1. (1) A sponsor of a sponsored captive insurance company shall be:

   1. (a) an insurer authorized or approved under the laws of a state;
   2. (b) a reinsurer authorized or approved under the laws of a state;
   3. (c) a captive insurance company holding a certificate of authority under this chapter;

   4. (d) an insurance holding company that:

      1. (i) controls an insurer licensed pursuant to the laws of a state; and
      2. (ii) is subject to registration pursuant to the holding company system of laws of the state of domicile of the insurer described in Subsection (1)(d)(i);
   5. (e) an approved captive management firm in Utah or its affiliates; or
   6. (f) another person approved by the commissioner after finding that the approval of the person as a sponsor is not inconsistent with the purposes of this chapter.

2. (2)

   1. (a) The business written by a sponsored captive insurance company with respect to a protected cell shall be fronted by the sponsored captive insurance company through a controlled unaffiliated contract or an insurer that is:

      1. (i) authorized or approved:

         1. (A) under the laws of a state; or
         2. (B) under any jurisdiction if the insurance company is a wholly owned subsidiary of an insurance company licensed pursuant to the laws of a state;
      2. (ii) reinsured by a reinsurer authorized or approved by this state; or

      3. (iii) subject to Subsection (2)(b), secured by a trust fund:

         1. (A) in the United States;
         2. (B) for the benefit of policyholders and claimants;
         3. (C) funded by an irrevocable letter of credit or other asset acceptable to the commissioner; and
         4. (D) held by the sponsor as provided in Subsection 31A-17-404(1).

   2. (b)

      1. (i) The amount of security provided by the trust fund described in Subsection (2)(a)(iii) may not be less than the reserves associated with the liabilities of the trust fund, including:

         1. (A) reserves for losses;
         2. (B) allocated loss adjustment expenses;
         3. (C) incurred but unreported losses; and
         4. (D) unearned premiums for business written through the participant's protected cell.
      2. (ii) The commissioner may require the sponsored captive insurance company to increase the funding of a trust established pursuant to this Subsection (2).

      3. (iii) If the form of security in the trust described in Subsection (2)(a)(iii) is a letter of credit, the letter of credit shall be established, issued, or confirmed by a bank that is:

         1. (A) chartered in this state;
         2. (B) a member of the federal reserve system; or
         3. (C) chartered by another state if that state-chartered bank is acceptable to the commissioner.
      4. (iv) A trust and trust instrument maintained pursuant to this Subsection (2) shall be in a form and upon terms approved by the commissioner.

3. (3) The business written by a sponsored captive insurance company with respect to an incorporated cell may be:

   1. (a) fronted by the sponsored captive insurance company in accordance with Subsection (2)(a); or
   2. (b) with prior approval of the sponsored captive insurance company, written directly by the incorporated cell.
4. (4) A risk retention group may not be either a sponsor or a participant of a sponsored captive insurance company.

Amended by Chapter 175, 2025 General Session