Protected Cell Captive Insurance Companies

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An act relating to protected cell captive insurance 2
companies; amending s. 628.901, F.S.; revising the 3
definitions of the terms "captive insurance company" 4
and "special purpose captive insurance company"; 5
defining terms; amending s. 628.905, F.S.; specifying 6
that a protected cell captive insurance company may 7
only insure certain risks; amending s. 628.907, F.S.; 8
revising the unimpaired paid-in capital requirements 9
for captive insurance companies; revising the 10
unrestricted net asset requirements for captive 11
insurance companies incorporated as nonprofit 12
corporations; amending s. 628.908, F.S.; revising the 13
unimpaired surplus requirements for captive insurance 14
companies; amending s. 628.909, F.S.; revising 15
applicability; creating s. 628.921, F.S.; authorizing 16
one or more sponsors to form a protected cell captive 17
insurance company; requiring protected cell captive 18
insurance companies to be incorporated in a specified 19
manner; requiring applicant protected cell captive 20
insurance companies to file certain information with 21
the Office of Insurance Regulation; authorizing 22
protected cell captive insurance companies to 23
establish and maintain certain protected cells, 24
subject to certain approvals granted by the office; 25

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specifying conditions on protected cell establishment 26
and maintenance; providing construction; specifying 27
requirements regarding protected cells' assets and 28
liabilities and their attribution; requiring protected 29
cell captive insurance companies to file annual 30
reports, as required by the office, and to notify the 31
office when any protected cell is insolvent or unable 32
to meet its obligations; requiring the office's 33
approval before a participant contract may take 34
effect; specifying requirements for any insurance 35
business written by a protected cell captive insurance 36
company and the security arrangements that must be 37
established; authorizing the office to take certain 38
actions in the event of an insolvency of a protected 39
cell captive insurance company; requiring certain 40
affidavits for owners of incorporated protected cells; 41
authorizing the assets of two or more protected cells 42
to be combined for a specified purpose; specifying 43
that such combination may not be construed in a 44
certain manner; authorizing the office to approve the 45
use of certain methods for valuation of certain assets 46
and liabilities and rating the risk attributable to a 47
protected cell; requiring a receiver to manage the 48
assets and liabilities of protected cell captive 49
insurance companies under certain circumstances; 50

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prohibiting assets of protected cells from being used 51
to pay certain expenses and claims; requiring that 52
protected cell captive insurance companies' capital 53
and surplus be available to pay certain expenses or 54
claims; specifying requirements in actions brought by 55
or against protected cell captive insurance companies; 56
specifying that certain legal actions are deemed to be 57
brought against the general account only; specifying 58
that protected cells not named in an action are not 59
deemed to be a party to the action and are entitled to 60
dismissal under certain circumstances; prohibiting the 61
assets of protected cells from being encumbered or 62
seized under certain circumstances; specifying that 63
protected cells do not have a duty to defend the 64
rights and obligations or other protected cells; 65
requiring protected cell captive insurance companies 66
and protected cells to be afforded a certain status 67
during discovery; specifying that nonparty protected 68
cells have standing under certain circumstances; 69
authorizing protected cells to be converted to any 70
authorized form of captive insurance company; 71
authorizing the office to issue a specified 72
certificate of authority; requiring converting 73
protected cells to file certain organizational 74
documents; specifying requirements for such documents; 75

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specifying the formation date upon conversion; 76
requiring converted protected cells to possess certain 77
assets and liabilities; requiring the converting 78
protected cell to submit amended organizational 79
documents under certain circumstances; authorizing 80
captive insurance companies to apply to the office for 81
conversion to protected cell captive insurance 82
companies; requiring captive insurance companies to be 83
issued a revised certificate of authority under 84
certain circumstances; specifying the effective date 85
of such certificate; authorizing protected cells of a 86
captive insurance company to disaffiliate and to 87
affiliate with another protected cell captive 88
insurance company under certain circumstances; 89
authorizing the office to require changes to certain 90
documents under certain circumstances; specifying the 91
formation date of protected cells that affiliate with 92
another protected cell captive insurance company; 93
requiring such protected cells to maintain and carry 94
over certain assets and liabilities; authorizing an 95
individual protected cell to merge or otherwise 96
combine assets and liabilities with another individual 97
protected cell, subject to certain requirements; 98
specifying that a hearing is not required for certain 99
mergers; specifying the date of final conversion or 100

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disaffiliation of a protected cell for certain 101
purposes; specifying that the prior entity and 102
successor entities are responsible for certain tasks; 103
providing an effective date. 104
105
Be It Enacted by the Legislature of the State of Florida: 106
107
Section 1. Present subsections (8) through (11), (12) 108
through (14), and (15) of section 628.901, Florida Statutes, are 109
redesignated as subsections (9) through (12), (19) through (21), 110
and (23), respectively, new subsections (8) and (13) through 111
(15) and subsections (16) through (18) and (22) are added to 112
that section, and subsection (2) and present subsection (14) of 113
that section are amended, to read: 114
628.901 Definitions.—As used in this part, the term: 115
(2) "Captive insurance company" means a domestic insurer 116
established under this part. A captive insurance company 117
includes a protected cell captive insurance company, pure 118
captive insurance company, special purpose captive insurance 119
company, or industrial insured captive insurance company formed 120
and licensed under this part. 121
(8) "General account" means all assets and liabilities of 122
a protected cell captive insurance company not attributable to a 123
protected cell. 124
(13) "Participant" means a person or an entity, and any 125

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affiliate of such person or entity, which is insured by a 126
protected cell captive insurance company, if the losses of the 127
participant are limited through a participant contract. 128
(14) "Participant contract" means a contract by which a 129
protected cell captive insurance company insures the risks of a 130
participant and limits the losses of each such participant to 131
its pro rata share of the assets of one or more protected cells 132
identified in such contract. 133
(15) "Protected cell" means a separate account established 134
by a protected cell captive insurance company formed or licensed 135
under this part, in which account an identified pool of assets 136
and liabilities is segregated and insulated by means of this 137
part from the remainder of the protected cell captive insurance 138
company's assets and liabilities in accordance with the terms of 139
one or more participant contracts to fund the liabilities of the 140
protected cell captive insurance company with respect to the 141
participants as set forth in the participant contracts. 142
(16) "Protected cell assets" means all assets, contract 143
rights, and general intangibles identified with and attributable 144
to a specific protected cell of a protected cell captive 145
insurance company. 146
(17) "Protected cell captive insurance company" means a 147
captive insurance company: 148
(a) In which the minimum capital and surplus required by 149
this part are provided by one or more sponsors; 150

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(b) That is formed or licensed under this part; 151
(c) That insures the risks of separate participants 152
through participant contracts; and 153
(d) That funds its liability to each participant through 154
one or more protected cells and segregates the assets of each 155
protected cell from the assets of other protected cells and from 156
the assets of the protected cell captive insurance company's 157
general account. 158
(18) "Protected cell liabilities" means all liabilities 159
and other obligations identified with and attributed to a 160
specific protected cell of a protected cell captive insurance 161
company. 162
(21)(14) "Special purpose captive insurance company" means 163
a captive insurance company that is formed or licensed under 164
this part which chapter that does not meet the definition of any 165
other type of captive insurance company defined in this section. 166
(22) "Sponsor" means any person or entity that is approved 167
by the office to provide all or part of the capital and surplus 168
required by this part and to organize and operate a protected 169
cell captive insurance company. 170
Section 2. Paragraph (f) is added to subsection (1) of 171
section 628.905, Florida Statutes, to read: 172
628.905 Licensing; authority.— 173
(1) A captive insurance company, if permitted by its 174
charter or articles of incorporation, may apply to the office 175

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for a license to do any and all insurance authorized under the 176
insurance code, other than workers' compensation and employer's 177
liability, life, health, personal motor vehicle, and personal 178
residential property insurance, except that: 179
(f) A protected cell captive insurance company may only 180
insure the risks of its protected cell participants. 181
Section 3. Subsections (1) and (2) of section 628.907, 182
Florida Statutes, are amended to read: 183
628.907 Minimum capital and net assets requirements; 184
restriction on payment of dividends.— 185
(1) A captive insurance company may not be issued a 186
license unless it possesses and thereafter maintains the 187
following applicable unimpaired paid-in capital requirements of: 188
(a) In the case of a protected cell captive insurance 189
company, at least $100,000. 190
(b) In the case of a pure captive insurance company, at 191
least $100,000.; 192
(c)(b) In the case of an industrial insured captive 193
insurance company incorporated as a stock insurer, at least 194
$200,000.; and 195
(d)(c) In the case of a special purpose captive insurance 196
company, an amount determined by the office after giving due 197
consideration to the company's business plan, feasibility study, 198
and pro forma financial statements and projections, including 199
the nature of the risks to be insured. 200

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(2) The office may not issue a license to a captive 201
insurance company incorporated as a nonprofit corporation unless 202
the company possesses and maintains the following applicable 203
unrestricted net assets requirements of: 204
(a) In the case of a protected cell captive insurance 205
company, at least $100,000. 206
(b) In the case of a pure captive insurance company, at 207
least $250,000. 208
(c)(b) In the case of a special purpose captive insurance 209
company, an amount determined by the office after giving due 210
consideration to the company's business plan, feasibility study, 211
and pro forma financial statements and projections, including 212
the nature of the risks to be insured. 213
Section 4. Subsection (1) of section 628.908, Florida 214
Statutes, is amended to read: 215
628.908 Surplus requirements; restriction on payment of 216
dividends.— 217
(1) The office may not issue a license to a captive 218
insurance company unless the company possesses and maintains the 219
following applicable unimpaired surplus requirements of: 220
(a) In the case of a pure captive insurance company, at 221
least $150,000. 222
(b) In the case of a protected cell captive insurance 223
company, at least $100,000. 224
(c) In the case of an industrial insured captive insurance 225

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company incorporated as a stock insurer, at least $300,000. 226
(d)(c) In the case of an industrial insured captive 227
insurance company incorporated as a mutual insurer, at least 228
$500,000. 229
(e)(d) In the case of a special purpose captive insurance 230
company, an amount determined by the office after giving due 231
consideration to the company's business plan, feasibility study, 232
and pro forma financial statements and projections, including 233
the nature of the risks to be insured. 234
Section 5. Subsection (1) of section 628.909, Florida 235
Statutes, is amended to read: 236
628.909 Applicability of other laws.— 237
(1) The Florida Insurance Code does not apply to captive 238
insurance companies, protected cell captive insurance companies, 239
or industrial insured captive insurance companies except as 240
provided in this part and subsections (2) and (3). 241
Section 6. Section 628.921, Florida Statutes, is created 242
to read: 243
628.921 Protected cell captive insurance companies.— 244
(1) One or more sponsors may form a protected cell captive 245
insurance company under this part. 246
(2) A protected cell captive insurance company must be 247
incorporated as a stock insurer with its capital divided into 248
shares and held by the stockholders, as a mutual corporation, as 249
a nonprofit corporation with one or more members, or as a 250

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limited liability company. 251
(3) In addition to the information required by chapter 252
624, each applicant protected cell captive insurance company 253
must file all of the following information with the office: 254
(a) Materials demonstrating how the applicant will account 255
for the loss and expense experience of each protected cell at a 256
level of detail found to be sufficient by the office, and how it 257
will report such experience to the office. 258
(b) A statement acknowledging that all financial records 259
of the applicant, including records pertaining to any protected 260
cells, must be made available for inspection or examination by 261
the office or the office's designated agent. 262
(c) All contracts or sample contracts between the 263
applicant and any participants. 264
(d) Evidence that expenses will be allocated to each 265
protected cell in a fair and equitable manner. 266
(4) A protected cell captive insurance company formed or 267
licensed under this part may establish and maintain one or more 268
incorporated or unincorporated protected cells, to insure risks 269
of one or more participants, subject to all of the following 270
conditions: 271
(a)1. A protected cell captive insurance company may 272
establish one or more protected cells if the office has approved 273
in writing a plan of operation or amendments to a plan of 274
operation submitted by the protected cell captive insurance 275

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company with respect to each protected cell. A plan of operation 276
must include, but is not limited to, the specific business 277
objectives and investment guidelines of the protected cell. 278
However, the office may require additional information in the 279
plan of operation. The office may make the approval of a plan of 280
operation or amendments to a plan of operation effective as of 281
any date on or before the date the approval is signed so long as 282
the effective date is no earlier than the date on which the plan 283
of operation or amendments to the plan of operation were filed 284
with the office. 285
2. Upon the office's written approval of the plan of 286
operation, the protected cell captive insurance company, in 287
accordance with the approved plan of operation, may attribute 288
insurance obligations with respect to its insurance business to 289
the protected cell. 290
3. A protected cell must have its own distinct name or 291
designation, which must include the words "protected cell" or 292
"incorporated cell." Such names or designations may also be 293
reasonably abbreviated, including, without limitation, PC or 294
P.C. for "protected cell"; IC, I.C., IPC, or I.P.C. for 295
"incorporated cell"; and SC, S.C., SPC, or S.P.C. for "series 296
cell." 297
4. The protected cell captive insurance company shall 298
transfer all assets attributable to a protected cell to one or 299
more separately established and identified protected cell 300

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accounts bearing the name or designation of that protected cell. 301
Protected cell assets must be held in the protected cell 302
accounts for the purpose of satisfying the obligations of that 303
protected cell. 304
5. An incorporated protected cell may be organized and 305
operated in any form of business organization authorized by the 306
office, including, but not limited to, an individual series of a 307
limited liability company under chapter 605. Each incorporated 308
protected cell of a protected cell captive insurance company 309
must be treated as a captive insurer for purposes of this part 310
and has the power to enter into contracts, including an 311
individual series of a limited liability company. Unless 312
otherwise permitted by the organizational documents of a 313
protected cell captive insurance company, each incorporated 314
protected cell of the protected cell captive insurance company 315
must have the same directors, secretary, and registered office 316
as the protected cell captive insurance company. 317
6. All attributions of assets and liabilities between a 318
protected cell and the general account must be in accordance 319
with the plan of operation and participant contracts approved by 320
the office. A protected cell captive insurance company may not 321
make other attributions of assets or liabilities between the 322
protected cell captive insurance company's general account and 323
its protected cells. Any attribution of assets and liabilities 324
between the general account and a protected cell must be in cash 325

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or in readily marketable securities with established market 326
values. 327
(b) The creation of a protected cell does not create, with 328
respect to that protected cell, a legal person separate from the 329
protected cell captive insurance company unless the protected 330
cell is an incorporated cell. Amounts attributed to a protected 331
cell under this part, including assets transferred to a 332
protected cell account, are owned by the protected cell. A 333
protected cell captive insurance company may not act as, or hold 334
itself out to be, a trustee of the protected cell assets of the 335
protected cell account. Notwithstanding this subsection, a 336
protected cell captive insurance company may permit a security 337
interest to attach to the assets of a protected cell assets or a 338
protected cell account if the security interest is in favor of a 339
creditor of that protected cell and is otherwise authorized by 340
applicable law. 341
(c) This subsection may not be construed to prohibit the 342
protected cell captive insurance company from contracting with 343
or arranging for an investment advisor, commodity trading 344
advisor, or other third party to manage the protected cell 345
assets of a protected cell if all remuneration, expenses, and 346
other compensation of the third-party advisor or manager are 347
payable from the protected cell assets of that protected cell 348
and not from the protected cell assets of other protected cells 349
or the assets of the protected cell captive insurance company's 350

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general account. 351
(d)1. A protected cell captive insurance company must 352
establish administrative and accounting procedures necessary to 353
properly identify the one or more protected cells of the 354
protected cell captive insurance company and the protected cell 355
assets and protected cell liabilities attributable to the 356
protected cells. The directors of a protected cell captive 357
insurance company must keep protected cell assets and protected 358
cell liabilities: 359
a. Separate and separately identifiable from the assets 360
and liabilities of the protected cell captive insurance 361
company's general account; and 362
b. Attributable to one protected cell separate and 363
separately identifiable from protected cell assets and protected 364
cell liabilities attributable to other protected cells. 365
2. If subparagraph 1. is violated, the remedy of tracing 366
applies to protected cell assets that have been commingled with 367
the protected cell assets of other protected cells or with the 368
assets of the protected cell captive insurance company's general 369
account. The remedy of tracing may not be construed as 370
exclusive. 371
(e) When establishing a protected cell, the protected cell 372
captive insurance company must attribute to the protected cell 373
assets a value at least equal to the reserves and other 374
insurance liabilities attributed to that protected cell. 375

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(f) Each protected cell must be accounted for separately 376
on the books and records of the protected cell captive insurance 377
company to reflect the financial condition and results of 378
operations of such protected cell, net income or loss, dividends 379
or other distributions to participants, and such other factors 380
as may be provided in the participant contract or required by 381
the office. 382
(g) An asset of a protected cell may not be charged with, 383
or otherwise made liable for, any liability arising out of 384
insurance business conducted by the protected cell captive 385
insurance company on behalf of any other protected cell or its 386
general account. 387
(h) A protected cell captive insurance company may not 388
sell, exchange, or otherwise transfer assets between or among 389
any of its protected cells without the consent of such protected 390
cells. 391
(i) A protected cell captive insurance company may not 392
sell, exchange, transfer, or otherwise distribute assets, or pay 393
any dividend or distribution, from a protected cell to the 394
company or to a participant without the approval of the office. 395
The office may not approve any sale, exchange, transfer, 396
dividend, or distribution that would result in the insolvency or 397
impairment of a protected cell. 398
(j) All attributions of assets and liabilities to the 399
protected cells and the general account must be in accordance 400

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with the plan of operation approved by the office. A protected 401
cell captive insurance company may not attribute assets or 402
liabilities between its general account and any protected cell, 403
or between any protected cells. The protected cell captive 404
insurance company must attribute all insurance obligations, 405
assets, and liabilities relating to a reinsurance contract 406
entered into with respect to a protected cell to such protected 407
cell. The performance under such reinsurance contract and any 408
tax benefits, losses, refunds, or credits allocated pursuant to 409
a tax allocation agreement to which the protected cell captive 410
insurance company is a party, including any payments made by or 411
due to be made to the protected cell captive insurance company 412
pursuant to the terms of such agreement, must reflect the 413
insurance obligations, assets, and liabilities relating to the 414
reinsurance contract which are attributed to such protected 415
cell. 416
(k) In connection with the conservation, rehabilitation, 417
or liquidation of a protected cell captive insurance company, 418
the assets and liabilities of a protected cell must, to the 419
extent the office determines they are separable, at all times be 420
kept separate from, and may not be commingled with, those of 421
other protected cells and the protected cell captive insurance 422
company. 423
(l) Each protected cell captive insurance company must 424
annually file with the office such financial reports as required 425

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by the office. Any such financial report must include, without 426
limitation, accounting statements detailing the financial 427
experience of each protected cell. 428
(m) Each protected cell captive insurance company must 429
notify the office in writing within 10 business days of any 430
protected cell that is insolvent or otherwise unable to meet its 431
claim or expense obligations. 432
(n) A participant contract may not take effect without the 433
office's prior written approval. The addition of each new 434
protected cell, the withdrawal of any participant, or the 435
termination of any existing protected cell constitutes a change 436
in the plan of operation requiring the office's prior written 437
approval. 438
(o) The business written by a protected cell captive 439
insurance company, with respect to each protected cell, must be: 440
1. Fronted by an insurance company licensed under the laws 441
of any state; 442
2. Reinsured by a reinsurer authorized or approved by this 443
state; or 444
3. Secured by a trust fund in the United States for the 445
benefit of policyholders and claimants or funded by an 446
irrevocable letter of credit or other arrangement that is 447
acceptable to the office. The amount of security provided may 448
not be less than the reserves associated with those liabilities 449
which are neither fronted nor reinsured, including reserves for 450

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losses, allocated loss adjustment expenses, incurred but not 451
reported losses, and unearned premiums for business written 452
through the participant's protected cell. The office may require 453
the protected cell captive insurance company to increase the 454
funding of any security arrangement established under this 455
paragraph. If the form of security is a letter of credit, the 456
letter of credit must be issued or confirmed by a bank approved 457
by the office. A trust maintained pursuant to this paragraph 458
must be established in a form and upon such terms as approved by 459
the office. 460
(p) Notwithstanding this part or other laws of this state, 461
and in addition to subsection (6), in the event of an insolvency 462
of a protected cell captive insurance company where the office 463
determines that one or more protected cells remain solvent, the 464
office may separate such cells from the protected cell captive 465
insurance company and may allow, on application of the protected 466
cell captive insurance company, for the conversion of such 467
protected cells into one or more new or existing protected cell 468
captive insurance companies, or one or more other captive 469
insurance companies, pursuant to such plan of operation as the 470
office deems acceptable. 471
(q) Biographical affidavits are not required for 472
participants in unincorporated cells. However, biographical 473
affidavits are required for owners of incorporated cells, 474
including series members of a series limited liability company. 475

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(r) A protected cell captive insurance company formed or 476
licensed under this part may establish and operate both 477
unincorporated and incorporated protected cells. 478
(5) Notwithstanding subsection (4), the assets of two or 479
more protected cells may be combined for purposes of investment, 480
and such combination may not be construed as defeating the 481
segregation of such assets for accounting or other purposes. 482
Notwithstanding any other provision of the insurance code, the 483
office may approve the use of alternative reliable methods for 484
the valuation of protected cell assets and liabilities and for 485
the rating of risks attributable to a protected cell. 486
(6) Upon any order of supervision, rehabilitation, or 487
liquidation of a protected cell captive insurance company, the 488
receiver shall manage the assets and liabilities of the 489
protected cell captive insurance company pursuant to this part. 490
(7)(a) Assets of a protected cell may not be used to pay 491
any expenses or claims other than those attributable to such 492
protected cell. 493
(b) A protected cell captive insurance company's capital 494
and surplus must at all times be available to pay any expenses 495
of or claims against the protected cell captive insurance 496
company. 497
(8)(a) The pleadings in any legal action brought by or 498
against a protected cell captive insurance company must specify 499
which protected cell or cells are or should be named a party to 500

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the suit. If the general account is party to the suit, such 501
account must be separately identified in the pleadings as if it 502
were a protected cell. 503
(b) A legal action brought against a protected cell 504
captive insurance company which does not specify one or more 505
protected cells shall be deemed to have been brought against the 506
general account only. 507
(c) Any protected cell that is not named in the pleadings 508
of the legal action may not be deemed to be a party to the legal 509
action. Any protected cell that is erroneously named as a party 510
or named without proper cause is entitled to prompt dismissal 511
from the legal action. 512
(d) Unless specified by the plan of operation, participant 513
contract, or other prior contractual agreement, the assets of 514
one protected cell may not be encumbered or seized to satisfy 515
the obligations of or a judgment against any other protected 516
cell. A protected cell does not have a duty to defend the rights 517
and obligations of any other protected cell. 518
(e) In any legal action involving a protected cell captive 519
insurance company or a protected cell, any papers, documents, or 520
property of a nonparty protected cell must be afforded the same 521
status during discovery as the documents or property of any 522
other unrelated third party. A nonparty protected cell has 523
standing to appear and petition for any appropriate relief to 524
protect the confidentiality of its papers or documents. 525

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(9)(a)1. Upon the application of a protected cell captive 526
insurance company, one of its protected cells may be converted 527
to any form of captive insurance company authorized pursuant to 528
this part with the consent of the office. Upon compliance with 529
this part, the office may issue to the converting protected cell 530
a certificate of authority with an effective date of its 531
original date of formation as a protected cell. 532
2. If the converting protected cell is a series of a 533
limited liability company, the protected cell must file 534
organizational documents with the Secretary of State which 535
comply with this part. The organizational documents must include 536
the date of formation as a series of a limited liability 537
company. Upon conversion, the formation date of the series shall 538
be deemed the formation date of the converted protected cell. 539
The converted protected cell shall possess all assets and 540
liabilities, including outstanding insurance liabilities, owned 541
by the predecessor series. 542
3. If the converting protected cell is any other type of 543
incorporated protected cell entity, the converting protected 544
cell must submit amended organizational documents to the 545
Secretary of State which comply with this part. 546
4. If the converting protected cell is neither a series of 547
a limited liability company nor an incorporated protected cell, 548
the protected cell must file organizational documents with the 549
Secretary of State which comply with this part. The 550

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organizational documents must include the date of formation as a 551
protected cell. Upon conversion, the formation date of the 552
protected cell is the formation date of the converted protected 553
cell. The converted protected cell shall possess all assets and 554
liabilities, including outstanding insurance liabilities, owned 555
by the predecessor cell. 556
(b) A captive insurance company may apply to the office 557
for conversion to become a protected cell captive insurance 558
company under any form permitted under this part. Upon 559
compliance with this part, approval by the office, and the 560
filing of amended organizational documents with the Secretary of 561
State, the captive insurance company must be issued a revised 562
certificate of authority. The effective date of the revised 563
protected cell captive insurance company's certificate of 564
authority shall remain the same as the effective date of the 565
prior captive insurance company. 566
(c) With the consent of both the affected protected cell 567
captive insurance companies and the office, an individual 568
protected cell of a captive insurance company may disaffiliate 569
from one protected cell captive insurance company and affiliate 570
with another protected cell captive insurance company. The 571
office may require the affected protected cell captive insurance 572
companies and the individual protected cell to make necessary 573
changes to their business plans, organizational documents, 574
participation contracts, or other governing documents before 575

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approving the change in affiliation. The formation date of a 576
protected cell that affiliates with another protected cell 577
captive insurance company shall be the date of its original 578
formation with the prior protected cell captive insurance 579
company. A protected cell shall maintain and carry over all 580
assets and liabilities, including outstanding insurance 581
liabilities, to the new protected cell captive insurance 582
company. 583
(d) With the consent of the affected protected cell 584
captive insurance company or companies, the owners or the 585
participants of the protected cells, and the office, an 586
individual protected cell of a captive insurance company may 587
merge or otherwise combine assets and liabilities with another 588
individual protected cell of a protected cell captive insurance 589
company. The office may require the affected protected cell 590
captive insurance companies and the individual protected cells 591
to make necessary changes to their business plans, 592
organizational documents, participation contracts, or other 593
governing documents before approving the change in affiliation. 594
The formation date of a protected cell that merges or otherwise 595
combines assets and liabilities with another protected cell 596
captive insurance company is the date of the original formation 597
of the surviving protected cell. The surviving protected cell 598
must acquire all of the assets and liabilities, including 599
outstanding insurance liabilities, of the merging protected 600

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cell. A hearing is not required for mergers of protected cells 601
effectuated under this section. 602
(e) Solely for the purposes of annual reports, 603
inspections, examinations, and taxation, the date of final 604
conversion or disaffiliation of a protected cell shall be deemed 605
a termination of that cell from the prior entity. The prior 606
entity shall be responsible for the accounting, oversight, and 607
premium tax on any transactions prior to the date of final 608
conversion or disaffiliation. The successor entity shall be 609
responsible for the accounting, oversight, and premium tax on 610
any transactions on or after the date of final conversion or 611
disaffiliation. 612
Section 7. This act shall take effect July 1, 2026. 613