KRS 304.49-060: Formation of captive insurers -- Applicability of KRS Chapters 271B,

273, and 275 -- Conditions for issuing certificate of authority -- Applicability of

KRS Chapter 271B and Subtitles 27 and 45 -- Conflicts -- Owners and parent

companies.

(1) A captive insurer shall be formed as a:

(a) Stock insurer with its capital divided into shares and held by the stockholders;

(b) Mutual insurer without capital stock in accordance with Subtitle 24 of this

chapter;

(c) Reciprocal insurer in accordance with Subtitle 27 of this chapter;

(d) Limited liability company pursuant to KRS Chapter 275;

(e) Business corporation pursuant to KRS Chapter 271B;

(f) Nonstock, nonprofit corporation pursuant to KRS Chapter 273; or

(g) Partnership, limited partnership, statutory bu siness trust, or other legal person

or entity other than a natural person in his or her individual capacity, with the

approval of the commissioner upon a showing of demonstrated need.

(2) A captive insurer formed as a corporation, limited liability company , or nonstock,

nonprofit corporation shall have the privileges and be subject to the provisions of

KRS Chapter 271B, 273, or 275 and the provisions of this subtitle. If there is a

conflict between the provisions of KRS Chapter 271B, 273, or 275 and the

provisions of this subtitle, the provisions of this subtitle shall control.

(3) A captive insurer organized as a corporation may issue classes of shares and series

of shares within a class pursuant to KRS Chapter 271B.

(4) Captive insurance companies formed a s corporations under the provisions of this

subtitle shall have the privileges and be subject to the provisions of KRS Chapter

271B and the applicable provisions contained in this subtitle. The provisions of this

chapter shall control if there is a conflic t between the provisions of KRS Chapter

271B and the provisions of this chapter. The provisions of this chapter, pertaining to

mergers, consolidations, conversions, mutualizations, and redomestications, shall

apply in determining the procedures to be follo wed by captive insurance companies

in carrying out any of the transactions described in Subtitles 24 and 37 of this

chapter, except that:

(a) The commissioner may, upon request of an insurer party to a merger

authorized under this subsection, waive the req uirement of KRS 304.24 -

390(4); and

(b) The commissioner may waive or modify the requirements for public notice

and hearing in accordance with administrative regulations which may be

promulgated by the commissioner addressing categories of transactions. If a

notice of public hearing is required, but no one requests a hearing, the

commissioner may cancel the hearing.

(5) A risk retention group may take any form permitted under the Liability Risk

Retention Act of 1986, 15 U.S.C. secs. 3901 et seq., as amended.

(6) A captive insurer incorporated or organized in Kentucky shall have at least one (1)

incorporator or organizer.

(7) In the case of a captive insurer, the commissioner shall find, in order to issue a

certificate of authority, that the establishment and maintenance of the proposed

captive insurer will promote the general good of the state. In arriving at such a

finding, the commissioner shall consider:

(a) The character, reputation, financial standing, and purposes of the

incorporators or organizers;

(b) The character, reputation, financial responsibility, insurance experience, and

business qualifications of the persons re sponsible for the conduct of the

captive insurer's affairs; and

(c) Any other aspects the commissioner deems advisable.

(8) The capital stock of a captive insurer incorporated as a stock insurer may be

authorized with no par value.

(9) Captive insurance co mpanies formed as reciprocal insurers under the provisions of

KRS 304.49 -010 to 304.49 -230 shall have the privileges and be subject to the

provisions of Subtitle 27 of this chapter in addition to the applicable provisions of

this subtitle. In the event of a conflict between the provisions of Subtitle 27 of this

chapter and the provisions of this subtitle, the latter shall control. To the extent a

reciprocal insurer is made subject to other provisions of this subtitle pursuant to

Subtitle 27 of this chapter, those provisions shall not be applicable to a reciprocal

insurer formed under KRS 304.49 -010 to 304.49 -230 unless the provisions are

expressly made applicable to captive insurance companies under KRS 304.49 -010

to 304.49-230.

(10) In addition to the provi sions of subsection (9) of this section, captive insurance

companies organized as reciprocal insurers that are industrial insured groups as

defined in this subtitle shall have the privileges and be subject to the provisions of

Subtitle 45 of this chapter, in addition to the applicable provisions of this subtitle.

(11) The articles of incorporation or bylaws of a captive insurer formed as a corporation

may authorize a quorum of a board of directors to consist of no fewer than one-third

(1/3) of the fixed or prescribed number of directors.

(12) The subscribers' agreement or other organizing document of a captive insurer

formed as a reciprocal insurer may authorize a quorum of a subscribers' advisory

committee to consist of no fewer than one-third (1/3) of the number of its members.

(13) Each owner of an agency captive insurer shall be licensed as an insurance producer.

(14) The parent of a pure captive insurer may include an employee benefit plan,

employee stock ownership plan, or any legal or business trust ap proved by the

commissioner.