsurance obligations of the branch captive insurance company to such ceding company; or b. Assets belonging to a reinsurer if held in trust for, or otherwise under the control of the branch captive insurance company and that secure the obligations of such reinsurer to the branch captive insurance company. (b) Subject to the prior approval of the Commissioner, the amounts required in paragraphs (a)(1) and (2) of this section may be held in the form of: (1) A trust formed under a trust agreement and funded by assets acceptable to the Commissioner; (2) An irrevocable letter of credit issued or confirmed by a bank approved by the Commissioner; or (3) Any combination thereof. (c) The Commissioner may, on a case by case basis, exempt a branch captive insurance company from any or all of the requirements of this section, provided the Commissioner finds satisfactory evidence of the branch captive insurer’s financial stability.

Del. Code tit. 18, § 6974 Annual reports.

(a) Notwithstanding § 6907 of this title, a branch captive insurance company 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 insurance company or alien captive insurance company is formed, verified by oath of 2 of its executive officers. Such reports and statements shall be filed with the Commissioner on the same day that such reports and statements are due in the domiciliary jurisdiction of the foreign captive insurance company or alien captive insurance company. (b) If the Commissioner is satisfied that the annual report filed in accordance with subsection (a) of this section provides adequate information concerning the financial condition of the branch captive insurance company, the Commissioner may waive the requirement for completion of the annual report required under § 6907 of this title. If the Commissioner is not satisfied with the reports and statements filed pursuant to subsection (a) of this section, a report that meets the requirements of § 6907 of this title shall be filed with the Commissioner at such date as the Commissioner shall establish. (c) If the foreign captive insurance company or alien captive insurance company is not required to file reports or statements in its domiciliary jurisdiction, the requirements of § 6907 of this title shall apply.

Del. Code tit. 18, § 6975 Examination of branch captives.

(a) The examination of a branch captive insurance company pursuant to § 6908 of this title shall be of branch business and branch operations only, so 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 domiciliary jurisdiction of the foreign captive insurance company or alien captive insurance company, 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. (b) Notwithstanding subsection (a) of this section, if the Commissioner elects to waive any of the requirements of § 6973 of this title pursuant to § 6973(c) of this title, the Commissioner shall examine so much of the financial condition and affairs of the foreign captive insurance company or alien captive insurance company as the Commissioner deems appropriate. (c) As a condition of the issuance of a certificate of authority under this chapter, the foreign captive insurance company or alien captive insurance company shall grant authority to the Commissioner for examination of the affairs of such foreign captive insurance company or alien captive insurance company in the jurisdictions in which the foreign captive insurance company or alien captive insurance company is formed, operates or maintains books and records.

Del. Code tit. 18, § 6976 Taxation of branch captives.

In the case of a branch captive insurance company, the tax provided for in § 6914 of this title shall apply only to the branch business of such company.

Del. Code tit. 18, § 6980 Federal Home Loan Bank membership.

A captive insurance company may apply for and become a member of a Federal Home Loan Bank, as defined in 12 U.S.C. § 1422(1)(A). The Commissioner may issue such reasonable rules, regulations and orders as the Commissioner may deem necessary or desirable to effectuate the purposes of this section, including setting standards for captive insurance companies qualifying for, entering into, and reporting advance agreements with Federal Home Loan Banks.

Del. Code tit. 18, § 6981 Repeals; effective date; applicability.

(a) Except as provided in subsection (b) of this section, this chapter shall apply to all captive insurance companies. (b) Chapter 69 of this title as in effect prior to July 11, 2005, chapter is hereby repealed, except as set forth in the next sentence. Chapter 69 of this title as in effect on July 11, 2005, shall apply to any captive insurance company licensed under such chapter as of such date that has not submitted a written notice to the Commissioner under subsection (c) of this section. (c) Any captive insurance company licensed in this State as of July 11, 2005, that otherwise would be subject to the application of Chapter 69 of this title as in effect on such date may elect to become subject to the application of this chapter instead by submitting to the Commissioner a written notice to that effect.

Del. Code tit. 18, § 6982 Reserved power of this State to alter or repeal chapter.

All provisions of this chapter may be altered from time to time or repealed.

Del. Code tit. 18, § 6983 Short title.

This chapter may be cited as the “Delaware Revised Captive Insurance Company Act.”

Source: DE Code (Official Site)URL: https://delcode.delaware.gov/title18/c069/sc01/index.htmlFetched: 10/4/2026