§ 27-64-5 - Use and operation of protected cells. - Rhode Island Statutes

SECTION 27-64-5

   § 27-64-5  Use and operation of protectedcells. – (a) The protected cell assets of any protected cell may not be charged withliabilities arising out of any other business the protected cell company mayconduct. All contracts or other documentation reflecting protected cellliabilities shall clearly indicate that only the protected cell assets areavailable for the satisfaction of those protected cell liabilities.

   (b) Unless otherwise approved by the commissioner, assetsattributed to a protected cell shall be valued at their fair value on the dateof valuation.

   (c) The income, gains and losses, realized or unrealized,from protected cell assets and protected cell liabilities shall be credited toor charged against the protected cell without regard to other income, gains, orlosses of the protected cell company, including income, gains, or losses ofother protected cells. Amounts attributed to any protected cell andaccumulations on the attributed amounts may be invested and reinvested withoutregard to any requirements or limitations imposed on investments of insurancecompanies domiciled in this state and the investments in any protected cell orcells may not be taken into account in applying the investment limitationsotherwise applicable to the investments of the protected cell company, subjectto any restrictions that may be imposed by the commissioner in accordance with§ 27-64-12.

   (d) As permitted by the commissioner, a protected cellcompany may, in respect of any of its protected cells, engage in fully fundedindemnity triggered and/or fully funded non-indemnity triggered insurancesecuritization to support in full the protected cell exposures attributable tothat protected cell. A protected cell company insurance securitization that isnon-indemnity triggered shall qualify as an insurance securitization under theterms of this chapter only after the commissioner, in accordance with theauthority granted under § 27-64-12, adopts regulations addressing themethods of funding of the portion of the risk that is not indemnity based,accounting, disclosure, risk based capital treatment, and assessing risksassociated with those securitizations. A protected cell company insurancesecuritization that is not fully funded, whether indemnity triggered ornonindemnity triggered is prohibited. Protected cell assets may be used to payinterest or other consideration on any outstanding debt or other obligationattributable to that protected cell, and nothing in this section shall beconstrued or interpreted to prevent a protected cell company from entering intoa swap agreement or other transaction for the account of the protected cellthat has the effect of guaranteeing that interest or other consideration.

   (e) In all protected cell company insurance securitizations,the contracts or other documentation effecting the transaction shall containprovisions identifying the protected cell to which the transaction will beattributed. In addition, the contracts or other documentation shall clearlydisclose that the assets of that protected cell, and only those assets, areavailable to pay the obligations of that protected cell. Notwithstanding theforegoing, and subject to the provisions of this chapter and any otherapplicable law, rule or regulation, the failure to include that language in thecontracts or other documentation shall not be used as the sole basis bycreditors, reinsurers or other claimants to circumvent the provisions of thischapter.

   (f) At the cessation of business of a protected cell, and inabsence of any placement under administrative supervision or order ofconservation, rehabilitation or liquidation attributable to that protected cellor the protected cell company, the protected cell company shall voluntarilyclose out the protected cell account in accordance with a plan approved by thecommissioner.

   (g) A protected cell company shall only be authorized toattribute to a protected cell account the insurance obligations relating to theprotected cell company's general account. Under no circumstances shall aprotected cell be authorized to issue insurance or reinsurance contractsdirectly to policyholders or reinsureds or have any obligation to thepolicyholders or reinsureds of the protected cell company's general account.