Amends TCA Title 9, Chapter 8, Part 1 and Title 56.

Present law defines "captive insurance company" to mean any pure captive insurance company, association captive insurance company, industrial insured captive insurance company, risk retention group, protected cell captive insurance company, incorporated cell captive insurance company, or special purpose financial captive insurance company formed or licensed under the Revised Tennessee Captive Insurance Act. Present law generally authorizes governmental entities to expend public funds other than local tax revenues for the purchase of capital stock in a captive insurance company or to provide guaranty capital in a mutual captive insurance company; provided, that at the time of authorization of expenditure of public funds adequate insurance markets in the United States are not available to cover the risks, hazards, and liabilities of the governmental entity or that the needed coverage is only available at excessive rates or with unreasonable deductibles. This bill authorizes the state treasurer to establish and maintain a captive insurance company, with the approval of the board of claims. The captive insurance company authorized by this bill: (1) Is subject to the Revised Tennessee Captive Insurance Act and other applicable laws; (2) Is a separate legal entity, owned and controlled by the state, and is only permitted to insure entities that are subject to insurance and self-insurance under present law concerning the board of claims; and (3) Is administratively attached to the department of treasury for administrative purposes. The full text of this bill specifies various duties that the board of claims will be required to perform for the effective implementation, operation, and administration of the captive insurance company, including, but not limited to, promulgating rules. The full text of this bill also specifies various duties that state treasurer will be authorized to perform for the effective implementation, operation, and administration of the captive insurance company. This bill requires that funds received by the captive insurance company are used exclusively for the purposes and activities set forth in this bill, and are invested and reinvested in the name of the captive insurance company by the state treasurer in accordance with the board's investment policy. Any reserve balance in the captive insurance company's account, and interest on the captive insurance company's investments and deposits, will not revert to the general fund or the risk management fund at the end of a fiscal year. The captive insurance company authorized by this bill is required to have policies consistent with the requirements of present law for claims filed against the state. The captive insurance company is subject to examination and audit by the comptroller in the same manner as prescribed for the department of treasury. If the captive insurance company ceases to exist, then its residual assets pass to the risk management fund managed by the state treasurer. Present law requires that expenses payable from the risk management fund include those attributable to: (1) Defending state employees in lawsuits based on acts or omissions in the scope of their employment; (2) Defending the state in claims brought before the claims commission; (3) The division of claims and risk management; (4) The Tennessee claims commission; (5) The department of the treasury's casualty risk program; and (6) Expenses and losses arising pursuant to the Life Cycle Cost and Procurement Act of 1978. This bill makes (5) permissive, deletes (6), and adds the following as additional purposes for which the risk management fund may be used to pay expenses: (1) Initial and continuing capital to fund the state's captive insurance company; (2) Expenses for the operation of the state's captive insurance company; (3) Premium payments for covered entities; and (4) Expenses and losses arising pursuant to present law concerning the state insurance purchasing program.