substitute for

House BILL NO. 5380

A bill to amend 1956 PA 218, entitled

"The insurance code of 1956,"

by amending section 4665 (MCL 500.4665), as added by 2008 PA 29.

the peoplE of the state of michigan enact:

Sec. 4665. (1) A sponsor of a sponsored captive insurance company shall must be an insurer authorized pursuant to the laws of a state or the District of Columbia, an insurance holding company that controls an insurer authorized pursuant to the laws of a state or the District of Columbia and subject to registration pursuant to the insurance holding company system laws of the state of domicile of the insurer, a reinsurer authorized or approved pursuant to the laws of a state or the District of Columbia, or a captive insurance company authorized pursuant to this chapter.approved by the director. The director shall not approve the proposed sponsor if the director determines the proposed sponsor is not safe, reliable, and entitled to public confidence. In evaluating the qualifications of a proposed sponsor, the director shall consider all of the following:

(a) The proposed sponsor's type and structure.

(b) The proposed sponsor's experience in financial operations.

(c) The proposed sponsor's financial stability and strength.

(d) The proposed sponsor's business reputation.

(e) Other factors the director considers relevant.

(2) A risk retention group shall must not be either a sponsor or a participant of a sponsored captive insurance company. The business written by a sponsored captive insurance company with respect to each protected cell shall meet at least 1 of the following:

(a) Be fronted by an insurance company authorized pursuant to the laws of any state or any jurisdiction if the insurance company is a wholly owned subsidiary of an insurance company authorized pursuant to the laws of any state or any jurisdiction.

(b) Be reinsured by a reinsurer authorized or approved by this state.

(c) Be secured by a trust fund in the United States for the benefit of policyholders and claimants funded by an irrevocable letter of credit or other asset acceptable to the commissioner. The amount of security provided by the trust fund shall not be less than the reserves associated with those liabilities, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses, and unearned premiums for business written through the participant's protected cell. The commissioner may require the sponsored captive to increase the funding of a trust established pursuant to this subdivision. A trust and trust instrument maintained pursuant to this subdivision shall be in a form and upon terms approved by the commissioner.