Definitions

As used in this Chapter, unless the context requires otherwise:

(1)>Captive insurance company=:

(a)Means a limited purpose insurance subsidiary of a company with the specific objective of financing risks of its parent and affiliated companies; and

(b)Is a pure captive insurance company, group captive insurance company, or industrial insured captive company formed or licensed under the provisions of this Chapter.

(2)>Affiliated company= means any company in the same corporate system as a parent or a member organization by virtue of common COL120106 CH. 23 CAPTIVE INSURANCE COMPANIES ownership, control, operation or management, or, in the case of a pure captive insurance company, that maintains a working relationship with, and whose business risks insured by the pure captive insurance company are similar or related to the business risks of, the parent insured by the pure captive insurance company.

(3)Commissioner means the Commissioner of Banking and Insurance.

(4)>Director= means the Director of the Department of Revenue and Taxation.

(5)>Domestic Insurer= means an insurer domiciled in the island of Guam.

(6)>Excess workers compensation insurance= means in the case of an employer that has insured or self-insured the workers compensation risks in accordance with applicable state or Federal law, insurance in excess of a specified per-incident or aggregate limit established by the Commissioner.

(7)>Fair value= of an asset (or liability) means the amount at which that asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale. Quoted market prices in active markets are the best evidence of fair value and shall be used as the basis for the measurement, if available. If a quoted market price is available, the fair value is the product of the number of trading units times market price. If quoted market prices are not available, the estimate of fair value shall be based on the best information available. The estimate of fair value shall consider prices for similar assets and liabilities and the results of valuation techniques to the extent available in the circumstances. Examples of valuation techniques include the present value of estimated expected future cash flows using a discount rate commensurate with the risks involved, option-pricing models, matrix pricing, option-adjusted spread models and fundamental analysis. Valuation techniques for measuring financial assets and liabilities and servicing assets and liabilities shall be consistent with the objective of measuring fair value. Those techniques shall incorporate assumptions that market participants would use in their estimates of values, future revenues, and future expenses, including assumptions about interest rates, default, prepayment, and volatility. In measuring financial liabilities and servicing liabilities at fair value by discounting estimated future cash flows, an objective is to use discount rates at which those liabilities could be settled in an arm=s-length transaction. Estimates of expected future cash flows, if COL120106 CH. 23 CAPTIVE INSURANCE COMPANIES used to estimate fair value, shall be the best estimate based on reasonable and supportable assumptions and projections. All available evidence shall be considered in developing estimates of expected future cash flows. The weight given to the evidence shall be commensurate with the extent to which the evidence can be verified objectively. If a range is estimated for either the amount or timing of possible cash flows, the likelihood of possible outcomes shall be considered in determining the best estimate of future cash flows.

(8)‘Fully funded= means that, with respect to any exposure attributed to a protected cell, the fair value of the protected cell assets, on the date on which the insurance securitization is effected, equals or exceeds the maximum possible exposure attributable to the protected cell with respect to such exposures.

(9)>General account= means the assets and liabilities of a protected cell company other than protected cell assets and protected cell liabilities.

(10)>Group= means any legal association of individuals, corporations, partnerships, limited liability companies or associations, the member organizations of which collectively:

(a)own, control or hold with power to vote all of the outstanding voting securities of a group captive insurance company incorporated as a stock insurer; or

(b)having complete voting control over a group captive insurance company incorporated as a mutual insurer.

(11)‘Group captive insurance company= means any company that insures risks of the member organizations of that group, and their affiliated companies.

(12)>Indemnity trigger= means a transaction term by which relief of the issuer=s obligation to repay investors is triggered by its incurring a specified level of losses under its insurance or reinsurance contracts.

(13)>Industrial insured= means an insured:

(a)who procures the insurance of any risk or risks by use of the services of an employee acting as an insurance manager or buyer;

(b)whose aggregate annual premiums for insurance on all risks total at least Fifteen Thousand Dollars ($15,000.00); and COL120106 CH. 23 CAPTIVE INSURANCE COMPANIES

(c)who has at least ten

(10)full-time employees.

(14)>Industrial insured captive insurance company= means any company that insures risks of the industrial insured group, and their affiliated companies.

(15)>Industrial insured group= means any group that meets either of the following criteria:

(a)any group of industrial insured that collectively:

(i)own, control or hold with power to vote all of the outstanding voting securities of an industrial insured captive insurance company incorporated as a stock insurer, or

(ii)have corporate voting control over an industrial insured captive insurance company incorporated as a mutual insurer; or

(b)any group which is created under the Product Liability Risk Retention Act of 1981, 15 U.S.C. '3901 et seq., as amended, as a corporation or other limited liability company taxable as a stock insurance company or a mutual insurer under the laws of Guam.

(16)>Member organization= means a corporation, partnership or association that belongs to a group.

(17)>Non-indemnity trigger= means a transaction term by which relief of the issuer=s obligation to repay investors is triggered solely by some event or condition other than the individual protected cell company incurring a specified level of losses under its insurance or reinsurance contracts.

(18)>Parent= means a corporation, partnership, limited liability company, or individual that directly or indirectly owns, controls, or holds the power to vote more than fifty percent (50%) of the outstanding voting securities of a pure captive insurance company.

(19)>Protected cell= means an identified pool of assets and liabilities of a protected cell company segregated and insulated by means of this Chapter from the remainder of the protected cell company=s assets and liabilities.

(20)>Protected cell account= means a specifically identified bank or custodial account established by a protected cell company for the purpose of segregating the protected cell assets of one

(1)protected cell from the COL120106 CH. 23 CAPTIVE INSURANCE COMPANIES protected cell assets of other protected cells and from the assets of the protected cell company=s general account.

(21)>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.

(22)>Protected cell company= means a domestic captive insurance company insurerthat has one

(1)or more protected cells.

(23)>Protected cell company insurance securitization= means the issuance of debt instruments, the proceeds from which support the exposures attributed to the protected cell, by a protected cell company where repayment of principal or interest, or both, to investors pursuant to the transaction terms is contingent upon the occurrence or nonoccurrence of an event with respect to which the protected cell company is exposed to loss under insurance or reinsurance contracts it has issued.

(24)>Protected cell liabilities= means all liabilities and other obligations identified with and attributable to a specific protected cell of a protected cell company.

(25)>Pure captive insurance company= means any company that insures risks of its parent and affiliated companies.