Ohio § 3964.19

§ 3964.19.

(A) As used in sections 3964.19 to 3964.194 of the Revised Code : (1) “ Counterparty ” means a special purpose financial captive insurance company's parent or an affiliated

entity that is an insurer domiciled in this state that cedes life insurance risks

to the special purpose financial captive insurance company pursuant to a special purpose

financial captive insurance company contract. (2) “ Insolvency ” or “ insolvent ” means that the special purpose financial captive insurance company is unable to

pay its obligations when they are due, unless those obligations are the subject of

a bona fide dispute. (3) “ Insurance securitization ” means a package of related risk transfer instruments, capital market offerings,

and facilitating administrative agreements, for which a special purpose financial

captive insurance company obtains proceeds, either directly or indirectly, through

the issuance of securities, where the investment risk to the holders of the securities

is contingent upon the obligations of the special purpose financial captive insurance

company to the counterparty under the special purpose financial captive insurance

company contract, in accordance with the transaction terms, and pursuant to this section.  This includes situations where the securitization proceeds are held in trust to

secure the obligations of the special purpose financial captive insurance company

under one or more special purpose financial captive insurance company contracts. (4) “ Organizational document ” means the special purpose financial captive insurance company's articles of incorporation,

bylaws, code of regulations, operating agreement, or other foundational documents

that establish the special purpose financial captive insurance company as a legal

entity. (5) “ Securities ” means debt obligations, equity investments, surplus certificates, surplus notes,

funding agreements, derivatives, and other legal forms of financial instruments. (6) “ Special purpose financial captive insurance company contract ” means a contract between a special purpose financial captive insurance company and

a counterparty pursuant to which the special purpose financial captive insurance company

agrees to provide insurance or reinsurance protection to the counterparty for risks

associated with the counterparty's insurance or reinsurance business, and includes

a contract entered into under division (F) of this section. (7) “ Special purpose financial captive insurance company securities ” means the securities issued by a special purpose financial captive insurance company. (B) The requirements of this section shall not apply to a specific special purpose financial

captive insurance company if the superintendent finds a specific requirement is inappropriate

due to the nature of the risks to be insured by the special purpose financial captive

insurance company and if the special purpose financial captive insurance company meets

the criteria established by rules and regulations adopted and promulgated by the superintendent. (C)(1) A special purpose financial captive insurance company may not issue a contract for

assumption of risk or indemnification of loss other than a special purpose financial

captive insurance company contract.  However, the special purpose financial captive insurance company may cede a risk

assumed through a special purpose financial captive insurance company contract to

a third-party reinsurer through the purchase of reinsurance or retrocession protection

if approved by the superintendent. (2) A special purpose financial captive insurance company may enter into contracts and

conduct other commercial activities related or incidental to and necessary to fulfill

the purposes of special purpose financial captive insurance company contracts, insurance

securitization, and this section.  Those activities may include: (a) Entering into special purpose financial captive insurance company contracts; (b) Issuing securities of the special purpose financial captive insurance company in

accordance with applicable securities law; (c) Complying with the terms of special purpose financial captive insurance company contracts

or securities; (d) Entering into trust, swap, tax, administration, reimbursement, or fiscal agent transactions; (e) Complying with trust indenture, reinsurance, retrocession, and other agreements necessary

or incidental to effectuate an insurance securitization in compliance with this section

and in the plan of operation considered by the superintendent under division (F)(5) of section 3964.03 of the Revised Code . (D)(1) A special purpose financial captive insurance company may issue securities, subject

to and in accordance with applicable law, its plan of operation considered by the

superintendent under division (E) of section 3964.03 of the Revised Code , and its organizational documents. (2) A special purpose financial captive insurance company, in connection with the issuance

of securities, may enter into and perform all of its obligations under any required

contracts to facilitate the issuance of these securities. (3) The obligation to repay principal or interest, or both, on the securities issued

by the special purpose financial captive insurance company shall reflect the risk

associated with the obligations of the special purpose financial captive insurance

company to the counterparty under the special purpose financial captive insurance

company contract. (E)(1)(a) A special purpose financial captive insurance company may enter into the following

types of transactions for the purposes described in division (E)(1)(b) of this section: (i) Asset management agreements, including swap agreements; (ii) Guaranteed investment contracts; (iii) Other transactions with the objective of reducing timing differences in the funding

of upfront, or ongoing, transaction expenses, or managing asset, credit, prepayment,

or interest rate risk of the investments of the special purpose financial captive

insurance company. (b) The purpose of the transactions described in division (E)(1)(a) of this section shall

be any of the following: (i) To ensure that the investments are sufficient to assure payment or repayment of the

securities, and related interest or principal payments, issued pursuant to a special

purpose financial captive insurance company insurance securitization transaction; (ii) To ensure that the investments are sufficient to assure payment or repayment of the

obligations required under a special purpose financial captive insurance company contract; (iii) Any other purpose approved by the superintendent. (2) An asset management agreement shall not be entered into under this section by a special

purpose financial captive insurance company unless it has been approved by the superintendent. (F)(1) If a special purpose financial captive insurance company has entered into a special

purpose financial captive insurance company contract with a counterparty and the special

purpose financial captive insurance company has conducted an insurance securitization

that is made up, in part or in whole, of the risks of that contract, then the special

purpose financial captive insurance company may enter into a second contract with

the counterparty under which the counterparty is held liable for those losses or other

obligations that were securitized. (2) Such obligations may be funded and secured with assets held in trust for the benefit

of the counterparty pursuant to agreements contemplated by this section and invested

in a manner that meet the criteria in sections 3907.14 and 3907.141 of the Revised Code . (G)(1) A special purpose financial captive insurance company may enter into agreements with

affiliated companies and third parties and conduct business necessary to fulfill its

obligations and administrative duties incidental to an insurance securitization and

a special purpose financial captive insurance company contract entered into under

division (F) of this section. (2) The agreements may include management and administrative services agreements and

other allocation and cost sharing agreements, or swap and asset management agreements,

or both, or agreements for other contemplated types of transactions provided in this

section. (H) A special purpose financial captive insurance company contract entered into under

division (F) of this section shall contain all of the following: (1) A requirement that the special purpose financial captive insurance company do either

of the following: (a) Enter into a trust agreement specifying what recoverables or reserves, or both, the

agreement is to cover and to establish a trust account for the benefit of the counterparty

and the security holders; (b) Establish such other methods of security acceptable to the superintendent. (2) A stipulation that assets deposited in the trust account shall be valued in accordance

with their current fair-market value and shall consist only of investments permitted

by sections 3907.14 and 3907.141 of the Revised Code ; (3) A requirement that, if a trust arrangement is used, the special purpose financial

captive insurance company, before depositing assets with the trustee, execute assignments,

execute endorsements in blank, or take such actions as are necessary to transfer legal

title to the trustee of all assets requiring assignment, in order that the counterparty,

or the trustee upon the direction of the counterparty, may negotiate whenever necessary

the assets without consent or signature from the special purpose financial captive

insurance company or another entity; (4) A stipulation that, if a trust arrangement is used, the special purpose financial

captive insurance company and the counterparty agree that the assets in the trust

account established pursuant to the contract: (a) May be withdrawn by the counterparty, or the trustee on its behalf, at any time,

but only in accordance with the terms of the contract; (b) Shall be utilized and applied by the counterparty, without diminution because of

insolvency on the part of the counterparty or the special purpose financial captive

insurance company, only for the purposes set forth in the credit for reinsurance laws

and rules of this state.  As used in this division, “ counterparty ” includes any successor of the counterparty by operation of law, including, subject

to the provisions of this section, but without further limitation, any liquidator,

rehabilitator, or receiver of the counterparty. (I) A special purpose financial captive insurance company contract entered into under

division (F) of this section may contain provisions that give the special purpose

financial captive insurance company the right to seek approval from the counterparty

to withdraw from the trust all or part of the assets, or income from them, contained

in the trust and to transfer the assets to the special purpose financial captive insurance

company if such provisions comply with the credit for reinsurance laws and rules of

this state. (J)(1) A special purpose financial captive insurance company contract entered into under

division (F) of this section, meeting the requirements of this section, shall be granted

credit for reinsurance treatment or otherwise qualify as an asset or a reduction from

liability for reinsurance ceded by a domestic insurer to a special purpose financial

captive insurance company as an assuming insurer for the benefit of the counterparty

if both of the following apply: (a) The assets are held or invested in one or more of the forms allowed in sections 3907.14 and 3907.141 of the Revised Code . (b) The agreement is in compliance with section 3901.64 of the Revised Code . (2) The contract shall be granted credit or otherwise qualify as an asset or reduction

from liability only to the extent of the value of the assets held in trust for, or

letters of credit, that meet the requirements set forth in division (C) of section 3964.05 of the Revised Code , or as approved by the superintendent, for the benefit of the counterparty under

the special purpose financial captive insurance company contract. (K) A special purpose financial captive insurance company may make investments that meet

the qualifications set forth in sections 3907.14 and 3907.141 of the Revised Code , however these investments shall not be subject to any limitations contained in such

sections as to invested amounts.  The superintendent may prohibit or limit any investment that threatens the solvency

or liquidity of a special purpose financial captive insurance company or that is not

made in accordance with the approved plan of operation.