(1) For purposes of this section, "marketable securities" means: (a) a bond or other evidence of indebtedness of a governmental unit in the United States or Canada or any instrumentality of the United States or Canada; or (b) securities: (i) traded on one or more of the following exchanges in the United States: (A) New York; (B) American; or (C) NASDAQ; (ii) when no particular security, or a substantially related security, applied toward the required minimum capital and surplus requirement of Subsection (2) represents more than 50% of the minimum capital and surplus requirement; and (iii) when no group of up to four particular securities, consolidating substantially related securities, applied toward the required minimum capital and surplus requirement of Subsection (2) represents more than 90% of the minimum capital and surplus requirement. (2) (a) The commissioner may not issue a certificate of authority to a captive insurance company unless the company possesses and maintains unimpaired paid-in capital and unimpaired paid-in surplus of: (i) in the case of a pure captive insurance company: (A) except as provided in Subsection (2)(a)(i)(B), not less than $250,000; or (B) if the pure captive insurance company is not acting as a pool that facilitates risk distribution for other captive insurers, an amount that is the greater of: (I) not less than 20% of the company's total aggregate risk; or (II) $50,000; (ii) in the case of an association captive insurance company, not less than $500,000; (iii) in the case of an industrial insured captive insurance company or a risk retention group, not less than $700,000; (iv) in the case of a sponsored captive insurance company, not less than $250,000 of which a minimum of $50,000 is provided by the sponsor; or (v) in the case of a special purpose captive insurance company, an amount determined by the commissioner after giving due consideration to the company's business plan, feasibility study, and pro-formas, including the nature of the risks to be insured. (b) The paid-in capital and surplus required under this Subsection (2) may be in the form of: (i) (A) cash; or (B) cash equivalent; (ii) an irrevocable letter of credit: (A) issued by: (I) a bank chartered by this state; (II) a member bank of the Federal Reserve System; or (III) a member bank of the Federal Deposit Insurance Corporation; (B) that the commissioner approves; (iii) marketable securities as determined by Subsection (1); or (iv) some other thing of value that the commissioner approves, for a period not to exceed 45 days, to facilitate the formation of a captive insurance company in this state in accordance with an approved plan of liquidation and reorganization of another captive insurance company or alien captive insurance company in another jurisdiction. (3) (a) The commissioner may, under Section 31A-37-106, require additional capital based on the type, volume, and nature of insurance business transacted. (b) The capital that the commissioner requires under this Subsection (3) may be in the form of: (i) cash; (ii) an irrevocable letter of credit issued by: (A) a bank chartered by this state; or (B) a member bank of the Federal Reserve System; or (iii) marketable securities as determined by Subsection (1). (4) (a) Except as provided in Subsection (4)(c), a branch captive insurance company, as security for the payment of liabilities attributable to branch operations, shall, through the branch captive insurance company's branch operations, establish and maintain a trust fund: (i) funded by an irrevocable letter of credit or other acceptable asset; and (ii) in the United States for the benefit of: (A) United States policyholders; and (B) United States ceding insurers under: (I) insurance policies issued; or (II) reinsurance contracts issued or assumed. (b) The amount of the security required under this Subsection (4) shall be no less than: (i) the capital and surplus required by this chapter; and (ii) the reserves on the insurance policies or reinsurance contracts, including: (A) reserves for losses; (B) allocated loss adjustment expenses; (C) incurred but not reported losses; and (D) unearned premiums with regard to business written through branch operations. (c) Notwithstanding the other provisions of this Subsection (4): (i) the commissioner may permit a branch captive insurance company that is required to post security for loss reserves on branch business by the branch captive insurance company's reinsurer to reduce the funds in the trust account required by this section by the same amount as the security posted if the security remains posted with the reinsurer; and (ii) a branch captive insurance company that is the result of the licensure of an alien captive insurance company that is not formed in an alien jurisdiction is not subject to the requirements of this Subsection (4). (5) (a) A captive insurance company may not pay the following without the prior approval of the commissioner: (i) a dividend out of capital or surplus; or (ii) a distribution with respect to capital or surplus. (b) The commissioner shall condition approval of an ongoing plan for the payment of dividends or other distributions on the retention, at the time of each payment, of capital or surplus. (6) Notwithstanding Subsection (1), to protect the solvency and liquidity of a captive insurance company, the commissioner may reject the application of specific assets or amounts of specific assets to satisfy the requirement of Subsection (2).
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