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S. 582
STATUS INFORMATION
General Bill
Sponsors: Senator Malloy
Document Path: l:\council\bills\dka\3215dw07.doc
Introduced in the Senate on March 15, 2007
Currently residing in the Senate Committee on Banking and Insurance
Summary: Workers' Compensation Guaranty Association for Captive Insurers Act
HISTORY OF LEGISLATIVE ACTIONS
Date Body Action Description with journal page number ------------------------------------------------------------------------------- 3/15/2007 Senate Introduced and read first time SJ-5 3/15/2007 Senate Referred to Committee on Banking and Insurance SJ-5
View the latest legislative information at the LPITS web site
VERSIONS OF THIS BILL
TO AMEND THE CODE OF LAWS OF SOUTH CAROLINA, 1976, BY ADDING CHAPTER 32 TO TITLE 38 SO AS TO ENACT THE "SOUTH CAROLINA WORKERS' COMPENSATION GUARANTY ASSOCIATION FOR CAPTIVE INSURERS ACT"; BY ADDING SECTION 38-90-640 SO AS TO REQUIRE A CAPTIVE INSURER THAT WRITES WORKERS' COMPENSATION INSURANCE TO SEEK APPROVAL OF THE DEPARTMENT OF INSURANCE BEFORE WRITING WORKERS' COMPENSATION INSURANCE AND TO REQUIRE OTHER CONDITIONS; BY ADDING SECTION 42-5-23 SO AS TO AUTHORIZE A QUALIFIED SELF-INSURED FUND TO CONVERT TO A WORKERS' COMPENSATION CAPTIVE INSURANCE COMPANY UNDER CERTAIN CONDITIONS; AND TO AMEND SECTION 38-90-20, AS AMENDED, RELATING TO LICENSING AND REQUIRED INFORMATION OF A CAPTIVE INSURANCE COMPANY, SO AS TO ALLOW A CAPTIVE INSURANCE COMPANY TO WRITE WORKERS' COMPENSATION INSURANCE.
Be it enacted by the General Assembly of the State of South Carolina:
SECTION 1. Title 38 of the 1976 Code is amended by adding:
Section 38-32-10 This chapter may be cited as the 'South Carolina Workers' Compensation Guaranty Association For Captive Insurers Act'.
Section 38-32-20. As used in this chapter:
(1) 'Account' means any one of the accounts created by Section 38-32-40.
(2) 'Affiliate' means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an insolvent insurer on December thirty-first of the year next preceding the date the insurer becomes an insolvent insurer.
(3) 'Affiliate of the insolvent insurer' means a person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with an insolvent insurer on December thirty-first of the year next preceding the date the insurer becomes an insolvent insurer.
(4) 'Association' means the South Carolina Workers' Compensation Guaranty Association for Captive Insurers created under Section 38-32-40.
(5) 'Association similar to the association' means any guaranty association, security fund, or other insolvency mechanism which affords protection similar to that of the association. The term also includes a property/casualty insolvency mechanism which obtains assessments or other contributions from insurers on a preinsolvency basis.
(6) 'Claimant' means an insured making a first party claim or a person instituting a liability claim. However, a person who is an affiliate of the insolvent insurer may not be a claimant.
(7) 'Control' means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, unless the power is the result of an official position with or corporate office held by the person. Control is presumed to exist if a person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing ten percent or more of the voting securities of another person. This presumption may be rebutted by a showing that control does not exist in fact.
(8)(a) 'Covered claim' means an unpaid claim, including one of unearned premiums, which arises out of and is within the coverage and is subject to the applicable limits of an insurance policy to which this chapter applies issued by an insurer, if the insurer is an insolvent insurer and the claimant or insured is a resident of this State at the time of the insured event, if for entities other than an individual, the residence of a claimant or insured is the state in which its principal place of business is located at the time of the insured event.
(b) 'Covered claim' does not include:
(i) an amount awarded as extra-contractual damages unless awarded against the association;
(ii) an amount sought as a return of premium under any retrospective rating plan;
(iii) an amount due any reinsurer, insurer, insurance pool, or underwriting association as subrogation recoveries, reinsurance recoveries, contribution, indemnification, or otherwise. A claim for an amount due any reinsurer, insurer, insurance pool, or underwriting association may not be asserted against a claimant or a person insured under a policy issued by an insolvent insurer other than to the extent that a claim exceeds the association obligation limitations provided for in Section 38-32-60;
(iv) a first party claim by an insured which is an affiliate of the insolvent insurer;
(v) a fee or other amount relating to goods or services sought by or on behalf of an attorney or other provider of goods or services retained by the insolvent insurer or an insured before the date it was determined to be insolvent;
(vi) a fee or other amount sought by or on behalf of an attorney or other provider of goods or services retained by an insured or claimant in connection with the assertion or prosecution of a claim, covered or otherwise, against the association; or
(vii) a claim for interest.
(9) 'Insolvent insurer' means an insurer:
(a) licensed to transact insurance in this State as a captive insurer either at the time the policy was issued or when the insured event occurred; and
(b) determined to be insolvent by a court of competent jurisdiction in the insurer's state of domicile or of this State and which the director or his designee has found fails to meet its obligation to policyholders in this State.
(10) 'Insured' means a named insured, any additional insured, any vendor, lessor, or another party identified as an insured under the policy.
(11)(a) 'Member insurer' means a person who:
(i) is a captive workers' compensation insurance insurer, and
(ii) is licensed to transact insurance in this State as a captive.
(b) An insurer shall cease to be a member insurer effective on the day following the termination or expiration of its license to transact the kinds of insurance to which this chapter applies. The insurer remains liable as a member insurer for all obligations, including obligations for assessments levied before the termination or expiration of the insurer's license and assessments levied after the termination or expiration, which relate to an insurer which became an insolvent insurer before the termination or expiration of the insurer's license. The insurer remains liable for full funding of the self-insurance fund runoff account.
(12) 'Net direct written premiums' means direct gross premiums written in this State on insurance policies to which this chapter applies, less return premiums on the policies and dividends paid or credited to policyholders on the direct business. It does not include premiums on contracts between insurers or reinsurers.
(13) 'Person' means an individual, a corporation, a partnership, an association, a voluntary organization, or a governmental entity.
Section 38-32-30. This chapter applies to workers' compensation insurance but does not apply to:
(1) a transaction or combination of transactions between a person, including affiliates of the person, and an insurer, including affiliates of the insurer, which does not effect a transfer of risk from the person, including affiliates of the person, to the insurer, including affiliates of the insurer, to the extent there is not a transfer of risk; or
(2) insurance written on a retroactive basis to cover known losses that have resulted from an event with respect to which a claim has already been made, and the claim is known to the insurer at the time the insurance is bound. An exception may be granted for a self-insured fund that is regulated by the Workers' Compensation Commission, to allow coverage for known claims of a fund that converts its operations from a self-insured fund to a captive workers' compensation insurer. The conversion process is provided in 38-32-200.
Section 38-32-40. There is created a nonprofit unincorporated legal entity to be known as the South Carolina Workers' Compensation Guaranty Association for Captive Insurers. All insurers defined as member insurers in Section 38-32-20(11) are members of the association as a condition of their authority to transact insurance in this State. The association shall perform its functions under a plan of operation established and approved under Section 38-32-70 and shall exercise its powers through a board of directors established under Section 38-32-50. For purposes of administration and assessment, the association is divided into separate accounts:
(1) the Workers' Compensation Insurance account; and
(2) the Workers' Compensation Self-insurance Runoff accounts.
Section 38-32-50. (A) The board of directors of the association consists of not less than five nor more than nine persons who serve terms as established in the plan of operation. Member insurers shall select the members of the board subject to the approval of the director. A vacancy on the board must be filled for the unexpired portion of the term in the same manner as any initial appointment.
(B) In approving selections to the board, the director shall consider, among other things, whether all member insurers are represented fairly.
(C) A member of the board may be reimbursed from the assets of the association for expenses incurred as a member of the board of directors.
Section 38-32-60. The association:
(1) is obligated to the extent of claims existing before the determination of insolvency and claims arising up to the earliest dates of:
(a) thirty days after the determination of insolvency;
(b) the policy expiration date; or
(c) the date the insured replaces or cancels the policy;
(2) shall pay the full amount of any covered workers' compensation claim;
(3) shall allocate claims paid, and expenses incurred among the accounts separately, and assess member insurers separately for each account amounts necessary to pay:
(a) the obligation of the association under item (1) of this section;
(b) the expenses of handling covered claims;
(c) other expenses authorized by this chapter; and
(d) the contingent liability of the respective Workers' Compensation Self-insurance account;
(4) shall assess each member insurer in the proportion that the net direct written premiums of the member insurer for the calendar year preceding the insolvency on the kinds of insurance in the account bear to the net direct written premiums of all member insurers for the calendar year preceding the insolvency on the kinds of insurance in the account. Each member insurer must be notified of the assessment not later than thirty days before it is due. A member insurer may not be assessed in a year on an account, an amount greater than one percent of that member insurer's net direct written premiums for the calendar year preceding the insolvency on the kinds of insurance in the account. If the maximum assessment, together with the other assets of the association in an account, does not provide in any year an amount sufficient to make all necessary payments from that account, the funds available must be prorated, and the unpaid portion must be paid as soon after proration as funds become available. The association may exempt or defer, in whole or in part, the payment of an assessment of a member insurer, if the payment would cause the member insurer's financial statement to reflect amounts of capital or surplus less than the minimum amounts required for a certificate of authority by a jurisdiction in which the member insurer is authorized to transact insurance. Each member insurer, serving as a servicing facility on behalf of the association, may set off against an assessment authorized payments made on covered claims and expenses incurred in the payment of the claims by the member insurer;
(5) shall investigate claims brought against the association and adjust, compromise, settle, and pay covered claims to the extent of the association's obligation and deny all other claims and may review settlements, releases, and judgments to which the insolvent insurer or its insureds were parties to determine the extent to which these settlements, releases, and judgments may be properly contested;
(6) shall notify the person the director or his designee directs under Section 38-32-80;
(7) shall handle claims through its employees or through one or more insurers or other persons designated as servicing facilities. Designation of a servicing facility is subject to the approval of the director or his designee, but designation may be declined by a member insurer;
(8) shall reimburse each servicing facility for obligations of the association paid by the facility and for expenses incurred by the facility while handling claims on behalf of the association and pay the other expenses of the association authorized by this chapter;
(9) may employ or retain persons necessary to handle claims and perform other duties of the association;
(10) may borrow funds necessary to effect the purpose of this chapter in accordance with the plan of operation;
(11) may sue or be sued. An action brought directly against the association must be brought against the association in this State as a condition precedent to recovery directly against the association;
(12) may negotiate and become a party to contracts necessary to carry out the purpose of this chapter;
(13) may perform other acts necessary or proper to effectuate the purpose of this chapter;
(14) may refund to the member insurers, in proportion to the contribution of each member insurer to that account that amount by which the assets of the account exceed the liabilities, if, at the end of any calendar year, the board of directors finds that the assets of the association in any account exceed the liabilities of that account as estimated by the board of directors for the coming year; and
(15) may agree to be responsible for claims of an insurer covered by another guaranty fund, if the claim occurred during a time period when the insolvent insurer was a member of the Workers' Compensation Guaranty Fund for captive insurers.
Section 38-32-70. (A) The association shall submit to the department a plan of operation and amendments necessary or suitable to assure the fair, reasonable, and equitable administration of the association. The plan of operation and amendments become effective upon the written approval of the director or his designee. If the association fails to submit suitable amendments to the plan, the director or his designee, after notice and hearing, shall adopt and promulgate reasonable amendments necessary or advisable to effectuate the provisions of this chapter. These amendments continue in force until modified by the director or his designee or superseded by amendments submitted by the association and approved by the director or his designee.
(B) Member insurers shall comply with the plan of operation.
(C) The plan of operation shall:
(1) establish the procedures for the powers and duties of the association under Section 38-32-60 are performed;
(2) establish procedures for handling assets of the association;
(3) establish the amount and method of reimbursing members of the board of directors under Section 38-32-50;
(4) establish procedures by which claims may be filed with the association and establish acceptable forms of proof of covered claims. Notice of claims to the receiver or liquidator of the insolvent insurer is considered notice to the association or its agent and a list of these claims must be submitted periodically to the association or an association similar to the association in another state by the receiver or liquidator;
(5) establish places and times for meetings of the board of directors;
(6) establish procedures for records to be kept of all financial transactions of the association, its agents, and the board of directors;
(7) provide that a member insurer aggrieved by a final action or decision of the association may appeal to the Administrative Law Judge Division as provided by law within thirty days after the action or decision;
(8) establish the procedures for selections for the board of directors to be submitted to the director; and
(9) contain additional provisions necessary or proper for the execution of the powers and duties of the association.
(D) The plan of operation may provide that all powers and duties of the association, except those under Section 38-32-60(4), are delegated to a corporation, an association similar to the association, or another organization that performs or may perform functions similar to those of this association, or its equivalent, in two or more states. This corporation, association, or organization must be reimbursed as a servicing facility is reimbursed and must be paid for its performance of any other functions of the association. A delegation under this item takes effect only with the approval of both the board of directors and the director or his designee and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this chapter.
Section 38-32-80. (A) The director or his designee shall:
(1) notify the association of the existence of an insolvent insurer not later than three days after he receives notice of the determination of the insolvency; and
(2) provide the association, upon request of the board of directors, with a statement of the net direct written premiums of each member insurer.
(B) The director or his designee may:
(1) require that the association notify the insureds of the insolvent insurer and other interested parties of the determination of insolvency and of their rights under this chapter. The notification must be by mail at their last known address, where available, but if sufficient information for notification by mail is not available, notice by publication in a newspaper of general circulation is sufficient;
(2) suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this State of a member insurer who fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the director or his designee may impose the penalties provided in Section 38-2-10;
(3) revoke the designation of a servicing facility if he finds claims are being handled unsatisfactorily; or
(4) upon request of the board of directors, notwithstanding the limitation on assessments contained in Section 38-32-60(4), increase the maximum assessment in a year in an account in order for that assessment to provide an amount sufficient to make all necessary payments by the association from that account. However, a member insurer may not be assessed in a year on an account under this provision an amount greater than two percent of the member insurer's net direct written premiums for the calendar year preceding the insolvency on the kinds of insurance in the account.
Section 38-32-90. (A) A person recovering under this chapter is considered to have assigned his rights under the policy to the association to the extent of his recovery from the association. Each insured or claimant seeking the protection of this chapter shall cooperate with the association to the same extent as he would have been required to cooperate with the insolvent insurer. The association has no cause of action against the insured of the insolvent insurer for any sums it has paid out, except the causes of action the insolvent insurer would have had if the sums had been paid by the insolvent insurer and except as provided in subsection (B). In the case of an insolvent insurer operating on a plan with assessment liability, payments of claims of the association do not operate to reduce the liability of insureds to the receiver, liquidator, or statutory successor for unpaid assessments.
(B) The association has the right to recover the amount of any 'covered claim' paid on behalf of the person pursuant to this chapter from:
(1) an insured whose net worth on December thirty-first of the year immediately preceding the date the insurer becomes an insolvent insurer exceeds twenty-five million dollars and whose liability obligations to other persons are satisfied, in whole or in part, by payments made under this chapter; and
(2) a person who is an affiliate of the insolvent insurer and whose liability obligations to other persons are satisfied, in whole or in part, by payments made under this chapter.
(C) The receiver, liquidator, or statutory successor of an insolvent insurer is bound by settlements of covered claims by the association or an association similar to the association in another state. The court having jurisdiction shall grant these claims priority, equal to that in which the claimant is entitled in the absence of this chapter against the assets of the insolvent insurer. The expenses of the association or an association similar to the association in handling claims must be accorded the same priority as the liquidator's expenses.
(D) The association periodically shall file with the receiver or liquidator of the insolvent insurer statements of the covered claims paid by the association and estimates of anticipated claims on the association which shall preserve the rights of the association against the assets of the insolvent insurer.
Section 38-32-100. (A) A person having a claim under an insurance policy, whether or not it is a policy issued by a member insurer, and the claim under such other policy arises from the same facts, injury, or loss that gave rise to the covered claim against the association, is required first to exhaust all coverage and limits provided by the policy. Any amount payable on a covered claim under this chapter must be reduced by the full limits of other coverage as set forth on the declarations page, and the association shall receive a full credit for these limits, or, where there are no applicable limits, the claim must be reduced by the total recovery. A person may not be required to exhaust all coverage and limits under the policy of an insolvent insurer.
(1) A claim under a policy providing liability coverage to a person who jointly and severally may be liable with or a joint tortfeasor with the person covered under the policy of the insolvent insurer that gives rise to the covered claim must be considered to be a claim arising from the same facts, injury, or loss that gave rise to the covered claim against the association. Any amount payable on a covered claim under this chapter must be reduced by the full and combined policy limits of all joint tortfeasers.
(2) To the extent that the association's obligation is reduced by the application of this section, the liability of the person insured by the insolvent insurer's policy for the claim must be reduced in the same amount.
(B)(1) A person having a claim that may be recovered under more than one insurance guaranty association or associations similar to the association is required first to exhaust all coverage and limits in recovery from the association of the place of residence of the insured except that, if it is a:
(a) first-party claim for damage to property with a permanent location, he is required first to exhaust all coverage and limits in recovery from the association of the location of the property; and
(b) workers' compensation claim, he is required first to exhaust all coverage and limits in recovery from the association of the residence of the claimant.
(2) An amount payable on a covered claim under this chapter must be reduced by the full amount of recovery from any other insurance guaranty association or associations similar to the association, and the association shall receive full credit for the recovery.
(C) A person having a claim or legal right of recovery under a governmental insurance or guaranty program, which also is a covered claim, is required first to exhaust all coverage and limits in recovery under the program. An amount payable on a covered claim under this chapter must be reduced by the full amount of any recovery under the governmental insurance or guaranty program.
(D) A claim held by an insurer, reinsurer, insurance pool, or underwriting association based on an assignment or on rights of subrogation, or otherwise, may not be recovered from a claimant or asserted in a legal action against a person insured under a policy issued by an insolvent insurer or the association except to the extent the amount of the claim exceeds the obligation of the association under this chapter.
(E) A person who has liquidated by settlement or judgment a claim against an insured under a policy issued by an insolvent insurer, and the claim is a covered claim and also is a claim within the coverage of any policy issued by a solvent insurer, must be required first to exhaust all coverage and limits provided under the policy issued by the solvent insurer before execution, levy, or any other proceedings are begun to enforce any judgment obtained against or the settlement with the insured of the insolvent insurer. An amount payable on a covered claim under this chapter, whether through settlement, judgment, or otherwise, must be reduced by the full limits of such other coverage as set forth on the declarations page of the policy issued by the insolvent insurer.
(F) A person having a claim against an insolvent insurer under a provision in an insurance policy is limited to ten million dollars aggregate payout from the association.
(G) A person having a net worth of greater than twenty-five million dollars and having a claim against an insolvent insurer under any provision in an insurance policy may not make a claim against the association.
Section 38-32-110. (A) The board of directors, upon majority vote, may make recommendations to the director, his designee, and the department for the detection and prevention of insurer insolvencies.
(B) The board of directors, at the conclusion of any insurer insolvency in which the association was obligated to pay covered claims, may prepare a report on the history and causes of the insolvency, based on the information available to the association, and submit the report to the department.
(C) The board of directors, upon majority vote, may respond to requests by the director or his designee to discuss and make recommendations regarding the status of any member insurer whose financial condition may be hazardous to policyholders or the public. These recommendations are not considered public documents.
Section 38-32-120. The association is subject to examination and regulation by the department. The board of directors annually shall submit to the department by March thirtieth a financial report for the preceding calendar year in a form approved by the director or his designee.
Section 38-32-130. The association is exempt from payment of all fees and all taxes levied by this State or any of its political subdivisions, except taxes levied on real or personal property.
Section 38-32-140. The rates and premiums charged for insurance policies, as provided by this chapter, includes amounts sufficient to recoup a sum equal to the amounts paid to the association by the member insurer less any amounts returned to the member insurer by the association. These rates may not be considered excessive because they contain an amount reasonably calculated to recoup assessments paid by the member insurer.
Section 38-32-150. There is no liability on the part of, and no cause of action of any nature may arise against a member insurer, the association's agents or employees, the board of directors, or the director or his representatives for any act or omission in the performance of their powers and duties under this chapter. This section does not relieve the association of any of its liability.
Section 38-32-160. All proceedings involving covered claims in which the insolvent insurer is a party or is obligated to defend a party in any court in this State must be stayed ninety days from the date insolvency is determined to permit proper defense by the association. The court may stay the proceedings for a longer period of time, if the court finds the additional time is necessary to permit proper defense by the association. As to any judgment, decision, order, verdict, or finding based on the insurer's default or failure to defend the insured, the association may apply to have the judgment, decision, order, verdict, or finding set aside by the same court or administrator which made it and must be permitted to defend against the claim on its merits.
Section 38-32-170. (A) The director or his designee, by order, shall terminate the operation of the association as to any kind of insurance covered by this chapter with respect to which he has found, after hearing, that there is in effect a statutory or voluntary plan that:
(1) is a permanent plan which is adequately funded or for which adequate funding is provided; and
(2) extends, or will extend, to the policyholders and residents of this State protection and benefits with respect to insolvent insurers not substantially less favorable and effective to these policyholders and residents than the protection and benefits provided with respect to those kinds of insurance under this chapter.
(B) The director or his designee, by the same order, shall authorize discontinuance of future payments by insurers to the association with respect to the same kinds of insurance. However, the assessments and payments must continue, as necessary, to liquidate covered claims of insurers adjudged insolvent before the order and the related expenses not covered by the other plan.
(C) If the operation of the association is terminated as to all kinds of insurance within its scope, the association, as soon as possible, shall distribute the balance of remaining money and assets, after first discharging the association's duties with respect to prior insurer insolvencies and related expenses not covered by the other plan. The distribution must be to the insurers in this State which are policies of insurance covered by this chapter and which had made payments to this association, pro rata upon the basis of the aggregate of the payments made by the respective insurers during the period of five years next preceding the date of the order. Upon completion of the distribution, with respect to all of the kinds of insurance covered by this chapter, this chapter is considered to have expired.
Section 38-32-180. (A) Monies received and paid into the Workers' Compensation Self-insurance Runoff Account together with all property and securities acquired by and through the use of monies belonging to this fund, including interest earned upon monies in this fund, must be transferred and deposited into a new account with the association created pursuant to Section 38-32-200. These accounts must be separate and apart from other accounts similarly created and from all other association accounts. The association is the custodian of the account, and shall administer the account in accordance with the provisions of this chapter.
(B) At least yearly, the contingent liability of each self-insurance runoff account must be determined. If the reserves in the account are less than the estimated contingent liability, the workers' compensation captive insurer that was created when the respective account was created may be assessed to obtain additional funds for this account in the manner described in Section 38-32-60(4).
Section 38-32-190. The purpose of the accounts created in the association pursuant to Section 38-32-200 of this chapter is to:
(1) receive assessment monies from self-insurance funds converting to captive insurance company structure as provided in Section 38-90-640;
(2) receive interest on monies in the accounts;
(3) pay claims for the runoff of self-insurance funds who have converted to captive insurance company structure; and
(4) refund to the self-insurance fund the excess funds not paid out.
Section 38-32-200. In order for a self-insurance fund to convert to a captive insurance company, an amount equivalent to one hundred percent of the contingent liabilities of the self-insurance fund that is converting to captive insurance company structure, as provided by Section 38-90-640, existing on the date of conversion must be deposited in a separate reserve account to be maintained by the association which is designated as the 'Workers' Compensation Self-insurance Runoff Account'. The amount of the fund's contingent liabilities and the amount to be deposited in this account must be determined and approved by the department."
SECTION 2. Article 3, Chapter 90, Title 38 of the 1976 Code is amended by adding:
"Section 38-90-640. (A) A captive insurer that writes workers' compensation insurance shall seek approval of the department before writing workers' compensation insurance and shall belong to the Workers' Compensation Guaranty Association for Captive Insurers.
(B) A captive insurer that writes workers' compensation insurance must be a member of the rating bureau approved by the department for workers' compensation insurance."
SECTION 3. Chapter 5, Title 42 of the 1976 Code is amended by adding:
"Section 42-5-23. A qualified self-insured fund may convert to a workers' compensation captive pursuant to the provisions of Section 38-32-200 and Chapter 90, Title 38."
SECTION 4. Section 38-90-20(A) of the 1976 Code, as last amended by Act 73 of 2003, is further amended to read:
"(A) A captive insurance company, when permitted by its articles of incorporation, articles of organization, operating agreement, or charter, may apply to the director for a license to do any and all insurance, except workers' compensation insurance, authorized by this title; however:
(1) a pure captive insurance company may not insure any risks other than those of its parent, affiliated companies, controlled unaffiliated business, or a combination of them;
(2) an association captive insurance company may not insure any risks other than those of the member organizations of its association and their affiliated companies;
(3) an industrial insured captive insurance company may not insure any risks other than those of the industrial insureds that comprise the industrial insured group and their affiliated companies;
(4) in general, a special purpose captive insurance company only may insure the risks of its parent. Notwithstanding any other provisions of this chapter, a special purpose captive insurance company may provide insurance or reinsurance, or both, for risks as approved by the director;
(5) a captive insurance company may not provide personal motor vehicle or homeowner's insurance coverage or any component of these coverages;
(6) a captive insurance company may not accept or cede reinsurance except as provided in Section 38-90-110."
SECTION 5. This act takes effect upon approval by the Governor.
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