Vermont has proposed to update its branch captive legislation to require branch captives to designate the state’s commissioner of the Department of Financial Regulation as its agent for service of process.
A Vermont Captive Insurance Association memo explained that the concept is from the Liability Risk Retention Act, which requires risk retention groups (RRGs) to appoint the commissioners of insurance as agents for service in all states where they operate.
The second change to branch captive legislation includes deleting section 8 V.S.A. §6044, which requires the branch captive to petition the commissioner of the Department of Financial Regulation for a certificate of general good.
In all other captives, this certificate is then presented to the Secretary of State as part of the entity organisation process.
According to VCIA, since the branch does not form a Vermont corporation, or other Vermont business entities, this section of the statue services “no useful purpose”.
After adopting governance standards for RRGs during the past two legislative sessions, the state has decided to propose one amendment to section 8 VSA §(g)(2) to require annual certification of director independence.
The memo stated: “Accreditation standards require that our laws be “substantially similar and no less effective” than the National Association of Insurance Commissioners (NAIC) adopted model law. Upon review, the NAIC found that our ‘upon request’ language would only be ‘no less effective’ if we made such request annually.”
In addition, the state has also proposed to extend the annual report deadline for association and sponsored captives to 15 March deadline.
A few years ago, Vermont amended its captive legislation to allow most captives more time to prepare statements, excluding RRGs and special purpose financial captives because they report to other states.
The state has also requested that premium tax due dates and taxes of loss portfolio transfers match up to the due dates for annual statements and tax returns on 15 March.
When the state granted companies more time to prepare their annual statement, it didn’t adjust the premium tax due date to coincide. As it stands, premium taxes are due before the statement in which the tax return that it’s based on is prepared. This has caused a “significant number of errors” and requires re-filing of tax returns.
The proposal explained that companies that continue to file their annual statement on 1 March will not have the same issue.
It noted that there is no impact on revenue, and the collection of the tax will fall in the same fiscal year.