Vermont Governor Phil Scott has signed the captive insurance bill H.659 into law, which seeks to improve several sections of the state’s statute relating to the industry.
Vermont House Bill 659 clarifies the law in multiple instances to improve the process and consistency of regulatory practices, address unnecessary redundancies, and better align requirements with the captive marketplace.
Commenting on this, Governor Scott says: “Vermont has a strong foundation of regulators and service providers who work together to ensure our state is as supportive as possible for Vermont’s captive insurance companies.
“The passage of the yearly captive bill is always an important action to further improve the quality of our regulation.”
The statute provides an update to the state’s cell legislation, enabling a captive insurance company to be converted into an unincorporated cell, with all of its assets, rights, benefits, obligations and liabilities remaining unaffected by the process.
It simplifies state confidentiality and information sharing, as well as giving regulators more flexibility in sharing and reporting captive information.
The legislation also lowers the minimum capital requirement for an agency captive insurance company from US$500,000 to US$250,000.
Since the initial passage of the agency captive statutes in 2017, Vermont has gained significant experience regulating this type of captive insurance entity.
According to Vermont captive regulators, a lower minimum capital requirement will compare more consistently with the current captive insurance marketplace, without lowering the expectations of captive insurance companies.
In evaluating this change, the Vermont Department of Financial Regulation (DFR) determines it does not present a risk to solvency since the law states: “The Commissioner may prescribe additional capital and surplus based upon the type, volume, and nature of insurance business transacted.”
Brittany Nevins, captive insurance economic development director at the Vermont Department of Economic Development, comments: “Captive insurance companies are regulated based on their individual risk profile, and our robust regulatory team is skilled at understanding appropriate capital to match the unique risk.
“Because of this, we realised it wasn’t necessary to have a high, arbitrary starting point for these companies.”
In addition, the amended law modifies the language concerning parametric policies to clearly allow captives to write parametric insurance contracts.
The DFR has the necessary regulatory processes and procedures to determine how a parametric contract should be classified and accounted for, when presented for approval by the Commissioner.
Every year, the Vermont Captive Insurance Association (VCIA) collaborates with the DFR to put forward a captive bill based on industry feedback to update Vermont's laws in order to keep pace with the industry's needs.
Kevin Mead, president of the VCIA, says: “The industry in Vermont knows that the regulators and the legislature are open to discussing new ideas and open to feedback.
“It's one of the primary reasons companies choose Vermont to license their captive insurance company.”
Nevins adds: “This process is essential for Vermont to proactively address inefficiencies in its statutes without compromising on quality regulation.
“This annual process ensures that Vermont is continuing to regulate captive insurance companies as best as possible.”
