Connecticut Approves Captive Bill on Protected Cell Use

The Connecticut General Assembly has approved House Bill 6433 (HB 6433), a measure that would provide expanded flexibility for captive insurance companies operating in the state. The bill outlines new options for converting captives into protected cells, transferring protected cells between entities, and managing protected cell insolvencies separately from the broader sponsored structure. HB 6433, approved by the Connecticut General Assembly, is scheduled to take effect on October 1, 2025, pending the governor's signature.

HB 6433 allows certain captive insurance companies—including pure, agency, association, industrial insured captives, risk retention groups, and special purpose financial insurers—to convert into protected cells within a sponsored captive insurance company, subject to the insurance commissioner's prior written approval. The bill states that such conversions would not affect the captive insurer's existing assets, obligations, or liabilities and would be treated as a continuation of the entity.

The bill also includes provisions that would permit a protected cell to be sold, transferred, assigned, or conveyed to a new or existing sponsored captive insurance company, including one licensed as a special purpose financial insurance company. According to the bill, any such transfer would preserve the protected cell's legal identity and would not impair the cell's assets, obligations, or rights. The sponsor must submit a plan of operation for approval by the insurance commissioner, and the transfer must either be approved by the participant or be consistent with the terms of the participation agreement.

HB 6433 further authorizes the insurance commissioner to separate an insolvent protected cell from a sponsored captive insurance company and manage the insolvency of that protected cell independently. The bill provides that such a separation could occur in the event of insolvency, allowing the affected cell to be converted into a new protected cell or a stand-alone captive insurance company, subject to an acceptable plan of operation.

The bill also revises Section 38a-91rr of the Connecticut General Statutes to include additional provisions related to the use of separate accounts within protected cells, including conditions for asset transfers, valuation rules, and investment guidelines. It would reinforce statutory requirements regarding asset segregation, creditor protections, and limited recourse, confirming that the assets of one protected cell may not be used to satisfy the obligations of another.

HB 6433 builds on recent legislative efforts by the Connecticut General Assembly and Insurance Department to enhance the state's captive insurance framework. If enacted, the bill would provide additional structural tools for captive formation and governance.