Bill Text: OH HB117 | 2013-2014 | 130th General Assembly | Engrossed

NOTE: There are more recent revisions of this legislation. Read Latest Draft

---

Bill Title: To provide for the operation of captive insurance companies in Ohio and special purpose financial captive insurance companies.

Spectrum: Slight Partisan Bill (Republican 21-11)

Status: (Passed) 2014-09-17 - Effective Date [HB117 Detail]

Download: Ohio-2013-HB117-Engrossed.html

---

As Passed by the House

130th General Assembly Regular Session 2013-2014

Am. H. B. No. 117

Representatives Hackett, Stinziano 

Cosponsors: Representatives Henne, Sears, Carney, Retherford, Anielski, Beck, Blair, Blessing, Buchy, Budish, Burkley, Curtin, Grossman, Hagan, C., Letson, Milkovich, O'Brien, Patterson, Rogers, Smith, Stebelton, Wachtmann, Winburn Speaker Batchelder 

---

A BILL

To amend section 4123.351 and to enact sections

1

3964.01 to 3964.15, 3964.17, 3964.171, 3964.172,

2

3964.173, 3964.174, 3964.175, 3964.176, 3964.177,

3

3964.178, 3964.179, 3964.1710, 3964.18, 3964.20,

4

and 3964.21 of the Revised Code to provide for the

5

operation of captive insurance companies in Ohio.

6

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That section 4123.351 be amended and sections	7
3964.01, 3964.02, 3964.03, 3964.04, 3964.05, 3964.06, 3964.07,	8
3964.08, 3964.09, 3964.10, 3964.11, 3964.12, 3964.13, 3964.14,	9
3964.15, 3964.17, 3964.171, 3964.172, 3964.173, 3964.174,	10
3964.175, 3964.176, 3964.177, 3964.178, 3964.179, 3964.1710,	11
3964.18, 3964.20, and 3964.21 of the Revised Code be enacted to	12
read as follows:	13

Sec. 3964.01. As used in this chapter:

14

(A) "Affiliated company" means any company in the same	15
corporate system as a parent, or a member organization by virtue	16
of common ownership, control, operation, or management.	17

(B) "Captive insurance company" means any insurer that	18
insures only the risks of its parent or affiliated companies of	19
its parent. "Captive insurance company" includes any protected	20
cell captive insurance company formed or licensed under the	21
provisions of this chapter.	22

(C) "Department" means the department of insurance.

23

(D) "Parent" means a corporation, limited liability company,	24
partnership, other entity, or individual that directly or	25
indirectly owns, controls, or holds, with power to vote, more than	26
fifty per cent of either of the following:	27

(1) Securities of a captive insurance company, organized as a	28
stock corporation;	29

(2) Membership interests of a captive insurance company	30
organized as a nonprofit corporation or a limited liability	31
company.	32

(E) "Protected cell captive insurance company" means a	33
captive insurance company organized pursuant to sections 3964.17	34
to 3964.1710 of the Revised Code.	35

(F) "Qualified actuary" means an individual who is both of	36
the following:	37

(1) A member of the American academy of actuaries;

38

(2) Qualified to provide such certifications as described in	39
the United States qualifications standards promulgated by the	40
American academy of actuaries pursuant to the code of professional	41
conduct adopted by the American academy of actuaries, the society	42
of actuaries, the American society of pension professionals and	43
actuaries, the casualty actuarial society, and the conference of	44
consulting actuaries.	45

(G) "Superintendent" means the superintendent of the	46
department of insurance.	47

Sec. 3964.02.  (A) A captive insurance company may apply for	48
authority to insure only the following lines of insurance:	49

(1) Commercial multiple peril;

50

(2) Ocean marine;

51

(3) Inland marine;

52

(4) Medical malpractice;

53

(5) Workers' compensation, to the extent permitted by law,	54
but only for the purpose of indemnification of a self-insuring	55
employer pursuant to division (B)(1) of section 4123.82 of the	56
Revised Code;	57

(6) Commercial auto liability;

58

(7) Commercial auto physical damage;

59

(8) Fidelity;

60

(9) Surety;

61

(10) Any other line which the superintendent, at the	62
superintendent's sole discretion, permits.	63

(B) A captive insurance company may purchase reinsurance	64
coverage for any risk that a captive insurance company is	65
permitted to write directly.	66

(C) A captive insurance company shall not issue insurance	67
policies or certificates, or any other similar documentation, to	68
any person other than its parent or affiliated companies.	69

(D) A captive insurance company may reinsure any risks	70
insured by its parent or an affiliated company, as approved by the	71
superintendent.	72

Sec. 3964.03.  (A) A captive insurance company shall be	73
organized under Chapter 1701., 1702., or 1705. of the Revised	74
Code.	75

(B) A captive insurance company shall not operate in this	76
state unless all of the following are met:	77

(1) The captive insurance company obtains from the	78
superintendent a license to do the business of captive insurance	79
in this state.	80

(2) The captive insurance company's board of directors holds	81
at least one meeting each year in this state.	82

(3) The captive insurance company maintains its principal	83
place of business in this state.	84

(4) The person managing the captive insurance company is a	85
resident of this state.	86

(5) The captive insurance company appoints a registered agent	87
to accept service of process and act on its behalf in this state.	88

(C) Whenever an agent required under division (B)(5) of this	89
section cannot, with reasonable diligence, be found at the	90
registered office of the captive insurance company, the	91
superintendent shall be an agent of such a captive insurance	92
company upon whom any process, notice, or demand may be served.	93

(D) A captive insurance company seeking a license to be a	94
captive insurance company in this state shall file an application	95
with the superintendent and shall submit all of the following	96
along with the application:	97

(1) A certified copy of its articles of incorporation,	98
bylaws, or other organizational document and code of regulations;	99

(2) A statement, made under oath by the president and	100
secretary, in a form prescribed by the superintendent, showing the	101
captive insurance company's financial condition;	102

(3) A statement of the captive insurance company's assets	103
relative to its risks, detailing the amount of assets and their	104
liquidity;	105

(4) An account of the adequacy of the expertise, experience,	106
and character of the person or persons who will manage the captive	107
insurance company;	108

(5) An account of the loss prevention programs of the persons	109
that the captive insurance company insures;	110

(6) Actuarial assumptions and methodologies that will be	111
utilized in calculating reserves;	112

(7) Any other information considered necessary by the	113
superintendent to determine whether the proposed captive insurance	114
company will be able to meet its obligations.	115

(E) In determining whether to approve an application for a	116
license, the superintendent shall consider all of the following:	117

(1) The character, reputation, financial standing, and	118
purposes of the incorporators, or other founders, of the captive	119
insurance company;	120

(2) The character, reputation, financial responsibility,	121
experience relating to insurance, and business qualifications of	122
the officers and directors of the captive insurance company;	123

(3) The amount of liquidity and assets of the captive	124
insurance company relative to the risks to be assumed;	125

(4) The adequacy of the expertise, experience, and character	126
of the person or persons who will manage the captive insurance	127
company;	128

(5) The overall soundness of the plan of operation;

129

(6) The adequacy of the loss prevention programs of the	130
persons that the captive insurance company insures.	131

(F)(1) Each captive insurance company that offers direct	132
insurance to its parent shall submit to the superintendent	133
for approval a detailed description of the coverages, deductibles,	134
coverage limits, proposed rates or rating plans, documentation	135
from a qualified actuary that demonstrates the actuarial soundness	136
of the proposed rates or rating plans, and other such additional	137
information as the superintendent may require.	138

(2)(a) Any captive insurance company licensed under the	139
provisions of this chapter that seeks to make any material change	140
to any item described in division (F)(1) of this section shall	141
submit to the superintendent for approval a detailed description	142
of the revision, documentation from a qualified actuary that	143
demonstrates the actuarial soundness of the revised rates or	144
rating plans, and other such additional information as the	145
superintendent may require.	146

(b) Each filing under division (F)(2)(a) of this section is	147
deemed approved thirty days after the filing is received by the	148
superintendent of insurance, unless the filing is disapproved by	149
the superintendent during that thirty-day period.	150

(c) If at any time subsequent to the thirty-day review period	151
the superintendent finds that a filing does not demonstrate	152
actuarial soundness, the superintendent shall hold a hearing	153
requiring the captive insurance company to show cause why an order	154
should not be made by the superintendent to disapprove the revised	155
rates or rating plans.	156

(d) If, upon such a hearing, the superintendent finds that	157
the captive insurance company failed to demonstrate the actuarial	158
soundness of the rates or rating plans, the superintendent shall	159
issue an order directing the captive insurance company to cease	160
and desist from using the revised rates or rating plans and to use	161
rates or rating plans as determined appropriate by the	162
superintendent.	163

(G) Except as otherwise provided in this division, documents	164
and information submitted by a captive insurance company pursuant	165
to this section are not subject to section 149.43 of the Revised	166
Code, and are confidential, and may not be disclosed by the	167
superintendent or any employee of the department of insurance	168
without the written consent of the company.	169

(1) Such documents and information may be discoverable in a	170
civil action in which the captive insurance company filing the	171
material is a party upon a finding by a court of competent	172
jurisdiction that the information sought is relevant and necessary	173
to the case and the information sought is unavailable from other,	174
nonconfidential sources.	175

(2) The superintendent may, at the superintendent's sole	176
discretion, share documents required under this section with the	177
chief deputy rehabilitator, the chief deputy liquidator, other	178
deputy rehabilitators and liquidators, and any other person	179
employed by, or acting on behalf of the superintendent pursuant to	180
Chapter 3901. or 3903. of the Revised Code, with other local,	181
state, federal, and international regulatory and law enforcement	182
agencies, with local, state, and federal prosecutors, and with the	183
national association of insurance commissioners and its affiliates	184
and subsidiaries provided that the recipient agrees to maintain	185
the confidential or privileged status of the documents and has	186
authority to do so.	187

(H)(1) Each applicant for a license to do the business of a	188
captive insurance company in this state shall pay to the	189
superintendent a nonrefundable fee of five hundred dollars for	190
processing its application for a license. The superintendent is	191
authorized to retain legal, financial, and examination services	192
from outside the department, at the expense of the applicant. Each	193
captive insurance company shall annually pay a license renewal fee	194
of five hundred dollars.	195

(2) The fees collected pursuant to division (H)(1) of this	196
section shall be deposited into the state treasury to the credit	197
of the captive insurance regulation and supervision fund created	198
under section 3964.15 of the Revised Code.	199

Sec. 3964.04.  No captive insurance company shall adopt a	200
name that is the same, deceptively similar, or likely to be	201
confused with, or mistaken for, any other existing business name	202
registered in this state. The name under which a captive insurance	203
company engages in business must contain the word "captive."	204

Sec. 3964.05. (A) No captive insurance company shall be	205
issued a license unless it possesses and maintains unimpaired,	206
paid-in capital and surplus as follows:	207

(1) Not less than two hundred fifty thousand dollars;

208

(2) In the case of a protected cell captive insurance	209
company, not less than five hundred thousand dollars.	210

(B) The superintendent may prescribe additional capital and	211
surplus based upon the type, volume, and nature of insurance	212
business transacted.	213

(C) Capital and surplus may be in the form of any of the	214
following:	215

(1) Cash;

216

(2) Marketable securities, as approved by the superintendent;

217

(3) Irrevocable, unconditional, and automatically renewable	218
letters of credit that are issued or confirmed by a qualified	219
United States financial institution.	220

(D) For purposes of division (C)(3) of this section, a United	221
States financial institution is qualified if all of the following	222
apply:	223

(1) It is organized under, or, in the case of the United	224
States branch or agency office of a foreign banking organization,	225
is chartered under the laws of the United States or any state	226
thereof.	227

(2) It is regulated, supervised, and examined by federal or	228
state officials that have regulatory authority over banks and	229
trust companies.	230

(3) The superintendent has determined that it meets such	231
standards of financial condition and standing as are necessary and	232
appropriate for purposes of ensuring that its letters of credit	233
will be of a quality that is acceptable to the superintendent, in	234
the superintendent's sole discretion.	235

Sec. 3964.06.  (A) No captive insurance company shall pay any	236
extraordinary dividend or make any other extraordinary	237
distribution to its shareholders or members other than in	238
accordance with this section. The declaration of an extraordinary	239
dividend or distribution shall be conditional and shall confer no	240
rights upon shareholders or members until thirty days after the	241
superintendent has received notice of the declaration thereof and	242
has not, within the thirty-day period, disapproved the dividend or	243
distribution, unless the superintendent approves the dividend or	244
distribution within the thirty-day period.	245

(B) Prior to paying any dividend or distribution, the	246
insurance company shall notify the superintendent on a form	247
provided by the superintendent for informational purposes within	248
five business days following its declaration of any dividend or	249
distribution and at least ten calendar days prior to payment of	250
such dividend or distribution. Such a ten-calendar-day period is	251
to begin on the date that the superintendent receives the notice.	252

(C)(1) For the purposes of this section, an extraordinary	253
dividend or distribution includes any dividend or distribution of	254
cash or other property, whose fair market value, together with	255
that of other dividends or distributions made within the preceding	256
twelve months, exceeds the greater of ten per cent of the	257
insurance company's surplus as regards policy holders as of the	258
thirty-first day of December immediately preceding, or the net	259
income of the insurance company for the twelve-month period ending	260
the thirty-first day of December immediately preceding.	261

(2) Pro rata distributions of any class of the insurance	262
company's own securities shall not be considered an extraordinary	263
distribution under division (C)(1) of this section.	264

(D) Any dividend or distribution paid from a source other	265
than earned surplus shall be considered an extraordinary dividend	266
or extraordinary distribution.	267

(E) For the purposes of this section, "earned surplus" means	268
an amount equal to an insurance company's unassigned funds as set	269
forth in its most recent financial statement submitted to the	270
superintendent, including net unrealized capital gains and losses	271
or revaluation of assets.	272

Sec. 3964.07.  (A) A captive insurance company shall not be	273
required to make any annual report except as required by this	274
section.	275

(B)(1) Two of the executive officers of a captive insurance	276
company, or a majority of the directors of a captive insurance	277
company, shall annually prepare under oath and submit to the	278
superintendent, on the first day of January or within sixty days	279
thereafter, a statement showing the financial condition of the	280
company on the thirty-first day of the December next preceding.	281
The statement shall include an opinion from a qualified actuary	282
regarding the adequacy of the company's required reserves to make	283
full provision for the company's liabilities.	284

(2) All captive insurance companies shall have an annual	285
audit by an independent certified public accountant and shall file	286
an audited financial report with the superintendent on or before	287
the first day of June as a supplement to the annual statement	288
required under division (B)(1) of this section.	289

(C) Each captive insurance company shall report using	290
generally accepted accounting principles, unless the	291
superintendent requires, approves, or accepts the use of statutory	292
accounting principles or other comprehensive basis accounting, any	293
appropriate, necessary modifications or adaptations required or	294
approved or accepted by the superintendent for each type of	295
insurance or kind of insurance company that makes such a report,	296
and as supplemented by additional information required by the	297
superintendent.	298

(D) Captive insurance companies shall prepare, at a minimum,	299
internal quarterly financial statements. These statements shall be	300
made available upon request to the superintendent.	301

(E) The superintendent shall adopt by rule the prescribed	302
forms, instructions, and manuals by which captive insurance	303
companies shall make the reports required under this section, as	304
the superintendent considers necessary.	305

(F) Division (G) of section 3964.03 of the Revised Code shall	306
apply to each report filed under this section.	307

Sec. 3964.08.  (A) Captive insurance companies shall be	308
examined, evaluated, and monitored pursuant to section 3901.07 of	309
the Revised Code.	310

(B) All examination reports, preliminary examination reports	311
or results, working papers, recorded information, documents and	312
copies thereof produced by, obtained by, or disclosed to the	313
superintendent or any other person in the course of an examination	314
made under this section are confidential and are not subject to	315
subpoena and may not be made public by the superintendent or an	316
employee or agent of the superintendent without the written	317
consent of the company, except to the extent provided in this	318
section. However, nothing in this section shall prevent the	319
superintendent from using such information in the furtherance of	320
the superintendent's regulatory authority under this chapter.	321

(C) The superintendent may, in the superintendent's sole	322
discretion, share documents that are the subject of this section	323
with the chief deputy rehabilitator, the chief deputy liquidator,	324
other deputy rehabilitators and liquidators, and any other person	325
employed by, or acting on behalf of, the superintendent pursuant	326
to Chapter 3901. or 3903. of the Revised Code, with other local,	327
state, federal, and international regulatory and law enforcement	328
agencies, with local, state, and federal prosecutors, and with the	329
national association of insurance commissioners and its affiliates	330
and subsidiaries provided that the recipient agrees to maintain	331
the confidential or privileged status of the confidential or	332
privileged work paper and has authority to do so.	333

Sec. 3964.09.  The superintendent may suspend or revoke the	334
license of a captive insurance company, in accordance with Chapter	335
119. of the Revised Code, for any of the following reasons:	336

(A) Insolvency or impairment of capital or surplus;

337

(B) Failure to meet the requirements of section 3964.05 of	338
the Revised Code;	339

(C) Refusal or failure to submit an annual report, as	340
required by section 3964.07 of the Revised Code, or any other	341
report or statement required by law or by lawful order of the	342
superintendent;	343

(D) Failure to comply with the provisions of its own	344
articles, bylaws, code of regulations, or other organizational	345
documents;	346

(E) Failure to submit to, or pay the cost of, examination, or	347
any legal obligation related to examination, as required by this	348
chapter;	349

(F) Use of practices that, although not otherwise	350
specifically prohibited by law, are determined by the	351
superintendent to render its operation detrimental or its	352
condition unsound with respect to the public or to its	353
policyholders;	354

(G) Failure to otherwise comply with the laws of this state.

355

Sec. 3964.10.  (A) The board of directors of a captive	356
insurance company shall determine appropriate investments for the	357
company. With respect to all of the insurance company's	358
investments, the board of directors shall exercise the judgment	359
and care, under the circumstances then prevailing, that a person	360
of reasonable prudence, discretion, and intelligence might	361
exercise in the management of a like enterprise, that person not	362
having an intent to speculate, but having regard for the permanent	363
disposition of the person's funds, considering the probable income	364
as well as the probable safety of the person's capital.	365

(B)(1) Investments shall be of sufficient value, liquidity,	366
and diversity to assure the captive insurance company's ability to	367
meet its outstanding obligations, based on reasonable estimations	368
of new business production for current lines of business. A copy	369
of the investment policy adopted by the board of directors shall	370
be filed with the superintendent.	371

(2) If the superintendent determines that a board of	372
directors of a captive insurance company has failed to comply with	373
the requirements of division (B)(1) of this section, the company	374
shall be notified in writing that it is required to file a	375
schedule of its proposed investments with the superintendent.	376

(C)(1) No captive insurance company may make a loan to, or an	377
investment in, its parent company or affiliates without prior	378
written approval of the superintendent.	379

(2) Any such loan or investment shall be evidenced by	380
documentation approved by the superintendent.	381

(3) Loans that violate the minimum capital and surplus funds	382
requirements of section 3964.05 of the Revised Code are	383
prohibited.	384

Sec. 3964.11. No captive insurance company shall be required	385
to join a rating organization.	386

Sec. 3964.12. No captive insurance company shall be permitted	387
to join or contribute financially to any plan, pool, association,	388
or guaranty or insolvency fund in this state, nor shall any	389
captive insurance company, or any insured or affiliate thereof,	390
receive any benefit from any such plan, pool, association, or	391
guaranty or insolvency fund for claims arising out of the	392
operations of the captive insurance company.	393

Sec. 3964.13. (A)(1) Not later than the second day of March	394
of each year, a captive insurance company shall pay to the	395
superintendent of insurance a fee computed in accordance with both	396
of the following:	397

(a) 0.35 per cent on its net direct premiums;

398

(b) 0.15 per cent on revenue from assumed reinsurance	399
premiums.	400

(2) The annual minimum aggregate fee to be paid by a captive	401
insurance company calculated under this division shall be seven	402
thousand five hundred dollars. The annual maximum aggregate fee to	403
be paid by a captive insurance company calculated under this	404
division shall be two hundred fifty thousand dollars.	405

(B) The fee on reinsurance premiums set forth under division	406
(A)(1)(b) of this section shall not be levied on premiums for	407
risks or portions of risks that are subject to the fee under	408
division (A)(1)(a) of this section.	409

(C) A captive insurance company shall not pay any reinsurance	410
fee pursuant to division (A)(1)(b) of this section on revenue	411
related to the receipt of assets by the captive insurance company	412
in exchange for the assumption of loss reserves and other	413
liabilities of another insurance company that is under common	414
ownership and control with the captive insurance company, if the	415
transaction is part of a plan to discontinue the operation of the	416
other insurance company and the intent of the exchange is to renew	417
or maintain such business with the captive insurance company.	418

(D)(1) The fee imposed in division (A) of this section shall	419
be calculated on an annual basis, notwithstanding policies,	420
contracts, insurance, or contracts of reinsurance issued on a	421
multi-year basis.	422

(2) In the case of multi-year policies or contracts, the	423
premium shall be prorated for purposes of determining the fee	424
required under division (A) of this section.	425

(E) All fees collected under this section shall be deposited	426
into the state treasury to the credit of the captive insurance	427
regulation and supervision fund.	428

Sec. 3964.14.  (A) Except as provided in this chapter,	429
captive insurance companies shall be governed by this chapter and	430
are exempt from all other provisions of the insurance laws of this	431
state. No insurance law of this state shall apply to captive	432
insurance companies unless captive insurance companies are	433
expressly designated as being subject to the law or, with respect	434
to a line of authority granted to a captive insurance company	435
pursuant to division (A)(10) of section 3964.02 of the Revised	436
Code, as required in the articles, bylaws, code of regulations, or	437
other organizational documents as approved by the superintendent.	438

(B) Except as otherwise provided in this chapter, sections	439
3903.01 to 3903.59 of the Revised Code shall apply to captive	440
insurance companies.	441

Sec. 3964.15.  (A) There is hereby created in the state	442
treasury the captive insurance regulation and supervision fund,	443
which shall consist of all fees, fines, penalties, and assessments	444
received by the superintendent under this chapter.	445

(B) The superintendent may charge captive insurance companies	446
for any of the following expenses incurred in carrying out this	447
chapter:	448

(1) The entire compensation for each day, or portion thereof,	449
worked by all personnel, including those who are not employees of	450
the department of insurance, in any of the following capacities:	451

(a) The conduct of an examination, calculated at the rates	452
provided in the financial condition examiners' handbook published	453
by the national association of insurance commissioners;	454

(b) The review and analysis of a company's annual report	455
submitted pursuant to section 3964.07 of the Revised Code, and any	456
interim financial statements and examination reports or related	457
documents of captive insurance companies in this state;	458

(c) The ongoing evaluation and monitoring of the financial	459
affairs of captive insurance companies;	460

(d) The determination and review of the premium franchise fee	461
liability of a captive insurance company;	462

(e) The training and continuing education costs of examiners	463
and analysts.	464

(2) Travel and living expenses of all personnel, including	465
those who are not employees of the department of insurance,	466
directly engaged in the conduct of an examination calculated at	467
rates not to exceed the rates provided in the financial condition	468
examiners' handbook published by the national association of	469
insurance commissioners;	470

(3) All other incidental expenses incurred by or on behalf of	471
such personnel in the conduct of such examination;	472

(4) An allocated share of all expenses not described in	473
division (B)(1), (2), or (3) of this section, but that are	474
necessarily incurred in carrying out the duties of the	475
superintendent under this chapter, including the expenses of	476
direct overhead and support staff for the examiners and persons	477
appointed or employed pursuant to section 3964.08 of the Revised	478
Code.	479

(C) All amounts collected by the superintendent under	480
division (B) of this section shall be deposited into the state	481
treasury to the credit of the captive insurance regulation and	482
supervision fund.	483

(D) At the discretion of the superintendent, the expenses of	484
the captive insurance regulation and supervision fund may be	485
covered by the department of insurance operating fund created	486
under section 3901.021 of the Revised Code.	487

(E) As used in this section, "examination" means the	488
examination required under section 3964.08 of the Revised Code.	489

Sec. 3964.17.  (A) As used in sections 3964.17 to 3964.1710	490
of the Revised Code:	491

(1) "Protected cell" means a captive insurance company that	492
is a part of another captive insurance company, and that has a	493
separate legal identity from the captive insurance company of	494
which it is a part.	495

(2) "Protected cell captive insurance company" means a	496
captive insurance company that meets all of the following	497
requirements:	498

(a) Is formed and licensed under the provisions of this	499
chapter;	500

(b) Insures or reinsures the risks of separate participants	501
through a participant contract;	502

(c) Segregates each participant's liability into a protected	503
cell.	504

(3) "Participant" means an individual, company, corporation,	505
partnership, limited liability company, and their affiliated	506
entities that insure or reinsure with a protected cell.	507
"Participant" includes an insurance agent licensed in this state	508
that accepts a stated percentage of risk on a pro rata basis	509
within a defined category of business underwritten by a licensed	510
insurance company that is domiciled in this state and that is	511
affiliated with a protected cell captive insurance company.	512

(4) "Participant contract" means a contract by which a	513
protected cell captive insurance company insures or reinsures the	514
risks of a participant.	515

(a) A participant that is not an insurance agent licensed in	516
this state shall insure or reinsure only its own risks through a	517
protected cell.	518

(b) If the participant is an insurance agent licensed in this	519
state, the participant contract must define each risk covered by	520
the contract with fixed and certain terms.	521

(B) A captive insurance company may be organized as a	522
protected cell captive insurance company and shall be permitted to	523
form one or more protected cells under this section to insure or	524
reinsure risks of one or more participants.	525

(C) The assets and liabilities of each protected cell shall	526
be held separately from the assets and liabilities of all other	527
protected cells.	528

(D) A protected cell of a protected cell captive insurance	529
company may be organized pursuant to Chapter 1701., 1702., or	530
1705. of the Revised Code.	531

(E) A protected cell captive insurance company shall, at the	532
time of paying the annual fee required under section 3964.13 of	533
the Revised Code, pay an additional annual fee for each protected	534
cell in an amount to be established by the superintendent.	535

(F) Each protected cell of a protected cell captive insurance	536
company shall be treated as a captive insurance company for	537
purposes of this chapter.	538

(G) Unless otherwise permitted by the articles of	539
incorporation, bylaws, code of regulations, or other	540
organizational document of a protected cell captive insurance	541
company, each protected cell of the protected cell captive	542
insurance company shall have the same directors, secretary, and	543
registered office as the protected cell captive insurance company.	544

(H) A protected cell captive insurance company may provide in	545
its articles of incorporation, bylaws, code of regulations, or	546
other organizational documents that a protected cell it creates	547
shall be wound up and dissolved upon any of the following:	548

(1) The bankruptcy, death, expulsion, insanity, resignation,	549
or retirement of any participant of the protected cell;	550

(2) The happening of some event that is not the expiration of	551
a fixed period of time;	552

(3) The expiration of a fixed period of time.

553

(I)(1) The articles of incorporation, bylaws, code of	554
regulations, or other organizational documents, of a protected	555
cell captive insurance company shall provide that a protected cell	556
shall not own shares or membership interests in the protected cell	557
captive insurance company of which it is a part.	558

(2) Such a document may provide that a protected cell may own	559
shares or membership interests in any other protected cell of the	560
protected cell captive insurance company of which it is a part.	561

(J) The name of a protected cell captive insurance company	562
shall include the words "protected cell captive" or the	563
abbreviation "PCC."	564

(K) A protected cell captive insurance company shall assign a	565
distinctive name to each of its protected cells that meets all of	566
the following:	567

(1) The name identifies the protected cell as being part of	568
the protected cell captive insurance company.	569

(2) The name distinguishes the protected cell from any other	570
protected cell of the protected cell captive insurance company.	571

(3) The name includes the words "protected cell" or the	572
abbreviation "PC."	573

(L) A protected cell has no legal identity separate from that	574
of the protected cell captive insurance company of which it is a	575
part.	576

(M)(1) A protected cell may enter into an agreement with its	577
protected cell captive insurance company or with another protected	578
cell of the same protected cell captive insurance company.	579

(2) Such an agreement shall be enforceable as if each	580
protected cell of the protected cell captive insurance company	581
were a separate legal entity.	582

(N)(1) The assets of a protected cell captive insurance	583
company shall be either cell assets or general assets.	584

(2) The cell assets comprise the assets of the protected cell	585
captive insurance company that are held within or on behalf of its	586
protected cells.	587

(3) The general assets of a protected cell captive insurance	588
company comprise the assets of the protected cell captive	589
insurance company that are not cell assets.	590

(O)(1) The liabilities of a protected cell captive insurance	591
company shall be either cell liabilities or general liabilities.	592

(2) The cell liabilities comprise the obligations of the	593
protected cell captive insurance company attributable to its	594
protected cells.	595

(3) The general liabilities of a protected cell captive	596
insurance company comprise the obligations of the protected cell	597
captive insurance company that are not cell liabilities.	598

(P) Each protected cell insurance company shall account	599
separately on its books and records for each of its protected	600
cells to reflect the financial condition and results of operations	601
of the protected cell, including net income or loss, dividends or	602
other distributions to participants, and such other factors as may	603
be provided by participant contracts or required by the	604
superintendent.	605

(Q) Each protected cell captive insurance company shall	606
annually file with the superintendent such financial reports as	607
the superintendent requires, which shall include financial	608
statements detailing the financial experience of each protected	609
cell and a statement regarding the adequacy of reserves kept to	610
make full provision for the liabilities insured by each protected	611
cell.	612

(R) An officer or manager of a protected cell captive	613
insurance company shall immediately notify the superintendent if	614
any protected cell of the company is trending toward reserves that	615
are inadequate, or if the company becomes insolvent or is	616
otherwise unable to meet its claims or other obligations.	617

(S) The duties of a director of a protected cell captive	618
insurance company under this chapter shall be in addition to, and	619
not in lieu of, those under other applicable law.	620

Sec. 3964.171.  (A) A protected cell captive insurance	621
company may create and issue shares in one or more classes or	622
series for one or more protected cells.	623

(1) The proceeds of the issue of shares for a specific	624
protected cell shall be included in the assets of that protected	625
cell.	626

(2) The proceeds of the issue of shares that are not for a	627
specific protected cell shall be included in the protected cell	628
captive insurance company's general assets.	629

(B) A protected cell captive insurance company may pay a	630
dividend on protected cell shares of any class or series,	631
regardless of whether a dividend is declared on any other class or	632
series of shares of a protected cell or any other shares of the	633
company. Such payment is subject to section 3964.06 of the Revised	634
Code.	635

(C) Dividends may be paid on protected cell shares only from	636
the cell assets of the protected cell that issued the shares and	637
must otherwise be made in accordance with the rights of such	638
shares and in accordance with section 3964.06 of the Revised Code.	639

Sec. 3964.172.  (A) No sale, exchange, or other transfer of	640
assets may be made by a protected cell captive insurance company	641
between or among any of its protected cells without the written	642
consent of the participants of the protected cell and the	643
superintendent.	644

(B)(1) No sale, exchange, transfer of assets, dividend, or	645
distribution may be made from a protected cell to any person	646
without the superintendent's prior written approval.	647

(2) The superintendent shall not give approval if the sale,	648
exchange, transfer, dividend, or distribution would result in the	649
insolvency or impairment of the protected cell in question.	650

Sec. 3964.173.  (A) The owners of a protected cell captive	651
insurance company, shall not, by virtue of being owners, be the	652
owners or participants of any protected cell of the protected cell	653
captive insurance company.	654

(B) The participants of a protected cell shall not, by virtue	655
of being such participants, be the owners of the protected cell	656
captive insurance company or participants or owners of any other	657
protected cell of the protected cell captive insurance company.	658

(C) A participant in a protected cell need not be a	659
shareholder or member of the protected cell or of the protected	660
cell captive insurance company or any affiliate thereof.	661

(D) No participant contract shall take effect without the	662
superintendent's prior written approval.	663

(E) The addition of a new protected cell, or the withdrawal	664
or other transfer of any participant from any existing protected	665
cell, shall constitute a change in the strategic business plan of	666
that protected cell, requiring the superintendent's prior written	667
approval.	668

(F) A protected cell captive insurance company shall, in	669
addition to keeping a register of its owners or participants, keep	670
a register of the participants of each of its protected cells.	671

Sec. 3964.174.  (A) If a protected cell captive insurance	672
company enters into a transaction with respect to a particular	673
protected cell, or incurs a liability arising from an activity or	674
asset of a particular protected cell, a claim by any person in	675
connection with the transaction or liability extends only to the	676
cell assets of the protected cell.	677

(B) If a protected cell captive insurance company enters into	678
a transaction in its own right and not in respect of any of its	679
protected cells, incurs a liability arising from an activity in	680
its own right and not in respect of any of its protected cells, or	681
incurs a liability arising from an asset held in its own right and	682
not in respect of any of its protected cells, then a claim by any	683
person or a liability in connection with this type of transaction,	684
activity, or ownership shall extend only to the general assets of	685
the protected cell captive insurance company.	686

(C) Except as provided by divisions (D) and (E) of this	687
section, a protected cell captive insurance company shall not do	688
either of the following:	689

(1) Satisfy a liability attributable to a particular	690
protected cell of the protected cell captive insurance company	691
from the general assets of the protected cell captive insurance	692
company;	693

(2) Satisfy a liability, whether attributable to a particular	694
protected cell or not, from the cell assets of another protected	695
cell.	696

(D)(1) A protected cell captive insurance company may satisfy	697
any liability attributable to a particular protected cell from the	698
protected cell captive insurance company's general assets if both	699
of the following conditions are met:	700

(a) The articles of incorporation, bylaws, code of	701
regulations, or similar organization documents of the protected	702
cell captive insurance company allow the protected cell captive	703
insurance company to satisfy the liability.	704

(b) Satisfying the liability has been approved by two-thirds	705
of the participants of the protected cell or, if the protected	706
cell has more than one class of participants, two-thirds of each	707
class of participants, unless the organizational document of the	708
protected cell insurance company requires a greater percentage.	709

(2) Prior to a protected cell captive insurance company	710
satisfying any liability attributable to a particular protected	711
cell from the protected cell captive insurance company's general	712
assets, the directors who authorize the satisfaction of the	713
liability shall state as part of the authorization that, having	714
inquired into the affairs and prospects of the protected cell	715
captive insurance company, they have formed an opinion that	716
includes both of the following:	717

(a) Immediately following the date on which the liability is	718
proposed to be met by the general assets of the protected cell	719
captive insurance company, the protected cell captive insurance	720
company will be able to discharge its liabilities as they fall	721
due.	722

(b) Having regard to the prospects of the protected cell	723
captive insurance company, the intentions of the directors with	724
respect to the management of the company's business, and the	725
amount and character of the financial resources that will, in	726
their view, be available to the protected cell captive insurance	727
company, the protected cell captive insurance company will be able	728
to continue its business and will be able to discharge its	729
liabilities as they fall due for a period of one year immediately	730
following the date on which the liability is proposed to be	731
satisfied by the general assets of the protected cell captive	732
insurance company or until the protected cell captive insurance	733
company is dissolved, whichever first occurs.	734

(E)(1) A protected cell captive insurance company may satisfy	735
any liability, whether attributable to a particular protected cell	736
or not, from the cell assets of another protected cell if it is	737
permitted to do so by the articles of incorporation, bylaws, code	738
of regulations, or other organizational document, as well as the	739
participant agreement, of the protected cell whose assets are	740
proposed to be used to satisfy the liability.	741

(2)(a) Prior to a protected cell captive insurance company	742
satisfying any liability from the assets of a protected cell that	743
is not responsible for the liability, the directors who authorize	744
the satisfaction shall make a full inquiry into the affairs and	745
prospects of the protected cell whose assets are proposed to be	746
used to satisfy the liability to determine that both of the	747
following are true:	748

(i) Immediately following the date on which the liability is	749
proposed to be met by the cell assets of the protected cell in	750
question, the protected cell will be able to discharge its	751
liabilities as they fall due.	752

(ii) Having regard to the prospects of the protected cell,	753
the intentions of the directors with respect to the management of	754
the protected cell's business, and the amount and character of the	755
financial resources that will in their view be available to the	756
protected cell in question, the protected cell will be able to	757
continue to carry on business and will be able to discharge its	758
liabilities as they become due or until the protected cell is	759
dissolved, whichever first occurs.	760

(b) If the criteria of division (E)(2)(a) of this section are	761
met, the directors shall make a written authorization stating the	762
outcome of their inquiry and shall submit the authorization to the	763
superintendent for approval prior to satisfying the liability.	764

(F) A director who makes a statement under division (D) or	765
(E) of this section without having reasonable grounds for the	766
opinion expressed in the statement violates this chapter and may	767
be removed by order of the superintendent.	768

Sec. 3964.175.  If a protected cell captive insurance company	769
is liable for any penalty, under this chapter or otherwise, due to	770
an act or the failure to act of a protected cell or an officer or	771
director of a protected cell, then both of the following apply:	772

(A) The penalty shall only be met by the protected cell	773
captive insurance company from the cell assets of the protected	774
cell responsible.	775

(B) The penalty shall not be enforceable in any way against	776
any other assets of the protected cell captive insurance company	777
or assets of any other protected cell.	778

Sec. 3964.176.  The directors of a protected cell captive	779
insurance company shall establish and maintain, or cause to be	780
established and maintained, procedures to do all of the following:	781

(A) Segregate cell assets and liabilities separate and	782
separately identifiable from general assets and liabilities;	783

(B) Segregate cell assets and liabilities of each protected	784
cell separate and separately identifiable from cell assets and	785
liabilities of any other protected cell;	786

(C) Apportion or transfer, where relevant, assets and	787
liabilities between protected cells or between protected cells and	788
the general assets and liabilities of the protected cell captive	789
insurance company.	790

Sec. 3964.177.  (A) If a protected cell captive insurance	791
company enters into an agreement with respect to a protected cell	792
of the company, the directors shall ensure that both of the	793
following are met:	794

(1) The other party to the transaction knows, or ought	795
reasonably to know, that the protected cell captive insurance	796
company is acting with respect to a particular protected cell.	797

(2) The minutes of any meeting of directors held with regard	798
to the agreement clearly record the fact that the company was	799
entering into the agreement with respect to the protected cell in	800
question and that the obligation imposed by division (A)(1) of	801
this section has been, or will be, complied with.	802

(B) If a protected cell captive insurance company fails to	803
comply with division (A) of this section, then both of the	804
following shall apply:	805

(1) The directors of the protected cell captive insurance	806
company shall be personally liable for the liabilities of the	807
protected cell captive insurance company and the protected cell	808
under the act, matter, deed, agreement, contract, instrument, or	809
arrangement that was executed, notwithstanding any provisions to	810
the contrary in the protected cell's organizational documents or	811
in any contract with the protected cell captive insurance company	812
or otherwise.	813

(2)(a) The directors of the protected cell captive insurance	814
company shall have a right of indemnity, in the case of a matter	815
on behalf of or attributable to a protected cell, against the	816
assets of the protected cell, unless the directors were	817
fraudulent, reckless, negligent, or acted in bad faith.	818

(b) The directors shall have a right of indemnity against the	819
general assets of the protected cell captive insurance company, in	820
the case of a matter not on behalf of or attributable to a	821
protected cell.	822

(C) Notwithstanding division (B)(1) of this section, a court	823
may relieve a director of all or part of the personal liability	824
required under division (B)(1) of this section if the director can	825
demonstrate either of the following to the satisfaction of the	826
court:	827

(1) The director was not aware of the circumstances giving	828
rise to the liability and therefore was not fraudulent, reckless,	829
or negligent and did not act in bad faith.	830

(2) The director expressly objected, and exercised the rights	831
available to the director, whether by way of voting power or	832
otherwise, to try to prevent the circumstances giving rise to the	833
liability.	834

(D) If, pursuant to division (C) of this section, a court	835
relieves a director of all or part of the director's personal	836
liability under division (B)(1) of this section, the court may	837
order that the liability in question instead be met from the	838
assets of the protected cell or the general assets of the	839
protected cell captive insurance company as the court finds	840
appropriate.	841

(E) Any provision in the organizational document of a captive	842
insurance company or any other contractual provision under which	843
the protected cell captive insurance company may be liable shall	844
be void if it purports to indemnify the directors of a protected	845
cell captive insurance company despite fraudulent, negligent,	846
reckless, bad faith, or other conduct that would otherwise exempt	847
them from indemnification by virtue of division (B)(2)(a) of this	848
section.	849

(F) The duties of a director of a protective cell captive	850
insurance company under this chapter shall be in addition to and	851
not in lieu of, those under any other applicable law.	852

Sec. 3964.178.  (A) A captive insurance company may amend its	853
organizational document to become a protected cell captive	854
insurance company.	855

(B) The amendment of the organizational document of a captive	856
insurance company to become a protected cell captive insurance	857
company shall require approval by both of the following:	858

(1) Holders of two-thirds of the outstanding shares or	859
ownership interests of the captive insurance company, unless a	860
greater amount is required by the organizational document of the	861
captive insurance company;	862

(2) All the creditors of the captive insurance company.

863

(C) Notwithstanding division (B)(2) of this section, if the	864
consent of all the creditors of the captive insurance company	865
cannot be obtained, the amendment may be approved by the	866
superintendent if the superintendent is satisfied that no creditor	867
will be materially prejudiced by the amendment.	868

(D) A protected cell captive insurance company may amend its	869
organizational document to cease to be a protected cell captive	870
insurance company.	871

(E) The amendment of an organizational document of a	872
protected cell captive insurance company to cease to be a	873
protected cell captive insurance company shall require approval by	874
all of the following:	875

(1) The superintendent;

876

(2) Holders of two-thirds of the outstanding shares or	877
ownership interests of the protected cell captive insurance	878
company, unless a greater amount is required by the organizational	879
document of the protected cell captive insurance company;	880

(3) Two-thirds of the participants of each protected cell;

881

(4) All the creditors of the protected cell captive insurance	882
company and its protected cells.	883

(F) Notwithstanding division (E)(4) of this section, if the	884
consent of all the creditors of the captive insurance company and	885
its protected cells cannot be obtained, the amendment may be	886
approved by the superintendent upon being satisfied that no	887
creditor will be materially prejudiced by the amendment.	888

(G)(1) If a captive insurance company or protected cell	889
captive insurance company seeks to change its status in accordance	890
with this section, the company shall deliver both of the following	891
to the superintendent:	892

(a) A copy of the amendment to its name;

893

(b) Evidence satisfactory to the superintendent that the	894
requirements of division (B) or (E) of this section have been met.	895

(2) If the documents required under division (G)(1) of this	896
section are provided, the superintendent shall issue a license	897
that is appropriate to the amended status of the company.	898

(H) If a company changes its status in accordance with this	899
section, the change of status shall take effect when the	900
superintendent issues a new license.	901

Sec. 3964.179.  (A) A protected cell of a protected cell	902
captive insurance company may be transferred to another protected	903
cell captive insurance company.	904

(B) The protected cell captive insurance companies between	905
which a protected cell is being transferred shall enter into a	906
written agreement that sets forth the terms of the transfer.	907

(C) A transfer of a protected cell shall be approved by the	908
superintendent when all of the following are met:	909

(1) The board of directors of each protected cell captive	910
insurance company involved in the transfer have approved the	911
transfer.	912

(2) The transfer agreement is approved by the superintendent	913
as an arrangement in accordance with this chapter.	914

(3) One of the following applies:

915

(a) The transfer agreement is consented to by at least	916
two-thirds of the participants of the protected cell being	917
transferred and all the creditors, if any, of that protected cell.	918

(b) If the agreement of all the creditors of the cell cannot	919
be obtained, the superintendent may approve the transfer upon	920
being satisfied that no creditor of the cell will be materially	921
prejudiced by the transfer.	922

(D) Within thirty days after a transfer agreement is approved	923
by the superintendent, the protected cell captive insurance	924
company to which the protected cell is being transferred shall	925
deliver both of the following to the superintendent:	926

(1) A copy of the executed transfer agreement;

927

(2) A declaration signed by the directors of the protected	928
cell captive insurance company transferring the protected cell	929
stating that each director has reason to believe all of the	930
following:	931

(a) The protected cell being transferred is able to discharge	932
its liabilities as they become due.	933

(b) There are no creditors of the protected cell captive	934
insurance company from which the cell is being transferred whose	935
interests will be unfairly prejudiced by the transfer.	936

(c) The transfer agreement has been approved in accordance	937
with this chapter.	938

(E) If a protected cell captive insurance company fails to	939
deliver the documents required under division (D) of this section	940
within the required thirty-day period, the superintendent may void	941
the transfer.	942

(F) The superintendent may void a transfer and order the	943
removal of any director who makes a declaration under division	944
(D)(2) of this section without having the grounds to do so.	945

(G) Upon fulfillment of the requirements of division (D) of	946
this section, the superintendent shall do all of the following:	947

(1) Record the transfer of the protected cell;

948

(2) Issue to the protected cell a new license;

949

(3) Record that the protected cell has ceased to be a	950
protected cell of the protected cell captive insurance company	951
from which it was transferred.	952

(H) Upon the issuance of the new license under this section	953
all of the following shall apply:	954

(1) The protected cell shall cease to be a protected cell of	955
the protected cell captive insurance company from which it was	956
transferred.	957

(2) The protected cell becomes a protected cell of the	958
protected cell captive insurance company to which it has been	959
transferred.	960

(3) All of the following shall apply:

961

(a) All property and rights to which the protected cell was	962
entitled immediately before the issue of the new license shall	963
remain the property and rights of the protected cell.	964

(b) All liabilities, contracts, debts, and other obligations	965
to which the protected cell was subject immediately before the	966
issue of the new license shall remain the liabilities, contracts,	967
debts, and other obligations of the protected cell.	968

(c) All actions and other legal proceedings that were pending	969
by or against a protected cell immediately before the issue of the	970
new license may be continued by or against the protected cell.	971

(I) The operation of division (H) of this section shall not	972
be regarded as any of the following:	973

(1) A breach of contract or otherwise as a civil wrong;

974

(2) A breach of any contractual provision prohibiting,	975
restricting, or regulating the assignment or transfer of rights or	976
liabilities;	977

(3) Giving rise to any remedy by a party to a contract or	978
other instrument as an event of default under any contract or	979
other instrument or as causing or permitting the termination of	980
any contract, other instrument, obligation, or relationship.	981

(J) Except as provided in this section, a protected cell	982
shall not be transferred if the transfer would be inconsistent	983
with the articles of incorporation, bylaws, code of regulations,	984
or similar organizational document, of the protected cell, the	985
protected cell captive insurance company transferring the	986
protected cell, or the protected cell captive insurance company to	987
which the cell is to be transferred.	988

Sec. 3964.1710.  (A) Any insurance company organized under	989
Chapter 3925. of the Revised Code, and any captive insurance	990
company that is not a protected cell captive insurance company,	991
may become a protected cell of a protected cell captive insurance	992
company, with the approval of the superintendent.	993

(B) A protected cell of a protected cell captive insurance	994
company may apply to the superintendent to be incorporated as an	995
insurance company, including a captive insurance company subject	996
to the requirements of this chapter, independent from the	997
protected cell captive insurance company of which it is currently	998
a part.	999

(C) An application made under division (B) of this section	1000
shall be approved by two-thirds of the participants of the	1001
protected cell or, if the protected cell has more than one class	1002
of participants, two-thirds of each class of participant, unless	1003
the organizational document of the protected cell requires a	1004
greater percentage.	1005

(D)(1) If a protected cell makes an application under	1006
division (B) of this section, any participant of the protected	1007
cell who objects to the protected cell being incorporated as an	1008
independent insurance company may petition the superintendent for	1009
an order denying the application on the grounds that the	1010
incorporation, or the terms of the incorporation, unfairly	1011
prejudice the interests of the participant.	1012

(2) Such a petition shall be made within thirty days after an	1013
application has been made under division (B) of this section.	1014

(E) If a protected cell is licensed as an independent legal	1015
entity pursuant to this section, then all of the following apply:	1016

(1) All property and rights to which the protected cell was	1017
entitled immediately before its licensure as a new entity shall	1018
remain the property and rights of the new entity.	1019

(2) The protected cell shall remain subject to all criminal	1020
and civil liabilities and all contracts, debts, and other	1021
obligations to which the protected cell was subject immediately	1022
before its licensure as a new entity.	1023

(3) All contracts, debts, and other obligations of the	1024
protected cell shall remain the contracts, debts, and other	1025
obligations of the new entity.	1026

(4) All actions and other legal proceedings that, immediately	1027
before the licensure of the protected cell as a new entity, were	1028
pending by or against the protected cell may be continued by or	1029
against the new entity.	1030

(F) The operation of division (E) of this section shall not	1031
be regarded as any of the following:	1032

(1) A breach of contract;

1033

(2) A breach of any contractual provision prohibiting,	1034
restricting, or regulating the assignment or transfer of rights or	1035
liabilities;	1036

(3) Giving rise to any remedy by a party to a contract or	1037
other instrument as an event of default under the contract or	1038
other instrument or as causing or permitting the termination of	1039
any contract, other instrument, obligation, or relationship.	1040

Sec. 3964.18.  (A) If a protected cell captive insurance	1041
company with one or more protected cells is being liquidated, the	1042
protected cell captive insurance company may be considered to have	1043
no assets and no liabilities only if the protected cell captive	1044
insurance company continues to have no protected cells.	1045

(B) In the course of liquidating a protected cell captive	1046
insurance company, each protected cell shall be dealt with one of	1047
the following ways:	1048

(1) Transfer to another protected cell captive insurance	1049
company;	1050

(2) Liquidation;

1051

(3) Continuation as a separate legal entity or protected cell	1052
under the law of another jurisdiction;	1053

(4) Incorporation, independent of the protected cell captive	1054
insurance company;	1055

(5) Merge with another insurance company.

1056

(C) If a protected cell captive insurance company is being	1057
liquidated, the liquidation shall not apply with respect to any	1058
protected cell of the protected cell captive insurance company.	1059

(D) If a protected cell of a protected cell captive insurance	1060
company is being liquidated, the liquidation shall not apply with	1061
respect to the protected cell captive insurance company or any	1062
other protected cell of the company.	1063

(E) A court, upon application of a protected cell captive	1064
insurance company that is being liquidated, may determine, in	1065
accordance with this chapter, if a liability of the protected cell	1066
captive insurance company shall be satisfied by its general	1067
assets, by the cell assets of a specific protected cell of the	1068
company, or by a combination of those assets.	1069

(F) Notwithstanding any statutory provision or rule of law to	1070
the contrary, in the disposition of a protected cell captive	1071
insurance company, the liquidator shall do both of the following:	1072

(1) Deal with the protected cell captive insurance company's	1073
assets only in accordance with the procedures set out in this	1074
section;	1075

(2) Apply the protected cell captive insurance company's	1076
assets to those entitled to have recourse to them under this	1077
section, in the discharge of the claims of creditors of the	1078
protected cell captive insurance company.	1079

(G)(1) A petition for a liquidation or rehabilitation order	1080
with respect to a protected cell of a protected cell captive	1081
insurance company may be made by any of the following:	1082

(a) The protected cell captive insurance company;

1083

(b) A majority of the directors of the protected cell captive	1084
insurance company;	1085

(c) Any creditor of that protected cell;

1086

(d) The superintendent.

1087

(2) Notice of a petition to the court for a liquidation or	1088
rehabilitation order with respect to a protected cell of a	1089
protected cell captive insurance company shall be served upon all	1090
of the following:	1091

(a) The protected cell captive insurance company;

1092

(b) The superintendent;

1093

(c) Such other persons as the court may direct.

1094

(H)(1) Except otherwise provided in this section, the court	1095
may make a liquidation or rehabilitation order with respect to a	1096
protected cell if, in relation to a captive insurance company, the	1097
court is satisfied that both of the following are met:	1098

(a) The cell assets attributable to a particular protected	1099
cell of the captive insurance company and the general assets of	1100
the company, in those cases where creditors of the captive	1101
insurance company with respect to the protected cell are entitled	1102
to have recourse to the captive insurance company's general	1103
assets, are, or are likely to be, insufficient to discharge the	1104
claims of creditors with respect to that protected cell.	1105

(b) An order would achieve the purposes set forth in division	1106
(H)(3) of this section.	1107

(2) A liquidation or rehabilitation order may be made with	1108
respect to one or more protected cells.	1109

(3) A liquidation or rehabilitation order shall direct that	1110
the business and cell assets of, or attributable to, a protected	1111
cell shall be managed by a liquidator or rehabilitator specified	1112
in the order for the purpose of accomplishing both of the	1113
following:	1114

(a) The orderly closing or rehabilitation of the business of,	1115
or attributable to, the protected cell;	1116

(b) The distribution of the cell assets, or assets	1117
attributable to the protected cell, to those having recourse	1118
thereto.	1119

(I) All of the following apply to the liquidator or	1120
rehabilitator of a protected cell:	1121

(1) The liquidator or rehabilitator shall have all the	1122
functions and powers of the directors responsible for the business	1123
and cell assets of, or attributable to, the protected cell.	1124

(2) The liquidator or rehabilitator may at any time apply to	1125
the court for any of the following:	1126

(a) Directions as to the extent or exercise of any function	1127
or power;	1128

(b) The liquidation or rehabilitation order to be discharged	1129
or varied;	1130

(c) Any other order as to any matter occurring during the	1131
course of the liquidation or rehabilitation.	1132

(3) The liquidator or rehabilitator shall act as the agent of	1133
the captive insurance company and shall not incur personal	1134
liability except to the extent that the liquidator or	1135
rehabilitator acts fraudulently, recklessly, negligently, or in	1136
bad faith, except that where the superintendent is appointed	1137
liquidator or rehabilitator of a protected cell. If the	1138
superintendent is appointed liquidator, section 3903.07 of the	1139
Revised Code shall apply to the superintendent, any deputy	1140
liquidator, any employee of the department of insurance, any	1141
employee appointed by the superintendent as liquidator, and any	1142
employee who serves under the liquidator.	1143

(4) The liquidator or rehabilitator shall administer the	1144
assets pursuant to the provisions of this section and sections	1145
3903.01 to 3903.59 of the Revised Code.	1146

(J) Upon the filing of a petition for a liquidation or	1147
rehabilitation order, and during the period of operation of	1148
liquidation or rehabilitation, both of the following shall apply:	1149

(1) No proceedings shall be instituted or continued by or	1150
against the captive insurance company or protected cell in respect	1151
of which the liquidation or rehabilitation order was made.	1152

(2) No action shall be taken to enforce any security, and no	1153
action shall be taken in the execution of a legal process with	1154
respect to the business or cell assets of, or attributable to, the	1155
protected cell with respect to which the liquidation or	1156
rehabilitation order was made, except by leave of the court.	1157

(K) During the period of operation of a liquidation or	1158
rehabilitation both of the following shall apply:	1159

(1) The functions and powers of the directors shall cease	1160
with respect to the business of, or attributable to, any protected	1161
cell or cell assets for which the order was made.	1162

(2)(a) The liquidator or rehabilitator of the protected cell	1163
shall be entitled to be present at all meetings of the captive	1164
insurance company and protected cell in question and to vote at	1165
such meetings as if the liquidator or rehabilitator were a	1166
director of the captive insurance company.	1167

(b) The liquidator's or rehabilitator's voting authority	1168
shall include matters concerning the captive insurance company's	1169
general assets, unless there are no creditors that are entitled to	1170
have recourse to the captive insurance company's general assets.	1171

(L)(1) A court shall not discharge a liquidation or	1172
rehabilitation order issued pursuant to this section unless it	1173
appears to the court that the purpose for which the order was made	1174
has been achieved, substantially achieved, or is incapable of	1175
being achieved.	1176

(2) The court, on hearing a petition for the discharge or	1177
variation of a liquidation or rehabilitation order, may make any	1178
interim order, discharge the order, or continue the liquidation or	1179
rehabilitation unchanged.	1180

(3) Upon the court issuing an order discharging a liquidation	1181
or rehabilitation order for a protected cell on the ground that	1182
the purpose for which the order was made had been achieved or	1183
substantially achieved, the court may direct that any payment made	1184
by the liquidator or rehabilitator to any creditor of the captive	1185
insurance company, with respect to that protected cell, shall be	1186
considered full satisfaction of the liabilities of the captive	1187
insurance company to the creditor with respect to the protected	1188
cell. However, such an order or discharge shall not be considered	1189
a bar to a creditor's claims against the captive cell insurance	1190
company arising out of the captive cell insurance company's	1191
administrative, regulatory, or marketing activities on behalf of	1192
the captive cell in question.	1193

Sec. 3964.20.  A captive insurance company organized under	1194
the laws of another state or jurisdiction may become a domestic	1195
captive insurance company pursuant to section 3913.40 of the	1196
Revised Code after complying with all the requirements of this	1197
chapter relative to the organization and formation of a domestic	1198
captive insurance company.	1199

Sec. 3964.21.  The superintendent may adopt rules in	1200
accordance with Chapter 119. of the Revised Code as are reasonably	1201
necessary for the implementation and operation of this chapter.	1202

Sec. 4123.351.  (A) The administrator of workers'	1203
compensation shall require every self-insuring employer, including	1204
any self-insuring employer that is indemnified by a captive	1205
insurance company granted a certificate of authority under Chapter	1206
3694. of the Revised Code, to pay a contribution, calculated under	1207
this section, to the self-insuring employers' guaranty fund	1208
established pursuant to this section. The fund shall provide for	1209
payment of compensation and benefits to employees of the	1210
self-insuring employer in order to cover any default in payment by	1211
that employer.	1212

(B) The bureau of workers' compensation shall operate the	1213
self-insuring employers' guaranty fund for self-insuring	1214
employers. The administrator annually shall establish the	1215
contributions due from self-insuring employers for the fund at	1216
rates as low as possible but such as will assure sufficient moneys	1217
to guarantee the payment of any claims against the fund. The	1218
bureau's operation of the fund is not subject to sections 3929.10	1219
to 3929.18 of the Revised Code or to regulation by the	1220
superintendent of insurance.	1221

(C) If a self-insuring employer defaults, the bureau shall	1222
recover the amounts paid as a result of the default from the	1223
self-insuring employers' guaranty fund. If a self-insuring	1224
employer defaults and is in compliance with this section for the	1225
payment of contributions to the fund, such self-insuring employer	1226
is entitled to the immunity conferred by section 4123.74 of the	1227
Revised Code for any claim arising during any period the employer	1228
is in compliance with this section.	1229

(D)(1) There is hereby established a self-insuring employers'	1230
guaranty fund, which shall be in the custody of the treasurer of	1231
state and which shall be separate from the other funds established	1232
and administered pursuant to this chapter. The fund shall consist	1233
of contributions and other payments made by self-insuring	1234
employers under this section. All investment earnings of the fund	1235
shall be credited to the fund. The bureau shall make disbursements	1236
from the fund pursuant to this section.	1237

(2) The administrator has the same powers to invest any of	1238
the surplus or reserve belonging to the fund as are delegated to	1239
the administrator under section 4123.44 of the Revised Code with	1240
respect to the state insurance fund. The administrator shall apply	1241
interest earned solely to the reduction of assessments for	1242
contributions from self-insuring employers and to the payments	1243
required due to defaults.	1244

(3) If the bureau of workers' compensation board of directors	1245
determines that reinsurance of the risks of the fund is necessary	1246
to assure solvency of the fund, the board may:	1247

(a) Enter into contracts for the purchase of reinsurance	1248
coverage of the risks of the fund with any company or agency	1249
authorized by law to issue contracts of reinsurance;	1250

(b) Require the administrator to pay the cost of reinsurance	1251
from the fund;	1252

(c) Include the costs of reinsurance as a liability and	1253
estimated liability of the fund.	1254

(E) The administrator, with the advice and consent of the	1255
board, may adopt rules pursuant to Chapter 119. of the Revised	1256
Code for the implementation of this section, including a rule,	1257
notwithstanding division (C) of this section, requiring	1258
self-insuring employers to provide security in addition to the	1259
contribution to the self-insuring employers' guaranty fund	1260
required by this section. The additional security required by the	1261
rule, as the administrator determines appropriate, shall be	1262
sufficient and adequate to provide for financial assurance to meet	1263
the obligations of self-insuring employers under this chapter and	1264
Chapter 4121. of the Revised Code.	1265

(F) The purchase of coverage under this section by	1266
self-insuring employers is valid notwithstanding the prohibitions	1267
contained in division (A) of section 4123.82 of the Revised Code	1268
and is in addition to the indemnity contracts that self-insuring	1269
employers may purchase pursuant to division (B) of section 4123.82	1270
of the Revised Code.	1271

(G) The administrator, on behalf of the self-insuring	1272
employers' guaranty fund, has the rights of reimbursement and	1273
subrogation and shall collect from a defaulting self-insuring	1274
employer or other liable person all amounts the administrator has	1275
paid or reasonably expects to pay from the fund on account of the	1276
defaulting self-insuring employer.	1277

(H) The assessments for contributions, the administration of	1278
the self-insuring employers' guaranty fund, the investment of the	1279
money in the fund, and the payment of liabilities incurred by the	1280
fund do not create any liability upon the state.	1281

Except for a gross abuse of discretion, neither the board,	1282
nor the individual members thereof, nor the administrator shall	1283
incur any obligation or liability respecting the assessments for	1284
contributions, the administration of the self-insuring employers'	1285
guaranty fund, the investment of the fund, or the payment of	1286
liabilities therefrom.	1287

Section 2. That existing section 4123.351 of the Revised Code	1288
is hereby repealed.	1289