This blog post is short, and is directed primarily to captive managers and/or owners or operators of protected cell captive insurance companies. You should be aware that in running a protected cell company, you must provide third parties with whom you transact business certain statutorily required notices.
North Carolina’s Captive Insurance Act is a fairly recent invention, and has undergone a few legislative tweaks so far each year since its inception.
As I was helping a few clients create protected cell companies for year-end 2016, I was reminded of a fairly recent change to the legislation that bears reminding.
N.C.G.S. 58-10-517 places certain notification requirements upon protected cell captive insurance companies. Specifically, it provides as follows:

A protected cell captive insurance company shall inform any person with whom it transacts business that it is a protected cell captive insurance company, and for the purposes of that transaction, identify or specify the protected cell with which that person is transacting, unless that transaction is not a transaction with a particular protected cell, in which case it shall specify that the transaction is with the protected cell captive insurance company’s core.

Because I have written in previous blog posts about the makeup of a protected cell company and its cells, because this blog post is directed to captive managers already familiar with protected cell companies, and because you can find a previous blog post on those topics here, I will not go into detail about the makeup of a protected cell company.
As I was forming a few of these companies the previous month, however, it occurred to me that this rule could prove a trap for the unwary. Specifically, to the extent the protected cell company acts and does business with the outside world, it needs to specifically describe to third parties whether it is acting on its own, in a general capacity (specifying that the transaction is with the core), or whether the protected cell company is acting in a more fiduciary and representative capacity on behalf of one or more protected cells.

I could see this being an easy thing to forget for the managers/directors of a protected cell company. For my own part, I’ve tried to recreate this statute in some of the organizational documents of the protected cell company: it is of course duplicative to put in bylaws or participation agreements a requirement that is already contained in the statute, but to my thinking, it will hopefully act as a reminder to the company’s management.
One potentially easy solution for a protected cell company to comply with the act might be to place, on the company’s letterhead (if such exists) or in the email signature of the company’s emails, something like the following:

Unless specifically stated herein, any business transacted by [the protected cell company] is with [the protected cell company’s] core.
Such template language might create a nice default position that would keep the company’s management mindful of its obligation to inform third parties if it is acting in a fiduciary capacity on behalf of its various cells, in which case it would then provide specific notice.

If you have questions about protected cell companies, or captive insurance legal matters in general, please contact me at