Kentucky Statutes 304.3-705 – Application for admission to regulatory sandbox — Disclosure and stability requirements — Disqualifying factors — Participation in regulatory sandbox under KRS 15.268. (Effective March 15, 2024)
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(1) Except as provided in subsection (2) of this section, on or before December 31,
2025, a person may apply to the department for admission to the sandbox by submitting an application in the form prescribed by the commissioner, accompanied by the following:
(a) A filing fee of seven hundred fifty dollars ($750);
(b) A detailed description of the innovation, which shall include:
1. An explanation of how the innovation will:
a. Add value to customers and serve the public interest;
b. Be economically viable for the applicant;
c. Provide suitable consumer protection; and
d. Not pose an unreasonable risk of consumer harm;
2. A detailed description of the statutory and regulatory issues that may prevent the innovation from being currently utilized, issued, sold, solicited, distributed, or advertised in the market;
3. A description of how the innovation functions and the manner in which it will be offered or provided;
4. If the innovation involves the use of software, hardware, or other technology developed for the purpose of implementing or operating it, a technical white paper setting forth a description of the operation and general content of technology to be utilized, including:
a. The problem addressed by that technology; and
b. The interaction between that technology and its users;
5. If the innovation involves the issuance of a policy of insurance, a statement that either:
a. If the applicant will be the insurer on the policy, that the applicant holds a valid certificate of authority and is authorized to issue the insurance coverage in question; or
b. If some other person will be the insurer on the policy, that the other person holds a valid certificate of authority and is authorized to issue the insurance coverage in question; and
6. A statement by an officer of the applicant certifying that no product, process, method, or procedure substantially similar to the innovation has been used, sold, licensed, or otherwise made available in this Commonwealth before the effective filing date of the application;
(c) The name, contact information, and bar number of the applicant’s insurance regulatory counsel, which shall be a person with experience providing insurance regulatory compliance advice;
(d) A detailed description of the specific conduct that the applicant proposes should be permitted by the limited no-action letter;
(e) Proposed terms and conditions to govern the applicant’s beta test, which shall include:
1. Citation to the provisions of Kentucky law that should be excepted in the notice of acceptance issued under KRS § 304.3-710(6); and
2. Any request for an extension of the time period for a beta test under
KRS § 304.3-720(1) and the grounds for the request;
(f) Proposed metrics by which the department may reasonably test the innovation’s utility during the beta test;
(g) Disclosure of all:
1. Persons who are directors and executive officers of the applicant;
2. General partners of the applicant if the applicant is a limited partnership;
3. Members of the applicant if the applicant is a limited liability applicant;
4. Persons who are beneficial owners of ten percent (10%) or more of the voting securities of the applicant;
5. Other persons with direct or indirect power to direct the management and policies of the applicant by contract, other than a commercial contract for goods or nonmanagement services; and
6. Conflicts of interest with respect to any person listed in this paragraph and the department;
(h) A statement that the applicant has funds of at least twenty-five thousand dollars ($25,000) available to guarantee its financial stability through one (1) or a combination of any of the following:
1. A contractual liability insurance policy;
2. A surety bond issued by an authorized surety;
3. Securities of the type eligible for deposit by authorized insurers in this
Commonwealth;
4. Evidence that the applicant has established an account payable to the commissioner in a federally insured financial institution in this Commonwealth and has deposited money of the United States in an amount equal to the amount required by this paragraph that is not available for withdrawal, except by direct order of the commissioner;
5. A letter of credit issued by a qualified United States financial institution as defined in KRS § 304.9-700; or
6. Another form of security authorized by the commissioner; and
(i) A statement confirming that the applicant is not seeking authorization for, nor shall it engage in, any conduct that would render the applicant unauthorized to make an application under subsection (2) of this section.
(2) (a) The following persons shall not be authorized to make an application to the department for admission to the sandbox:
1. Any person seeking to sell or license an insurance innovation directly to any federal, state, or local government entity, agency, or instrumentality as the insured person or end user of the innovation;
2. Any person seeking to sell, license, or use an insurance innovation that is not in compliance with subsection (1)(b)5. of this section;
3. Any person seeking to make an application that would result in the person having more than five (5) active beta tests ongoing within the Commonwealth at any one (1) time; and
4. Any person seeking a limited or extended no-action letter or exemption from any administrative regulation or statute concerning:
a. Assets, deposits, investments, capital, surplus, or other solvency requirements applicable to insurers;
b. Required participation in any assigned risk plan, residual market, or guaranty fund;
c. Any licensing or certificate of authority requirements; or d. The application of any taxes or fees.
(b) For the purposes of this subsection, “federal, state, or local government entity, agency, or instrumentality” includes any county, city, municipal corporation, urban-county government, charter county government, consolidated local government, unified local government, special district, special purpose governmental entity, public school district, or public institution of education.
(3) Notwithstanding any other provision of this chapter, a person regulated under this chapter may participate in the regulatory sandbox described in KRS § 15.268 if the person is:
(a) Not authorized to make an application under this section; or
(b) Seeking regulatory relief that is not available under KRS § 304.3-700 to KRS § 304.3-
735.
Effective: March 15, 2024
History: Amended 2023 Ky. Acts ch. 122, sec. 12, effective March 15, 2024. — Created 2019 Ky. Acts ch. 147, sec. 2, effective June 27, 2019.
2025, a person may apply to the department for admission to the sandbox by submitting an application in the form prescribed by the commissioner, accompanied by the following:
Terms Used In Kentucky Statutes 304.3-705
- Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
- City: includes town. See Kentucky Statutes 446.010
- Contract: A legal written agreement that becomes binding when signed.
- Directors: when applied to corporations, includes managers or trustees. See Kentucky Statutes 446.010
- Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
- Federal: refers to the United States. See Kentucky Statutes 446.010
- State: when applied to a part of the United States, includes territories, outlying possessions, and the District of Columbia. See Kentucky Statutes 446.010
- Statute: A law passed by a legislature.
(a) A filing fee of seven hundred fifty dollars ($750);
(b) A detailed description of the innovation, which shall include:
1. An explanation of how the innovation will:
a. Add value to customers and serve the public interest;
b. Be economically viable for the applicant;
c. Provide suitable consumer protection; and
d. Not pose an unreasonable risk of consumer harm;
2. A detailed description of the statutory and regulatory issues that may prevent the innovation from being currently utilized, issued, sold, solicited, distributed, or advertised in the market;
3. A description of how the innovation functions and the manner in which it will be offered or provided;
4. If the innovation involves the use of software, hardware, or other technology developed for the purpose of implementing or operating it, a technical white paper setting forth a description of the operation and general content of technology to be utilized, including:
a. The problem addressed by that technology; and
b. The interaction between that technology and its users;
5. If the innovation involves the issuance of a policy of insurance, a statement that either:
a. If the applicant will be the insurer on the policy, that the applicant holds a valid certificate of authority and is authorized to issue the insurance coverage in question; or
b. If some other person will be the insurer on the policy, that the other person holds a valid certificate of authority and is authorized to issue the insurance coverage in question; and
6. A statement by an officer of the applicant certifying that no product, process, method, or procedure substantially similar to the innovation has been used, sold, licensed, or otherwise made available in this Commonwealth before the effective filing date of the application;
(c) The name, contact information, and bar number of the applicant’s insurance regulatory counsel, which shall be a person with experience providing insurance regulatory compliance advice;
(d) A detailed description of the specific conduct that the applicant proposes should be permitted by the limited no-action letter;
(e) Proposed terms and conditions to govern the applicant’s beta test, which shall include:
1. Citation to the provisions of Kentucky law that should be excepted in the notice of acceptance issued under KRS § 304.3-710(6); and
2. Any request for an extension of the time period for a beta test under
KRS § 304.3-720(1) and the grounds for the request;
(f) Proposed metrics by which the department may reasonably test the innovation’s utility during the beta test;
(g) Disclosure of all:
1. Persons who are directors and executive officers of the applicant;
2. General partners of the applicant if the applicant is a limited partnership;
3. Members of the applicant if the applicant is a limited liability applicant;
4. Persons who are beneficial owners of ten percent (10%) or more of the voting securities of the applicant;
5. Other persons with direct or indirect power to direct the management and policies of the applicant by contract, other than a commercial contract for goods or nonmanagement services; and
6. Conflicts of interest with respect to any person listed in this paragraph and the department;
(h) A statement that the applicant has funds of at least twenty-five thousand dollars ($25,000) available to guarantee its financial stability through one (1) or a combination of any of the following:
1. A contractual liability insurance policy;
2. A surety bond issued by an authorized surety;
3. Securities of the type eligible for deposit by authorized insurers in this
Commonwealth;
4. Evidence that the applicant has established an account payable to the commissioner in a federally insured financial institution in this Commonwealth and has deposited money of the United States in an amount equal to the amount required by this paragraph that is not available for withdrawal, except by direct order of the commissioner;
5. A letter of credit issued by a qualified United States financial institution as defined in KRS § 304.9-700; or
6. Another form of security authorized by the commissioner; and
(i) A statement confirming that the applicant is not seeking authorization for, nor shall it engage in, any conduct that would render the applicant unauthorized to make an application under subsection (2) of this section.
(2) (a) The following persons shall not be authorized to make an application to the department for admission to the sandbox:
1. Any person seeking to sell or license an insurance innovation directly to any federal, state, or local government entity, agency, or instrumentality as the insured person or end user of the innovation;
2. Any person seeking to sell, license, or use an insurance innovation that is not in compliance with subsection (1)(b)5. of this section;
3. Any person seeking to make an application that would result in the person having more than five (5) active beta tests ongoing within the Commonwealth at any one (1) time; and
4. Any person seeking a limited or extended no-action letter or exemption from any administrative regulation or statute concerning:
a. Assets, deposits, investments, capital, surplus, or other solvency requirements applicable to insurers;
b. Required participation in any assigned risk plan, residual market, or guaranty fund;
c. Any licensing or certificate of authority requirements; or d. The application of any taxes or fees.
(b) For the purposes of this subsection, “federal, state, or local government entity, agency, or instrumentality” includes any county, city, municipal corporation, urban-county government, charter county government, consolidated local government, unified local government, special district, special purpose governmental entity, public school district, or public institution of education.
(3) Notwithstanding any other provision of this chapter, a person regulated under this chapter may participate in the regulatory sandbox described in KRS § 15.268 if the person is:
(a) Not authorized to make an application under this section; or
(b) Seeking regulatory relief that is not available under KRS § 304.3-700 to KRS § 304.3-
735.
Effective: March 15, 2024
History: Amended 2023 Ky. Acts ch. 122, sec. 12, effective March 15, 2024. — Created 2019 Ky. Acts ch. 147, sec. 2, effective June 27, 2019.