The strength of the captive regulators in Vermont could help increase the number of affiliated reinsurance companies (arc) formed in the state, according to Rich Smith, president of the Vermont Captive Insurance Association.
New legislation allowing for the formation of arcs was signed into law in May, which provides an opportunity for companies affected by the recent imposition of the Base Erosion Anti-Abuse Tax (BEAT) on reinsurance ceded to offshore affiliates with an onshore alternative.
No arcs have yet been formed, but speaking at the VCIA 2018 Annual Conference, Smith explained that the strength of Vermont’s regulators may help formations grow.
He said: “The fact that is the captive division that will be regulating them could be huge because people know the regulator in Vermont can do the job.”
“They take on these exogenous type of insurance vehicles and are able to regulate them and regulate them well.”
According to David Provost, deputy commissioner of the state’s Captive Insurance Division, it is difficult to predict when formations may begin.
Provost commented: “Nothing has been licensed yet. We have had interest that has gone in different directions and those conversations are a good start.”
“We really have no prediction of how much business it will generate, it may build and get more urgent as the end of the year approaches but it is tough to say.”
“We aren’t sure of how much interest will turn into arc formations but we’ve talked to maybe four different companies. It’s hard to say whether they will form any and how many they will form.”
He added: “We are doing more work on what it is intended to do, which is to offer an option for companies that ceded to foreign affiliates and allow them to cede to their Vermont affiliate instead, keeping the money onshore.”
“We are doing more work on what it is intended to do, which is to offer an option for companies that ceded to foreign affiliates and allow them to cede to their Vermont affiliate instead, keeping the money onshore.”
‘It will be a company that is subject to all of the accreditation standards, just like a risk retention group, but it will have some investment flexibility, that is really as far as we could go in terms of allowing a company to do something different.”
He said: “As a regulator we never target, we aren’t sure of how much interest will turn into arc formations but we’ve talked to maybe four different companies. It’s hard to say whether they will form any and how many they will form.”
“It may build and get more urgent as the end of the year approaches but some of the company. Really no prediction of how much business it will generate. “
Smith concluded: “The fact that is the captive division that will be regulating them could be huge because people know the regulator in Vermont can do the job.”
“They take on these exogenous type of insurance vehicles and are able to regulate them and regulate them well.”
