(a) One (1) or more sponsors may form a sponsored captive insurance company under this subchapter.

(b) A sponsor of a sponsored captive insurance company must be:

(1) An insurer licensed under the laws of any state;

(2) A reinsurer authorized or approved under the laws of any state;

(3) A captive insurance company formed or licensed under this subchapter; or

(4) Any other corporation, if approved by the Insurance Commissioner, in a manner to be prescribed by regulation.

(c) In his or her discretion, the commissioner may require that the business written by a sponsored captive insurance company, with respect to each protected cell, be fronted by an insurance company licensed under the laws of any state.

(d) A risk retention group may not be either a sponsor or a participant of a sponsored captive insurance company.

(e) A sponsored captive insurance company formed or licensed under this subchapter may establish and maintain one (1) or more protected cells to insure risks of one (1) or more participants, subject to the following conditions:

(1) The shareholders of a sponsored captive insurance company must be limited to its participants and sponsors;

(2) Each protected cell must be accounted for separately on the books and records of the sponsored captive insurance company to reflect the financial condition, results of operations of the protected cell, net income or loss, dividends or other distributions to participants, and other factors provided for in the participant contract or required by the commissioner;

(3) The assets of a protected cell must not be chargeable with liabilities arising out of any other insurance business the sponsored captive insurance company may conduct;

(4) No sale, exchange, or other transfer of assets may be made by the sponsored captive insurance company between or among any of its protected cells without the consent of the protected cells;

(5)

(A) No sale, exchange, transfer of assets, dividend, or distribution may be made from a protected cell to a sponsor or participant without the commissioner's approval.

(B) In no event may the commissioner's approval be given if the sale, exchange, transfer, dividend, or distribution would result in insolvency or impairment with respect to a protected cell;

(6) A sponsored captive insurance company shall file annually all the financial reports the commissioner requires, which shall include, but are not limited to, accounting statements detailing the financial experience of each protected cell;

(7) A sponsored captive insurance company shall notify the commissioner in writing within ten (10) business days of a protected cell that is insolvent or unable to meet its claim or expense obligations; and

(8)

(A) No participant contract shall take effect without the commissioner's prior written approval.

(B) The addition of each new protected cell and the withdrawal of any participant of any existing protected cell constitute a change in the business plan requiring the commissioner's prior written approval.

(f) A protected cell of a sponsored captive insurance company may be formed as an incorporated protected cell subject to subsection (e) of this section and the following conditions:

(1)

(A) Subject to the prior written approval of the sponsored captive insurance company and of the commissioner, an incorporated protected cell may enter into contracts and undertake obligations in its own name and for its own account.

(B) In the case of a contract or obligation to which the sponsored captive insurance company is not a party, either in its own name and for its own account or on behalf of a protected cell, the counterparty to the contract or obligation does not have a right or recourse against the sponsored captive insurance company and its assets other than against assets properly attributable to the incorporated protected cell that is a party to the contract or obligation;

(2)

(A) The articles of incorporation or articles of organization of an incorporated protected cell shall refer to the sponsored captive insurance company for which it is a protected cell and shall state that the protected cell is incorporated or organized for the limited purposes authorized by the sponsored captive insurance company's license.

(B) A copy of the prior written approval of the commissioner to add the incorporated protected cell shall be attached to and filed with the articles of incorporation or the articles of organization; and

(3) An incorporated protected cell shall have its own distinct name or designation, which shall include the words "Incorporated Cell".

(g) (1) A protected cell of a sponsored captive insurance company may be converted into an incorporated protected cell subject to the following conditions:

(A) Subject to the prior written approval of the commissioner, on application of the sponsor and with the prior consent of each participant of the affected protected cell or as otherwise permitted pursuant to a participation agreement, a sponsored captive insurance company may convert a protected cell into an incorporated protected cell without affecting the protected cell's assets, rights, benefits, obligations, and liabilities; and

(B) Any such conversion shall be deemed:

(i) For all purposes to be a continuation of the protected cell's existence together with all of its assets, rights, benefits, obligations, and liabilities, as an incorporated protected cell of the sponsored captive insurance company; and

(ii) To occur without any transfer or assignment of any such assets, rights, benefits, obligations, or liabilities and without the creation of any reversionary interest in, or impairment of, any such assets, rights, benefits, obligations, and liabilities.

(2)

(A) It is the intent of the General Assembly under this section to provide sponsored captive insurance companies with the option to establish one (1) or more protected cells as a separate legal entity.

(B) This section does not limit any rights or protections applicable to protected cells that are not established as separate legal entities.