{"data":{"id":"us-ky/krs-304.49-228","jurisdiction":"us-ky","citation":"KRS 304.49-228","heading":"Establishment of protected cells by sponsored captive insurer --","body":"Conditions.\nA sponsored captive insurer may establish and maintain one (1) or more protected cells to\ninsure risks of one (1) or more participants, subject to the following conditions:\n(1) The owners of a sponsored captive insurer shall be limited to its participants and\nsponsors, provided that a sponsored captive insurer may issue nonvoting securities\nor interests to other persons on terms approved by the commissioner;\n(2) The assets of each protected cell shall be held and accounted for separately on the\nbooks and records of the sponsored captive insurer to reflect the financial condition\nand results of operations of the protected cell, net income or loss of the protected\ncell, dividends or other distributions to participants of the protected cell, and other\nfactors regarding the protected cell as may be provided in the applicable participant\ncontract or required by the commissioner;\n(3) The assets of a protected cell shall not be char geable with liabilities of any other\nprotected cell or, unless otherwise agreed in the applicable participant contract, of\nthe sponsored captive insurer generally;\n(4) No sale or transfer of assets, or dividend or other distribution, may be made with\nrespect to a protected cell by such sponsored captive insurer without the consent of\nthe participants of each affected protected cell;\n(5) No sale, exchange, or transfer of assets, or dividend or other distribution, other than\na payment to a sponsor in accordan ce with the applicable participant contract, may\nbe made with respect to a protected cell to a sponsor or a participant without the\ncommissioner's approval;\n(6) Each sponsored captive insurer shall annually file with the commissioner financial\nreports as t he commissioner shall require, which shall include, without limitation,\naccounting statements detailing the financial experience of each protected cell;\n(7) Each sponsored captive insurer shall notify the commissioner, in writing, within ten\n(10) business days of any protected cell that has become insolvent or is otherwise\nunable to meet its claim or expense obligations;\n(8) No participant contract shall take effect without the commissioner's prior written\napproval. The addition of each new protected cell and withdrawal of any participant\nor termination of any existing protected cell shall constitute a change in the plan of\noperation of the sponsored captive insurer requiring the commissioner's prior\nwritten approval; and\n(9) (a) The business written by a sp onsored captive insurer, with respect to each\nprotected cell, shall be:\n1. Fronted by an insurance company licensed under the laws of this state or\nany other state;\n2. Reinsured by a reinsurer authorized or approved by this state;\n3. Secured by a trust fund in this state for the benefit of policyholders and\nclaimants; or\n4. Funded by an irrevocable letter of credit or other arrangement that is\napproved in writing by the commissioner.\n(b) The amount of security provided shall be no less  than the reserves associated\nwith those liabilities which are neither fronted nor reinsured, including\nreserves for losses, allocated loss adjustment expenses, incurred but not\nreported losses, and unearned premiums for business written through the\nprotected cell.\n(c) The commissioner may, for any reason, require the sponsored captive\ninsurance company to increase the funding of any security arrangement\nestablished under this subsection in order to protect claimants or potential\nclaimants.\n(d) If the form of security is a letter of credit, the letter of credit shall be\nestablished, issued, or confirmed by a financial institution chartered by or\nlicensed or otherwise authorized to do banking business in this state, or by any\nother financial institution approved by the commissioner.\n(e) A trust maintained pursuant to this subsection shall be established in a form\nand upon such terms as approved by the commissioner.","path":[],"source_url":"https://apps.legislature.ky.gov/law/statutes/statute.aspx?id=30243","current_through":"Includes enactments through the 2026 Regular Session","vintage":"09/05/2026","retrieved_at":"2026-09-05T20:58:00Z","sha256":"aa8a2de4af66d904e4c001b6701f70fe1f017ef4e8cae393d41a418e9be1f8cf","source_id":"us-ky","stale":false,"prev":"us-ky/krs-304.49-226","next":"us-ky/krs-304.49-230"},"notice":"GroundRules: Original legal text. Not legal advice."}