C.R.S. § 10-6-101 Short title
10-6-101. Short title. This article shall be known and may be cited as the "Colorado Captive Insurance Company Act".
Captive Insurance Companies
C.R.S. tit. 10, art. 6
in effectC.R.S. § 10-6-102 Legislative declaration
10-6-102. Legislative declaration. It is the policy of the general assembly and the intent and purpose of this article to simplify the procedures for organizing and regulating the operations of captive insurance companies within the state of Colorado, to encourage the formation of such companies while retaining the integrity, financial solvency, and stability of insurance operations, and thereby promoting economic development and the general welfare of the people of the state of Colorado.
C.R.S. § 10-6-103 Definitions
10-6-103. Definitions. As used in this article, unless the context otherwise requires:
(1) "Affiliated company" means any company that directly or indirectly owns or controls a pure captive insurance company and any company owned or controlled, directly or indirectly, by a parent or subsidiary.
(2) "Captive insurance company" means a pure captive insurance company or a group captive insurance company.
(3) "Commissioner" means the commissioner of insurance.
(4) "Group" means any association of individual professional practitioners, corporations, partnerships, limited liability companies, or associations with substantially similar or related risks, the members of which collectively own, control, or hold with power to vote all of the outstanding voting securities or other ownership interest of a group captive insurance company.
(5) "Group captive insurance company" means any domestic insurance company licensed under the provisions of this article for the purpose of making insurance and reinsurance, including any company organized under the federal "Liability Risk Retention Act of 1986", as amended, 15 U.S.C. secs. 3901 to 3905. Such insurance and reinsurance shall be limited to the risks, hazards, and liabilities of its group members and employee benefits coverages.
(6) "Impairment" means that a captive insurance company's permissible assets are less than its liabilities, including as a liability the aggregate amount of any outstanding capital stock, or that its capital and surplus are less than the capital and surplus established pursuant to section 10-6-116.
(7) "Insolvency" means that a captive insurance company's permissible assets are less than all of its liabilities, excluding from such liabilities the aggregate amount of any outstanding capital stock.
(8) "Parent" means a corporation, partnership, or individual who directly or indirectly owns, controls, or holds with power to vote more than fifty percent of the outstanding voting securities or other ownership interest of a pure captive insurance company.
(9) "Pure captive insurance company" means any domestic insurance company licensed under the provisions of this article for the purpose of making insurance and reinsurance. Such insurance and reinsurance shall be limited to the risks, hazards, and liabilities of its parent and affiliated entities along with employee benefits coverages.
C.R.S. § 10-6-104 Scope of article
10-6-104. Scope of article. (Repealed)
C.R.S. § 10-6-105 Employee benefits - minimum coverages
10-6-105. Employee benefits - minimum coverages. (1) Any captive insurance company issuing employee benefits coverages, as approved by the commissioner, in its plan of operation shall provide the minimum mandated insurance coverages required of insurance companies in the state.
(2) (a) (Deleted by amendment, L. 91, p. 1224, § 4, effective May 24, 1991.)
(b) (Deleted by amendment, L. 94, p. 542, § 3, effective April 6, 1994.)
C.R.S. § 10-6-106 Names of companies
10-6-106. Names of companies. No captive insurance company shall adopt the name of any existing company nor any name which may be misleading to the public.
C.R.S. § 10-6-107 Formation and operation of captive insurance companies
10-6-107. Formation and operation of captive insurance companies. (1) No person shall engage in the business of insurance as a captive insurance company without first applying for and obtaining a certificate of authority from the commissioner stating that such person complies with the laws of this state. Applicants shall submit articles of incorporation or other documents of organization for examination. If accepted and approved by the commissioner and the attorney general, said articles or other documents of organization shall be filed in the office of the secretary of state. A copy of said articles or other documents of organization, certified by the secretary of state, shall be filed with the commissioner. Amendments to organizational documents shall be filed with the commissioner and in the office of the secretary of state.
(2) (Deleted by amendment, L. 94, p. 543, § 5, effective April 6, 1994.)
(3) Applicants for a captive insurance company certificate of authority shall file a detailed plan of operation, which shall include a feasibility study and any other information deemed relevant by the commissioner in ascertaining whether the proposed captive insurance company will be able to meet its policy obligations. The commissioner is authorized to refuse to issue a certificate of authority until the commissioner is reasonably satisfied that the plan of operation contains sufficient indication of a successful insurance operation.
(4) (a) Each captive insurance company shall pay to the division of insurance a nonrefundable application fee of five hundred dollars in addition to any reasonable expenses to be paid pursuant to section 10-6-120. Each captive insurance company shall pay an annual license fee of five hundred dollars.
(b) Notwithstanding the amount specified for any fee in paragraph (a) of this subsection (4), the commissioner by rule or as otherwise provided by law may reduce the amount of one or more of the fees if necessary pursuant to section 24-75-402 (3), C.R.S., to reduce the uncommitted reserves of the fund to which all or any portion of one or more of the fees is credited. After the uncommitted reserves of the fund are sufficiently reduced, the commissioner by rule or as otherwise provided by law may increase the amount of one or more of the fees as provided in section 24-75-402 (4), C.R.S.
(5) The principal and home office of every captive insurance company incorporated under this article shall be in the state of Colorado. Every captive insurance company shall maintain such books and records in this state as will enable the financial examination of the company by the commissioner.
(6) Group captive insurance companies shall limit their exposure to loss on any one risk or hazard to an amount not to exceed ten percent of capital and surplus, unless such risk or hazard is reinsured through an insurance company which is licensed or accredited in this state, or unless other safeguards to its financial solvency and stability are in place and are acceptable to the commissioner.
C.R.S. § 10-6-108 Control of operations
10-6-108. Control of operations. The business of each captive insurance company shall be managed by a board of directors or other governing body consisting of not less than three persons. The organizational documents or bylaws shall provide for the terms, meetings, and elections of the directors and officers of the governing body. No individual may serve as a director or officer who has been convicted of fraud involving any financial institution or of a felony involving misuse of funds.
C.R.S. § 10-6-109 Increase of capital
10-6-109. Increase of capital. (Repealed)
C.R.S. § 10-6-110 Violations - penalty
10-6-110. Violations - penalty. (Repealed)
C.R.S. § 10-6-111 No seal required on policies
10-6-111. No seal required on policies. (Repealed)
C.R.S. § 10-6-112 Deemed incorporated under corporation law
10-6-112. Deemed incorporated under corporation law. (Repealed)
C.R.S. § 10-6-113 Authority to do business
10-6-113. Authority to do business. (1) The certificate of authority issued to a captive insurance company shall expire on June 30 each year and shall be renewed annually, upon payment of all required fees and filing of all lawfully required reports, if the company has continued to comply with the laws of this state.
(2) Within thirty business days from the day the division of insurance receives a complete filing, the division shall render a decision on the application.
C.R.S. § 10-6-114 Reports and statements
10-6-114. Reports and statements. (1) Every captive insurance company doing business in this state shall render to the commissioner a report, signed and sworn to by its chief officers, of its condition as of the end of each fiscal year, which shall be in a form prescribed by the commissioner and contain such information as the commissioner deems necessary. Such report shall be filed within sixty days following the company's fiscal year end. The fiscal year shall be the calendar year for all group captive insurance companies. The commissioner may require that the annual report include the information set forth in the then-current convention blank of the national association of insurance commissioners, including any instructions, procedures, and guidelines consistent with this article.
(2) The commissioner may prescribe the format and frequency of other reports to be filed, which may include, but shall not be limited to, summary loss reports, quarterly financial statements, audited annual financial statements, and other professional reports.
(3) (Deleted by amendment, L. 94, p. 545, § 8, effective April 6, 1994.)
C.R.S. § 10-6-115 Grounds and procedure for suspension or revocation of certificate - review by commissioner
10-6-115. Grounds and procedure for suspension or revocation of certificate - review by commissioner. (1) The certificate of authority of a captive insurance company to do business in this state may be revoked or suspended by the commissioner for any violation of this article, including without limitation the following:
(a) Insolvency or impairment;
(b) Failure to meet the requirements of section 10-6-116;
(c) Refusal or failure to submit an annual report, as required by section 10-6-114, or any other report required by law or by lawful order of the commissioner;
(d) Failure to comply with the provisions of its own charter, other organizational documents, bylaws, or approved plan of operation, if such failure renders its operation hazardous to the public or to its policyholders;
(e) Failure to submit to examination;
(f) Refusal or failure to pay the cost of examination, required premium taxes, or other penalty or fee assessed as authorized by law;
(g) Use of methods which, although not otherwise specifically proscribed by law, render its operation hazardous or its condition unsound;
(h) Refusal or failure otherwise to comply with this article or any other laws of this state.
(2) If the commissioner finds upon examination, hearing, or other evidence that any captive insurance company has committed any of the acts specified in subsection (1) of this section, the commissioner may, after notice and hearing in accordance with article 4 of title 24, C.R.S., suspend or revoke such certificate of authority. The commissioner may issue an order appointing a supervisor to monitor the operations of the company if the commissioner deems it in the best interest of the public or of the policyholders of the company. The commissioner may commence a delinquency action pursuant to part 4 of article 3 of this title or a liquidation or rehabilitation action pursuant to part 5 of article 3 of this title.
(3) Any final decision of the commissioner on any matter pursuant to this section shall be subject to judicial review by the court of appeals pursuant to section 24-4-106 (11), C.R.S.
C.R.S. § 10-6-116 Capital and surplus requirements
10-6-116. Capital and surplus requirements. (1) No captive insurance company issued a certificate of authority shall be permitted to do any business in this state unless it maintains total capital and surplus of not less than five hundred thousand dollars.
(1.5) Upon a written finding by the commissioner that the approved plan of operation or the operational results of the captive insurance company require either additional capital or a larger surplus than required by this section, the commissioner may require that additional capital or surplus, or both, be obtained. Additional capital or surplus may be tendered in the form of an irrevocable letter of credit as set forth in subsection (2) of this section.
(2) Securities acceptable to the commissioner in the amount of three hundred thousand dollars, or such greater amount as determined by the commissioner, shall be held by the commissioner or under the joint control of the commissioner and the captive insurance company. The commissioner shall accept an irrevocable letter of credit, in a form acceptable to the commissioner, issued or confirmed by a qualified United States financial institution as defined in section 10-1-102 (17) on behalf of a captive insurance company in lieu of securities. All securities or letters of credit jointly held shall be the sole property of such captive insurance company and shall be free and clear of any claim or encumbrance.
(3) Jointly held securities or letters of credit, wherever located, shall be deemed to be held for the benefit of all captive insurance company policyholders.
(4) The commissioner shall release funds held under joint control upon a showing satisfactory to the commissioner that all debts, obligations, and liabilities of the captive insurance company have been paid and discharged, or adequate provisions for payment and discharge have been made therefor, and the captive insurance company's original certificate of authority has been returned to the commissioner.
C.R.S. § 10-6-117 Security deposits - certificates
10-6-117. Security deposits - certificates. (Repealed)
C.R.S. § 10-6-118 Deposit and safekeeping of securities and letters of credit
10-6-118. Deposit and safekeeping of securities and letters of credit. (Repealed)
C.R.S. § 10-6-119 Surplus - letter of credit
10-6-119. Surplus - letter of credit. (Repealed)
C.R.S. § 10-6-120 Examinations and investigations
10-6-120. Examinations and investigations. (1) The commissioner or any person so authorized has the authority to examine the financial condition, affairs, and management of any applicant or captive insurance company operating under the laws of this state. For such purpose the commissioner shall have free access to all the books, papers, and documents relating to the business of the company, and the commissioner may summon witnesses and administer oaths and affirmations in the examination of the directors, trustees, officers, agents, or employees of such company and any other person in relation to its affairs, transactions, and conditions. The reasonable cost of examinations of captive insurance companies shall be paid by the company examined and shall include the expenses of the commissioner and the commissioner's assistants.
(2) The commissioner may use other independent professionals, such as qualified actuaries, risk managers, certified public accountants, or examiners of insurance companies. The commissioner may also accept, as a part of the examination, reports or portions thereof made by the persons specified in this subsection (2). All reasonable expenses and charges of such persons so retained shall be paid directly by the captive insurance company being examined.
C.R.S. § 10-6-121 Legal investments
10-6-121. Legal investments. (1) Group captive insurance companies shall comply with the investment requirements and limitations applicable to other insurance companies under the laws of this state as described in sections 10-1-102 (2) and (16), 10-3-213 to 10-3-242, and 10-3-802.
(2) (a) Pure captive insurance companies shall not be subject to any restrictions on investments whatsoever; except that the commissioner may prohibit or limit any investment that threatens the solvency or liquidity of any such company or if such investments are not made in accordance with the approved plan of operation.
(b) A pure captive insurance company may make loans to its parent company if approved within its plan of operations.
(3) In lieu of a fidelity bond, the officers, directors, or managers of a captive insurance company shall demonstrate sufficient safeguards to protect the funds of the captive insurance company.
C.R.S. § 10-6-122 Reinsurance
10-6-122. Reinsurance. (1) Except as otherwise provided in subsection (2) of this section, any captive insurance company authorized to do business in this state may take credit for reserves on risks ceded to a reinsurer pursuant to part 7 of article 3 of this title and any applicable rules.
(2) Notwithstanding the provisions of subsection (1) of this section, any captive insurance company may cede risks to a reinsurer not meeting the standards of said subsection (1) and may take reserve credits if the captive insurance company receives prior written approval from the commissioner.
C.R.S. § 10-6-123 Filing of policy provisions - no requirement of filing for pure captive insurance companies
10-6-123. Filing of policy provisions - no requirement of filing for pure captive insurance companies. (Repealed)
C.R.S. § 10-6-124 Making of rates
10-6-124. Making of rates. (Repealed)
C.R.S. § 10-6-125 Filing of rates
10-6-125. Filing of rates. (1) A group captive insurance company's rates, rate classification systems, or funding levels shall be sufficient to fund expected operations and expenses. The commissioner may require that a pure captive insurance company file rating or funding data if such pure captive insurance company provides or plans to provide employee benefits.
(2) Rating structures for insurance applied to and paid by employees of a captive insurance company shall not be excessive, inadequate, or unfairly discriminatory.
C.R.S. § 10-6-126 Rating organizations - membership
10-6-126. Rating organizations - membership. (Repealed)
C.R.S. § 10-6-127 Guaranty fund coverage - not required
10-6-127. Guaranty fund coverage - not required. (1) Any provision of the law to the contrary notwithstanding, no captive insurance company shall be compelled to join or contribute financially to any plan, pool, association, or guaranty or insolvency fund in this state; nor shall any captive insurance company or its insured receive any benefit from such plan, pool, association, or guaranty or insolvency fund for claims arising out of operations of such captive insurance company.
(2) All policy forms or other evidence of coverage shall clearly disclose that guaranty fund coverage is not available.
C.R.S. § 10-6-128 Tax on premiums collected - exemptions - penalties
10-6-128. Tax on premiums collected - exemptions - penalties. (1) All captive insurance companies doing business in this state, except a disqualified insurance company, shall pay to the division of insurance an annual tax on the gross amount of all premiums collected, less premiums or premium credits returned to policyholders, on policies or contracts of insurance covering property or risks in this state and on risks and property situated in any other state in which the insurer has not paid premium tax.
(2) The tax imposed by subsection (1) of this section shall be the greater of:
(a) Five thousand dollars; or
(b) (I) One-half of one percent of the first twenty-five million dollars, plus one-quarter of one percent of the next fifty million dollars, plus one-tenth of one percent of each dollar thereafter of direct premiums collected, of the captive insurance company, plus:
(II) One-quarter of one percent of the first twenty million dollars, plus one-tenth of one percent of each dollar thereafter of assumed reinsurance premiums.
(c) and (d) (Deleted by amendment, L. 94, p. 550, § 16, effective April 6, 1994.)
(e) Premium tax shall not be payable in connection with the receipt of assets in exchange for the assumption of existing loss reserves and other liabilities.
(2.5) The minimum tax provided for in paragraph (a) of subsection (2) of this section shall be due and payable on the first day of March of each fiscal year, accompanied by such forms as may be prescribed by the commissioner. The balance of the tax when payable for each fiscal year shall be paid on forms prescribed by the commissioner together with the report required under section 10-6-114 (1). The commissioner may by rule require partial payments, to be made in quarterly installments, of the balance of the tax payable.
(3) The taxes provided for in this section shall constitute all taxes collectible under the laws of this state against any such captive insurance companies, and no other occupation tax or other taxes shall be levied or collected from any captive insurance company by the state or any county, city, or town within this state, except ad valorem taxes on real and personal property used in the production of income.
(4) to (8) (Deleted by amendment, L. 94, p. 550, § 16, effective April 6, 1994.)
C.R.S. § 10-6-128.5 Penalties
10-6-128.5. Penalties. (1) The commissioner may charge a late fee of up to one hundred dollars per day for any required or reasonably requested report which is received after the filing deadline.
(2) Any company failing to pay taxes as specified in this article shall be liable to pay a penalty of up to one hundred dollars for each day of delinquency. If the tax paid is less than the full amount prescribed by this article, interest at the rate of one percent per month or fraction thereof on the unpaid amount shall be charged from the date payment was due until the date full payment is received, and a penalty of up to twenty-five percent of the unpaid amount may be assessed. The amount of taxes and the penalties collected shall be transmitted to the state treasurer and credited to the general fund.
(3) The assessment of any fee or penalty against a captive insurance company shall be subject to the company's right to request a hearing and to judicial review by the court of appeals pursuant to section 24-4-106 (11), C.R.S.
(4) Any director, trustee, officer, agent, or employee of a captive insurance company or any other person who knowingly or willfully makes any materially false certificate, entry, or memorandum upon any of the books or papers of any captive insurance company or upon any statement filed or offered to be filed in the division of insurance or used in the course of any examination, inquiry, or investigation with the intent to deceive the commissioner or any person appointed by the commissioner to make such examination commits a class 2 misdemeanor and shall be punished as provided in section 18-1.3-501, C.R.S.
C.R.S. § 10-6-129 Rules of commissioner
10-6-129. Rules of commissioner. The commissioner may establish and from time to time amend such reasonable rules as are necessary to enable the commissioner to carry out the commissioner's duties under this article, including rules concerning the establishment and nature of loss reserves.
C.R.S. § 10-6-130 Laws applicable
10-6-130. Laws applicable. (1) The provisions of law generally applicable to insurance companies shall not apply to captive insurance companies except as specifically provided in this article and except that captive insurance companies are subject to parts 9 and 10 of article 2 of this title and parts 7, 11, and 12 of article 3 of this title.
(2) Group captive insurance companies are subject to the provisions of section 10-3-208 (3) to (7), part 2 of article 1 of this title, article 2 of this title, and parts 8 and 14 of article 3 of this title.
(3) The malpractice reporting requirements of sections 10-1-120 to 10-1-125 shall apply to captive insurance companies.
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