It is enacted by the General Assembly as follows:

SECTION 1. Sections 27-64-2, 27-64-3, 27-64-4, 27-64-5, 27-64-6, 27-64-7, 27-64-8, 27-64-9, 27-64-10 and 27-64-11 of the General Laws in Chapter 27-64 entitled "The Protected Cell Companies Act" are hereby amended to read as follows:

27-64-2. Purpose -- The purpose of this Act is to facilitate economy and efficiency in funding the insurance obligations of domestic companies through insurance securitization, and to promote generally the securitization of insurance obligations for the purpose of increasing the sources and availability of capital and the stability of underwriting results of domestic companies.

27-64-3. Definitions -- As used in this chapter:

(a) "Commissioner" means the director of the department of business regulation of the state of Rhode Island.

(b) "Company" means protected cell company.

(c)(b) "Domestic company insurer" means an insurance or reinsurance company domiciled in the state or a captive insurance or reinsurance company domiciled in the state.

(d)(c) "General account" means the assets and liabilities of a protected cell company other than protected cell assets and protected cell liabilities.

(e)(d) "Protected cell company Iinsurance securitization" means the issuance of debt instruments, the proceeds from which support the exposures attributed to the protected cell, by a protected cell company, entering into of securities or other financial transactions with investors directly or indirectly by a domestic company, where repayment of principal and/or interest to investors pursuant to the transaction terms is contingent upon the occurrence or nonoccurrence of an event with respect to which the domestic protected cell company is exposed to loss under policies or contracts of insurance or reinsurance contracts it has issued. Insurance securitization instruments include, but are not limited to, catastrophe bonds, exchange traded futures and options and over-the-counter traded options and swaps.

(f) "Market value" means (1) as to cash and letters of credit, the amount thereof; and (2) as to a security as of any date, the price for the security on that date obtained from a generally recognized source or the most recent quotation from such a source, or to the extent no generally recognized sources exists, the price for the security as determined in good faith by the parties to the transaction, plus accrued but unpaid income thereon to the extent not included in the price as of that date.

(g)(e) "Protected cell" means an identified pool of assets and liabilities of a domestic protected cell company segregated and insulated by means of this Act from the remainder of the protected cell company's assets and liabilities.

(h)(f) "Protected cell account" means a specifically identified bank or custodial account established by a protected cell company for the purpose of physically segregating the protected cell assets of one protected cell from the protected cell assets of other protected cells and from the assets of the protected cell company's general account.

(i)(g) "Protected cell assets" means all assets, contract rights, and general intangibles, identified with and attributable to a specific protected cell of a protected cell company., including assets physically segregated in a protected cell account.

(j)(h) "Protected cell company" means a domestic company which insurer that has one or more protected cells.

(k)(i) "Protected cell liabilities" means all liabilities and other obligations identified with and attributable to a specific protected cell of a protected cell company. Protected cell liabilities include liabilities representing the insurance obligations of the protected cell as well as obligations of the protected cell arising out of any insurance securitization or reinsurance transactions of the protected cell.

(l)(j) "Receiver" means the commissioner, where the commissioner is acting as a rehabilitator, liquidator, or administrative supervisor of a company, or any person appointed to carry out an order of rehabilitation or liquidation of a company.

27-64-4. Establishment of protected cells -- (a) A domestic protected cell company may establish one or more protected cells, with the prior written approval by of the commissioner of a plan of operation or amendments thereto submitted by the domestic protected cell company with respect to each protected cell, establish one or more protected cells. Upon the written approval by of the commissioner of the plan of operation, which shall include, but not be limited to, the specific business and investment objectives and investment guidelines of the protected cell, the protected cell company may, in accordance with the approved plan of operations attribute to the protected cell amounts both reflective of insurance obligations with respect to its insurance business and obligations relating to the insurance securitization and assets to fund such the obligations. Each protected cell of a protected cell company shall have its own distinct name or designation, which shall include the words "protected cell." The protected cell company shall transfer all physical assets attributable to each protected cell to one or more separately established and identified protected cell accounts, bearing the name or designation of that protected cell. Protected cell assets shall be held in such the protected cell accounts for the purpose of satisfying the obligations of that protected cell.

(b) All sales, exchanges, transfers, or other attributions of assets or and liabilities between a protected cell and the general account or between other protected cells shall be in accordance with the plan of operation approved by the commissioner or shall be otherwise approved by the commissioner. Unless otherwise approved by the commissioner, no sale, exchange, transfer, or other attribution of assets or liabilities may be made by a protected cell company between any of its protected cells or between the protected cell company's general account and one or more of its protected cells unless, in the case of an attribution to a protected cell, the attribution is made solely to establish the protected cell or, in the case of an attribution from a protected cell to the company's general account the attribution is made solely to support the company's insurance obligations which are the subject of the business of the protected cell. Any sale, exchange, transfer or other attribution of assets and liabilities between a the general account and a protected cell or between protected cells ,or from investors in the form of principal on a debt instrument issued by a protected cell company in connection with a protected cell company securitization shall be in cash or readily marketable securities with established market values unless otherwise approved in advance in writing by the commissioner.

(c) The creation of a protected cell does not create, in respect of that protected cell, a legal person separate from the protected cell company. Amounts attributed to a protected cell under this Act, including assets transferred to a protected cell account, are owned by the protected cell company and the protected cell company may not be, nor hold itself out to be, a trustee with respect to those protected cell assets or of that protected cell account. Notwithstanding the foregoing, the protected cell company may allow for a security interest to attach to protected cell assets or a protected cell account when in favor of a creditor of the protected cell and otherwise allowed under applicable law.

(d) Nothing in this Act shall be construed to prohibit the protected cell company from contracting with or arranging for an investment advisor, commodity trading advisor, or other third party to manage the protected cell assets of a protected cell, provided that all remuneration, expenses, and other compensation of the third party advisor or manager be are payable from the protected cell assets of that protected cell and not from the protected cell assets of other protected cells or the assets of the protected cell company's general account. Any such contract shall clearly reference the protected cell or cells for which the contract has been arranged and shall contain a nonrecourse provision in favor of the company that prohibits the contracting party from seeking recourse against, or attaching, the assets of the general account, or the assets of another protected cell, to satisfy the obligations of any one or more protected cells which are the subject of such contract.

(e) Any domestic insurance company which is a A protected cell company shall establish such administrative and accounting procedures as are necessary to properly identify the one or more protected cells of the protected cell company and the protected cell assets and protected cell liabilities attributable thereto to the protected cells. It shall be the duty of the directors of a protected cell company to (1) keep protected cell assets and protected cell liabilities separate and separately identifiable from the assets and liabilities of the protected cell company's general account and (2) to keep protected cell assets and protected cell liabilities attributable to one protected cell separated and separately identifiable from protected cell assets and protected cell liabilities attributable to other protected cells. Notwithstanding the foregoing, and subject to the provisions of section 27-64-10 of this Act, if this section is violated, the remedy of tracing shall be applicable to protected cell assets when commingled with protected cell assets of other protected cells or the assets of the protected cell company's general account. The remedy of tracing shall not be construed as an exclusive remedy.

27-64-5. Use and operation of protected cells -- (a) Unless otherwise approved by the commissioner, the company shall, when establishing a protected cell, allocate to each protected cell assets with a value at least equal to the reserves and other insurance liabilities attributed to that protected cell. The protected cell assets of any protected cell may not be charged with liabilities arising out of any other business the protected cell company may conduct. All contracts or other documentation reflecting protected cell liabilities the obligations of a protected cell to the general account shall clearly indicate that only the assets of the protected cell assets are available for the obligations of the satisfaction of those protected cell liabilities.

(b) Unless otherwise approved by the commissioner, assets attributed to a protected cell must shall be valued at their market fair value on the date of valuation., or if there is no readily available market, then as provided in the contract or the rules or other written agreement applicable to the protected cell.

(c) The income, gains and losses, realized or unrealized, from protected cell assets and protected cell liabilities must shall be credited to or charged against the protected cell without regard to other income, gains, or losses of the protected cell company, including income, gains, or losses of other protected cells. Amounts attributed to any protected cell and accumulations on the attributed amounts thereon may be invested and reinvested without regard to any requirements or limitations imposed on investments of insurance companies domiciled in this state at the discretion of the company and the investments in any protected cell or cells may not be taken into account in applying the investment limitations otherwise applicable to the investments of the protected cell company, subject to any restrictions that may be imposed by the commissioner in accordance with section 27-64-12 of this chapter.

(d) As permitted by the commissioner, a protected cell company may, in respect of any of its protected cells, engage in fully funded indemnity triggered and/or fully funded index nonindemnity triggered insurance securitization or reinsurance transactions to support in full the protected cell exposures liabilities attributable to the that protected cell. A protected cell company insurance securitization that is nonindemnity triggered shall qualify as an insurance securitization under the terms of this act only after the commissioner, in accordance with the authority granted under section 27-64-12, adopts regulations addressing the methods of funding of the portion of the risk that is not indemnity based, accounting, disclosure, risk based capital treatment, and assessing risks associated with such securitizations. An A protected cell company insurance securitization that or reinsurance transaction which is not fully funded, whether indemnity triggered or nonindemnity triggered is prohibited. A pProtected cell assets may be used to pay interest or other consideration on any outstanding debt or other obligation attributable to that protected cell, and nothing in this section shall be construed or interpreted to prevent a protected cell company from entering into a swap agreement or other transaction for the account of the protected cell that has the effect of guaranteeing such interest or other consideration.

(e) In all protected cell company insurance securitizations, the contracts or other documentation cases where a protected cell engages in an insurance securitization or reinsurance transaction, the financial instrument or reinsurance agreement effecting the such securitization or transaction shall contain provisions identifying the protected cell to which the securitization or transaction will be attributed. In addition, the contracts or other documentation financial instrument or reinsurance agreement shall clearly disclose that the assets of that protected cell, and only those assets, are only available to pay the obligations of that protected cell. Notwithstanding the foregoing, and subject to the provisions of this Act and any other applicable law, rule or regulation, the failure to include such language in the financial instrument or reinsurance agreement contracts or other documentation shall not be used as the sole basis by creditors, reinsurers or other claimants to circumvent the provisions of this Act.

(f) At the cessation of business of a protected cell, and in absence of any placement under administrative supervision or order of conservation, rehabilitation or liquidation attributable to that protected cell or the protected cell company, the protected cell company shall voluntarily wind up close out the protected cell account in accordance with a plan approved by the commissioner.

27-64-6. Reach of creditors and other claimants -- (a) (1) Protected cell assets shall only be available to the creditors of the protected cell company who that are creditors in respect of to that protected cell and shall thereby be entitled, in conformity with the provisions of this Act, to have recourse to the protected cell assets attributable to that protected cell, and shall be absolutely protected from the creditors of the protected cell company who that are not creditors in respect of that protected cell and, who accordingly, shall not be entitled to have recourse to the protected cell assets attributable to that protected cell. Creditors of with respect to a protected cell shall not be entitled to have recourse against the protected cell assets of other protected cells or the assets of the protected cell company's general account.

(b) Where When an obligation of a protected cell company to a person arises from a transaction, or is otherwise imposed, in respect of a particular protected cell, (1) that obligation of the protected cell company shall extend only to the protected cell assets attributable to that protected cell, and the person shall, in with respect of to that obligation, be entitled to have recourse only to the protected cell assets attributable to that protected cell, and (2) that obligation of the company shall not extend to the protected cell assets of any other protected cell or the assets of the protected cell company's general account, and that person shall not, in with respect of to that obligation, be entitled to have recourse to the protected cell assets of any other protected cell or the assets of the protected cell company's general account.

(c) Where When an obligation of a protected cell company relates solely to the general account, the obligation of the protected cell company shall extend only to, and that creditor shall, in with respect of to that obligation, be entitled to have recourse only to the assets of the protected cell company's general account.

(d) A protected cell shall only be authorized to assume an insurance obligation directly from another protected cell or the company's general account and under no circumstances shall a protected cell be authorized to issue insurance policies or contracts directly to policyholders or have any obligation to the policyholders of the company's general account. Under no circumstances shall the The activities, assets, and obligations of relating to a protected cell be are not subject to the provisions of chapters 27-34, 27-34.1 and 27-34.3 of the general laws and neither a protected cells nor a protected cell company shall not be assessed by or otherwise be required to contribute to any guaranty fund or guaranty association in the this state with respect to the activities, assets or obligations of a protected cell. Nothing in this section shall affect the activities or obligations of a company's an insurer's general account.

(e) In no event shall the establishment of one or more protected cells alone constitute or be deemed to be a fraudulent conveyance, an intent by the protected cell company to defraud creditors or the carrying out of business by the protected cell company for any other fraudulent purpose.

27-64-7. Rehabilitation and liquidation of protected cell companies Conservation, rehabilitation and liquidation of protected cell companies. -- (a) Notwithstanding any contrary provision in this title, the insurance code of this state, the rules and regulations promulgated thereunder, or any other applicable law or regulation, upon placement under administrative supervision or any order of upon any order of conservation, rehabilitation or liquidation of a domestic protected cell company that is a protected cell company, the receiver shall be bound to deal with the protected cell company's assets and liabilities including protected cell assets and protected cell liabilities in accordance with the requirements set forth in this act.

(b) With respect to amounts recoverable under any a protected cell company insurance securitization, or reinsurance transaction entered into or outstanding in any protected cell of a protected cell company the amount recoverable by the receiver shall not be reduced or diminished as a result of the placement under administrative supervision or entry of an order of conservation, rehabilitation or liquidation with respect to the protected cell company or any of its protected cells, notwithstanding any provisions to the contrary in the financial instrument governing such insurance securitization or reinsurance transaction. contracts or other documentation governing the protected cell company insurance securitization.

27-64-8. Rehabilitation and liquidation of protected cells -- (a) If in relation to one or more protected cells of a protected cell company, the commissioner is satisfied that the protected cell assets attributable to that protected cell are insufficient to discharge the claims of creditors or other claimants with respect to that protected cell, the commissioner may place under administrative supervision or apply for an order of conservation, rehabilitation or liquidation with respect to that protected cell. In carrying out the administrative supervision, conservation, rehabilitation, or liquidation of a protected cell, the receiver shall follow generally the provisions of chapters 27-1, 27-12.2 and 27-14.1-14.4, of the general laws, as applicable, and any rules and regulations promulgated thereunder, except that at all times the receiver shall be bound to deal with the protected cell assets and protected cell liabilities in accordance with the requirements of this act.

(b) An order of rehabilitation or conservation may not be requested or made with respect to any protected cell of a protected cell company if a receiver has been appointed to act in respect of a protected cell company; however the commissioner may still apply for an order of liquidation with respect to that protected cell. Any prior order of rehabilitation or conservation with respect to a protected cell shall cease to be of effect upon an order of rehabilitation with respect to the protected cell company, without prejudice, however, to the prior acts of the receiver or its agents.

(c) An order of rehabilitation, conservation or liquidation may not be requested or made with respect to any protected cell of a protected cell company if a liquidator has been appointed to act in respect of the protected cell company. Any prior order of rehabilitation, conservation or liquidation with respect to a protected cell shall cease to be of effect upon an order of liquidation with respect to the protected cell company, without prejudice, however, to the prior acts of the receiver or its agent.

(d) During any period of conservation or rehabilitation, or upon an order of liquidation, with respect to a protected cell, the directors of the protected cell company shall cease in respect of the business of, and the protected cell assets and protected cell liabilities attributable to the protected cell, which is the subject of such rehabilitation, conservation or liquidation.

(e) In the event that a petition for an order of rehabilitation, conservation or liquidation of a protected cell is challenged, prior to the entry or denial of such order, the directors of the protected cell company shall cease in respect of the business of, and the protected cell assets and protected cell liabilities attributable to, the protected cell which is the subject of such petition and the commissioner shall carry out the business of the protected cell until such order has been entered or denied. In the event such order is denied, the commissioner shall immediately return possession and control of such protected cell to the directors of the protected cell company.

(f) No resolution for the voluntary winding up of a protected cell company with any protected cell which has been placed under administrative supervision or is the subject of an order of rehabilitation, conservation or liquidation shall be effective without permission of the commissioner and, in the case of rehabilitation, conservation or liquidation, the court supervising such rehabilitation ,conservation or liquidation.

27-64-9. Remuneration of receivers -- (a) With respect to orders of rehabilitation, conservation or liquidation directed at a protected cell company, the remuneration, expenses, and other compensation of the receiver shall be payable from the assets of the company's general account, in accordance with the priority of distribution set forth in sections 27-14.3-46 and 27-14.4-22 of the general laws.

(b) With respect to orders of rehabilitation, conservation or liquidation directed at a protected cell, the remuneration, expenses, and other compensation of the receiver shall be payable from the protected cell assets attributable to that protected cell. In the case where more than one protected cell is the subject of the order, the receiver shall account for remuneration, expenses, and other compensation separately for each protected cell in accordance with actual time and expenses attributable to the rehabilitation, conservation or liquidation of each respective protected cell.

(c) With respect to orders of rehabilitation, conservation or liquidation directed at a protected cell company during a pending rehabilitation, conservation or liquidation of one or more protected cells, the remuneration, expenses, and other compensation of the receiver of the protected cells shall be satisfied from the protected cell assets of such protected cell or cells in accordance with the provisions of subsection (b) above, and the remuneration, expenses, and other compensation of the receiver of the protected cell company shall be satisfied from the assets of the company's general account.

27-64-10. Penalties -- Any person violating the provisions of this act shall be subject to any and all enforcement procedures either currently employed or subsequently promulgated by the commissioner including, but not limited to, the imposition of fines, sanctions, or civil penalties, or an order to cease and desist from the establishment of additional protected cells. In no event shall the commissioner have the authority to cease the business of an existing protected cell, except by placement under administrative supervision or by order of rehabilitation, conservation or liquidation in accordance with the provisions of this act.

27-64-11. No transaction of insurance business -- No insurance securitization or reinsurance transaction affected under the provisions of this act shall be deemed to be an insurance policy or contract of insurance or otherwise constitute the transaction of an insurance business in the state for the purposes of chapter 27-16 of the general laws and no investor in an insurance securitization or reinsurance transaction shall, by sole means of such investment, be required to be licensed as an insurance company in this state. A protected cell company insurance securitization shall not be deemed to be an insurance or reinsurance contract. An investor in a protected cell company insurance securitization shall not, by sole means of this investment, be deemed to be transacting an insurance business in this state. The underwriters or selling agents (and their partners, directors, officers, members, managers, employees, agents, representatives and advisors) involved in a protected cell company insurance securitization shall not be deemed to be conducting an insurance or reinsurance agency, brokerage, intermediary, advisory or consulting business by virtue of their activities in connection therewith.

SECTION 2. This act shall take effect upon passage.