TITLE 4: ECONOMIC RESOURCES
DIVISION 7: INSURANCE
§ 7901.
Definitions.
As used in this Chapter, unless the context requires otherwise: (a) “Captive insurance company” means: (1) a limited-purpose insurance subsidiary of a company with the specific objective of financing risks of its parent and affiliated companies; and (2) is a pure captive insurance company, group captive insurance company, association captive insurance company, sponsored captive insurance company, agency captive insurance company, risk retention group, affiliated reinsurance company or special purpose insurance company financial insurance company or industrial insured captive company formed or licensed under the provisions of this Chapter. For purposes of this chapter, a branch captive insurance company shall be a pure captive insurance company with respect to operations in the Commonwealth, unless otherwise permitted by the Commissioner. (b) “Affiliated company” means any company in the same corporate system as a parent, an industrial insured or a member organization by virtue of common 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. (c) “Commissioner” means the Commissioner of Insurance. (d) “Director” means the Director of Insurance, Department of Commerce. (e) “Domestic Insurer” means an insurer domiciled in the CNMI. (f) “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. (g) “Fair value of an asset (or liability)” means the amount at which that asset (or liability) could be bought (or incurred) or should (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 time the 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
TITLE 4: ECONOMIC RESOURCES
DIVISION 7: INSURANCE discounting estimated future cash flows, an objective is to use discount rates at which those liabilities could be settled in an arms-length transaction. Estimates of expected future cash flows, if 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. (h) “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 affected, equals or exceeds the maximum possible exposure attributable to the protected cell with respect to such exposures. (i) “General account” means the assets and liabilities of a protected cell company other than protected cell assets and protected cell liabilities. (j) “Group” means any legal association of individuals, corporations, partnerships, limited liability companies, partnerships, associations or other entities, the member organizations of which or which itself, whether or not in conjunction with some or all of the member organizations: (1) 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 (2) having complete voting control over a group captive insurance company incorporated as a mutual insurer. (k) “Group captive insurance company” means any company that insures risks of the member organizations of that group, and may insure the risks of their affiliated companies and the risks of the association itself. (l) “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. (m) “Industrial insured” means an insured: (1) who procures the insurance of any risk or risks by use of the services of an employee acting as an insurance manager or buyer; (2) whose aggregate annual premiums for insurance on all risks total at least Fifteen Thousand Dollars ($15,000.00); and (3) who has at least ten (10) full-time employees. (n) “Industrial insured captive insurance company” means any company that insures risks of the industrial insured group, and their affiliated companies. (o) “Industrial insured group” means any group that meets either of the following criteria: (1) any group of the 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
TITLE 4: ECONOMIC RESOURCES
DIVISION 7: INSURANCE (2) 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 CNMI. (p) “Member organization” means a corporation, partnership, or association that belongs to a group. (q) “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. (r) “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. (s) “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. (t) “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 protected cell assets of other protected cells and from the assets of the protected cell company’s general account. (u) “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. (v) “Protected cell company” means a domestic captive insurance company insurer that has one (1) or more protected cells. (w) “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 investor (x) “Protected cell liabilities” means all liabilities and other obligations identified with and attributable to a specific protected cell of a protected cell company. (y) “Pure captive insurance company” means any company that insures the risks of its parent and affiliated companies. (z) “Controlled unaffiliated business” means any person: (1) that is not in the corporate system of a parent and its affiliated companies in the case of a pure captive insurance company, or that is not in the corporate system of an industrial insured and its affiliated companies in the case of an industrial insured captive insurance company; (2) that has an existing contractual relationship with a parent or one of its affiliated companies in the case of a pure captive insurance company, or with an industrial insured or one of its affiliated companies in the case of an industrial insured captive insurance company; and (3) whose risks are managed by a pure captive insurance company or an industrial insured captive insurance company, as applicable, in accordance with section 7907 of this Chapter.
TITLE 4: ECONOMIC RESOURCES
DIVISION 7: INSURANCE Source: PL 24-03, § 2 (June 12, 2025), modified. Commission Comment: Legislative Findings and Purpose.— In addition to severability and savings clause provisions, PL 24-03 included the following Findings and Purposes section: Section 1. Findings and Purpose. The Legislature finds that captive insurance companies can serve a valuable risk management function, and that their responsible utilization and the growth of the captive insurance industry in the Commonwealth of the Northern Mariana Islands (Commonwealth) are in the best interests of the Commonwealth. Captive insurance refers to a subsidiary corporation established to provide insurance solely to the parent company and its affiliates. A captive insurance company is, in its simplest form, an insurance company that is a wholly owned subsidiary whose primary function is to insure all or part of the risks of its parent company. A captive insurance company represents an option for many organizations, from Fortune 500 companies to nonprofits, that want to take financial control and manage risks by underwriting their own insurance rather than paying premiums to third party insurers. This act permits a novel captive insurance industry and captive insurance company (“captive”) to be licensed and domiciled (have its principal place of business) in the Commonwealth and to transact insurance business as enumerated in the Commonwealth. In codifying PL 24-03, the Commission decapitalized the word “Is” in subsection (a)(2) of § 7901 in accordance with 1 CMC § 3806(f).