Vermont is seeking to tweak and update parts of its captive insurance statute in the state’s 2019 legislative session.
A consensus bill, composed by the state’s Department of Financial Regulation (DFR) and the Vermont Captive Insurance Association (VCIA), will be presented to the Vermont General Assembly soon for their consideration.
The bill proposes a number of small changes to the statute, including requiring captives to be examined every five years (or more frequently if necessary), rather than every three years, which can currently be extended to five if the captive is audited.
Rich Smith, VCIA president, explained that while this change has no practical effect it reflects the state’s actual practice, which is typically to “examine all single-parent captives every 5 years, and prioritise group examinations every 3 to 5 years based on our assessment of their financial condition”.
Smith said: “I believe the captive industry will welcome the change because they will no longer need to get a waiver to push an exam to five years.”
Additionally, the bill will provide captives with flexibility in investments by allowing companies to follow the current investment rules or develop a plan for DFR approval.
According to Smith, this change is a move away from the current investment statutes, which are strict and prescriptive for some captives, and will allow Vermont to keep pace with the changes in the investment environment.
He added that the suggested change “better reflects the options captives could utilise that better suit their risk and investment needs”.
Other tweaks proposed in the bill include amending the statute to clearly identify nonprofit incorporated protected cells as eligible for dividends or distributions with commissioner approval and allowing the commissioner to exempt the attorney-in-fact from the bonding requirements under specific circumstances.
The bill also suggests clarification of the definition of an independent director; a requirement for National Association of Insurance Commissioners statutory accounting for affiliated reinsurance companies, the new captive structure introduced in the state last year; and specific inclusion of sole proprietorships among eligible businesses to be cell participants.
Additionally, it would allow captives to use any organisational form permitted by Vermont law, meaning the captive law will automatically stay current, and DFR still has plenty of opportunities to decline an application or reject a business form if not appropriate for an insurance company, or for a particular circumstance.
Smith said the bill would provide “updates and tweaks to Vermont’s captive law that incorporate a number of the issues VCIA’s legislative committee has discussed the past few months, as well as policy suggestions from DFR”.
The 2019 Vermont legislative session began on 9 January and is due to close on 10 May.
