(a) Any captive insurance company, when permitted by its organizational documents, may apply to the commissioner for a license to do any and all insurance comprised in §§ 56-2-201(2) and (4)-(7), 56-2-202, 56-2-203, and 56-2-204; provided, however, that:

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Terms Used In Tennessee Code 56-13-103

  • Agency captive insurance company: means a company or protected cell formed under this chapter that is owned by an insurance agency or brokerage and that only reinsures risks of policies that are placed by or through the agency or brokerage. See Tennessee Code 56-13-102
  • Amendment: A proposal to alter the text of a pending bill or other measure by striking out some of it, by inserting new language, or both. Before an amendment becomes part of the measure, thelegislature must agree to it.
  • Assets: (1) The property comprising the estate of a deceased person, or (2) the property in a trust account.
  • Association: means any legal association of individuals, corporations, limited liability companies, partnerships, associations, or other entities, whereby:
    (A) The member organizations of such or the association itself, whether or not in conjunction with some or all of the member organizations:
    (i) Own, control, or hold with power to vote all of the outstanding voting securities of an association captive insurance company incorporated as a stock insurer. See Tennessee Code 56-13-102
  • Association captive insurance company: means any company that insures risks of the member organizations of an association, and that also may insure the risks of affiliated companies of the member organizations and the risks of the association itself. See Tennessee Code 56-13-102
  • Captive insurance company: means any pure captive insurance company, association captive insurance company, agency captive insurance company, industrial insured captive insurance company, risk retention group, protected cell captive insurance company, incorporated cell captive insurance company, or special purpose financial captive insurance company formed or licensed under this chapter. See Tennessee Code 56-13-102
  • Commissioner: means the commissioner of the department, or the commissioner's designee. See Tennessee Code 56-13-102
  • Controlled unaffiliated business: means any person:
    (A) That is not in the corporate system of a parent and its affiliated companies in the case of a pure captive insurance company, or that is not in the corporate system of an industrial insured and its affiliated companies in the case of an industrial insured captive insurance company. See Tennessee Code 56-13-102
  • Department: means the department of commerce and insurance. See Tennessee Code 56-13-102
  • 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.
  • Industrial insured: means an insured:
    (A) Who procures the insurance of any risk or risks by use of the services of a full-time employee acting as an insurance manager or buyer. See Tennessee Code 56-13-102
  • Industrial insured group: means any group of industrial insureds that collectively:
    (A) Own, control, or hold with power to vote all of the outstanding voting securities of an industrial insured captive insurance company incorporated as a stock insurer. See Tennessee Code 56-13-102
  • Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
  • Member organization: means any individual, corporation, limited liability company, partnership, association, or other entity that belongs to an association. See Tennessee Code 56-13-102
  • Organizational documents: means the documents that must be submitted pursuant to title 48 and title 61 in order to legally form a business in this state or to obtain a certificate of authority to transact business in this state. See Tennessee Code 56-13-102
  • Parametric insurance: means a type of insurance that does not indemnify the pure loss, but ex ante agrees to make a payment upon the occurrence of a triggering event. See Tennessee Code 56-13-102
  • Parent: means an individual, corporation, limited liability company, partnership, association, or other entity, or individual that directly or indirectly owns, controls, or holds with power to vote more than fifty percent (50%) of the outstanding voting:
    (A) Securities of a pure captive insurance company organized as a stock corporation. See Tennessee Code 56-13-102
  • Person: means any association, aggregate of individuals, business, company, corporation, individual, joint-stock company, Lloyds-type organization, organization, partnership, receiver, reciprocal or interinsurance exchange, trustee or society. See Tennessee Code 56-16-102
  • Pure captive insurance company: means any company that insures risks of its parent and affiliated companies or a controlled unaffiliated business or businesses. See Tennessee Code 56-13-102
  • Reciprocal: means the aggregation of subscribers under a common name. See Tennessee Code 56-16-102
  • Remainder: An interest in property that takes effect in the future at a specified time or after the occurrence of some event, such as the death of a life tenant.
  • Risk retention group: means a captive insurance company organized under the laws of this state pursuant to the Liability Risk Retention Act of 1986, as amended, (15 U. See Tennessee Code 56-13-102
  • Service of process: The service of writs or summonses to the appropriate party.
  • signed: includes a mark, the name being written near the mark and witnessed, or any other symbol or methodology executed or adopted by a party with intention to authenticate a writing or record, regardless of being witnessed. See Tennessee Code 1-3-105
  • State: when applied to the different parts of the United States, includes the District of Columbia and the several territories of the United States. See Tennessee Code 1-3-105
  • Subpoena: A command to a witness to appear and give testimony.
  • written: includes printing, typewriting, engraving, lithography, and any other mode of representing words and letters. See Tennessee Code 1-3-105
  • Year: means a calendar year, unless otherwise expressed. See Tennessee Code 1-3-105
(1) No pure captive insurance company shall insure any risks other than those of its parent and affiliated companies or a controlled unaffiliated business or businesses;
(2) No association captive insurance company shall insure any risks other than those of its association, those of the member organizations of its association, and those of a member organization‘s affiliated companies;
(3) No industrial insured captive insurance company shall insure any risks other than those of the industrial insureds that comprise the industrial insured group, those of their affiliated companies, and those of the controlled unaffiliated business of an industrial insured or its affiliated companies;
(4) No risk retention group shall insure any risks other than those of its members and owners;
(5) No captive insurance company shall provide personal motor vehicle or homeowner’s insurance coverage or any component thereof;
(6) No captive insurance company shall accept or cede reinsurance except as provided in §§ 56-13-112 and 56-13-412;
(7) Any captive insurance company may provide excess or stop-loss accident and health insurance, unless prohibited by federal law or the laws of the state having jurisdiction over the transaction;
(8) Except as provided in subdivision (a)(9), a captive insurance company may only issue policies of workers’ compensation insurance to an insured or an affiliate who otherwise qualifies and maintains its qualifications as a self-insured under title 50, chapter 6; provided, that a captive insurance company may provide excess or stop-loss workers’ compensation coverage for those insureds not qualifying as self-insureds. The commissioner has the discretion to waive the requirements of this subdivision (a)(8) and the self-insurance requirements of § 50-6-405(b) and (c), according to guidelines established through the promulgation of rules or regulations;
(9) Any association captive insurance company of an association that is described in § 56-13-102(3)(B) or mutual captive insurance company whose member organizations or insureds are the type member organizations described in § 56-13-102(3)(B) may issue policies of workers’ compensation, directors’ and officers’ liability, and public officials’ liability insurance and reinsurance in addition to the insurance and reinsurance otherwise permitted to be made under this section; and
(10) Any captive insurance company, except for a risk retention group, may provide parametric insurance policies, which are considered contracts of insurance for purposes of this title.
(11) An agency captive insurance company may reinsure any risks of the policies that are placed by or through the insurance agency or brokerage that owns the agency captive insurance company;
(b) Except as provided in subsection (f), no captive insurance company shall transact any insurance business in this state unless:

(1) It first obtains from the commissioner a license authorizing it to do insurance business in this state;
(2) Its board of directors or committee of members or managers or, in the case of a reciprocal insurer, its subscribers’ advisory committee, holds at least one (1) meeting each year in this state; provided, however, with the approval of the commissioner, its board of directors or committee of members or managers or, in the case of a reciprocal insurer, its subscribers’ advisory committee, is not required to hold a meeting each year in this state if the captive insurance company utilizes at least two (2) service providers with physical office locations in this state;
(3) It maintains its principal place of business in this state; and
(4) It appoints a registered agent to accept service of process and to otherwise act on its behalf in this state; provided, that whenever such registered agent cannot with reasonable diligence be found at the registered office of the captive insurance company, the commissioner shall be an agent of such captive insurance company upon whom any process, notice, or demand may be served.
(c)

(1) In order to receive a license to issue policies of insurance as a captive insurance company in this state, an applicant business entity shall meet the requirements of this subdivision (c)(1).

(A) The applicant business entity shall submit its organizational documents to the commissioner. If the commissioner approves the organizational documents, then the commissioner shall issue a letter to the applicant certifying the commissioner’s approval. The applicant business entity shall submit the organizational documents, along with a copy of the approval letter issued by the commissioner, and the required filing fees for organizational documents prescribed in title 48 and title 61 to the secretary of state for filing. Upon filing the organizational documents, the secretary of state shall issue an acknowledgment letter to the applicant. The applicant business entity shall submit a copy of the acknowledgment letter relative to the applicant’s organizational documents issued by the secretary of state to the commissioner.
(B) The applicant business entity shall also file with the commissioner evidence of the following:

(i) The amount and liquidity of its assets relative to the risks to be assumed;
(ii) The adequacy of the expertise, experience, and character of the person or persons who will manage it;
(iii) The overall soundness of its plan of operation;
(iv) The adequacy of the loss prevention programs of its insureds; and
(v) Such other factors deemed relevant by the commissioner in ascertaining whether the applicant business entity will be able to meet its policy obligations.
(C) No less than the amount required by § 56-13-105 shall be paid in by the applicant business entity and deposited with the commissioner. In the alternative, an irrevocable letter of credit in that amount and acceptable to the commissioner shall be filed with the commissioner.
(D) Upon compliance with subdivision (c)(1)(C), the applicant business entity shall be certified as compliant with this chapter through examination by the commissioner. The department shall be reimbursed for the cost of the examination in accordance with § 56-1-413.
(E) The applicant business entity shall submit to the commissioner for approval a description of the coverages, deductibles, coverage limits, and rates, together with such additional information as the commissioner may reasonably require.
(2)

(A) Whenever a captive insurance company desires to amend the organizational documents submitted pursuant to subdivision (c)(1)(A), the company shall submit the amended organizational documents to the commissioner. If the commissioner approves the amendment, then the commissioner shall issue a letter to the applicant certifying the commissioner’s approval. The applicant business entity shall submit the organizational documents, along with a copy of the approval letter issued by the commissioner, and the required filing fees for organizational documents prescribed in title 48 and title 61 to the secretary of state for filing. Upon filing the organizational documents, the secretary of state shall issue an acknowledgment letter to the applicant. The applicant shall submit a copy of the acknowledgment letter relative to the applicant’s organizational documents issued by the secretary of state to the commissioner.
(B) If a captive insurance company makes any subsequent material change to any item in the description submitted pursuant to subdivision (c)(1)(E), then the company shall submit an appropriate revision to the commissioner for approval and shall not offer any additional kinds of insurance until a revision of such description is approved by the commissioner. The captive insurance company shall inform the commissioner of any material change in rates within thirty (30) days of the adoption of such change.
(3) Information submitted pursuant to this subsection (c) shall be and remain confidential, and shall not be made public by the commissioner without the written consent of the captive insurance company, except that:

(A) Such information may be discoverable by a party in a civil action or contested case to which the captive insurance company that submitted such information is a party, upon a showing by the party seeking to discover such information that:

(i) The information sought is relevant to and necessary for the furtherance of such action or case;
(ii) The information sought is unavailable from other non-confidential sources; and
(iii) A subpoena issued by a judicial or administrative officer of competent jurisdiction has been submitted to the commissioner; provided, however, that this subdivision (c)(3) shall not apply to any risk retention group; and
(B) The commissioner shall have the discretion to disclose such information to a public officer having jurisdiction over the regulation of insurance in another state; provided, that:

(i) Such public official shall agree in writing to maintain the confidentiality of such information; and
(ii) The laws of the state in which such public official serves require such information to be and to remain confidential.
(d) Each captive insurance company shall make payments to the commissioner in accordance with the fee schedule established in chapter 4, part 1 of this title. The commissioner is authorized to retain legal, financial, and examination services from outside the department, the reasonable costs of which may be charged against the applicant. Sections 56-1-401 – 56-1-420 shall apply to examinations, investigations, and processing conducted under the authority of this section.
(e) If the commissioner is satisfied that the documents and statements filed by an applicant captive insurance company comply with this chapter, then the commissioner may grant a license authorizing it to do insurance business in this state. The commissioner may make the license effective as of any date on or before the date the license is signed as long as the effective date is no earlier than the date of incorporation of the applicant captive insurance company.
(f) Any captive insurance company licensed and in good standing on September 1, 2011, which was licensed under the former “Tennessee Captive Insurance Act of 1978”, shall not be required to obtain a new license as required in this section; provided, that any such captive insurance company is subject to the remainder of this chapter.
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