The Vermont Captive Insurance Division is planning to work with the Vermont Secretary of State to experiment with the use of blockchain for captives.
Vermont, the largest US captive domicile, will trial the use of blockchain software for filing incorporation documents for captives.
The state’s captive insurance division is currently working with the Secretary of State on a memorandum of understanding, with the project expected to begin in the summer.
According to David Provost, deputy commissioner of the Vermont Captive Insurance Division, the specifics of the arrangement have not yet been decided.
Provost said: “We are still working out all the details and exactly what we are going to do, and we may have to hire some software engineers to help with the project, but I don’t expect it will start until the summer.”
“We form 25 to 50 captives a year, so, at a maximum, we are looking at a couple of transactions a week.”
“This is something we can experiment with and work with the Secretary of State to work through the technology before they try to roll this out and use blockchain for larger or more frequent transactions.”
In addition to working out how blockchain may be used for the benefit of captives, the Vermont Captive Insurance Division has been in contact with people in the blockchain industry to see how captives can work for them.
Provost explained: “There is going to be a certain amount of people in the blockchain industry that are going to need captives.”
“There may be blockchain businesses that form captives for various reasons, including their own liability insurance for developing software.”
New legislation relating to blockchain in Vermont is currently due a third reading by the state’s House of Representatives.
SB 269, which was introduced in January 2018, proposes the implementation of strategies relating to blockchain and other emerging technologies in order to promote regulatory efficiency and provide governance structures that may expand opportunities.
Provost suggested that though the legislation was specific to a “personal information trust”, the underlying idea was to encourage blockchain businesses to form in Vermont and to promote a new industry in the state that is blockchain based.
He explained: “The business they’re legislating for doesn’t exist yet, but they’re hoping that having a favourable regulatory environment will invite entrepreneurs to start blockchain businesses in Vermont.”
“Any legislature loves jobs and opportunities, so they looked at this idea which was marketed to them as the ‘next captive insurance’.”
“Our legislature did so well with captive insurance they’re always looking for the next idea that is going to do the same thing, generate clean jobs and improve the economy.”
Provost said he did not expect the blockchain legislation to have a direct impact on captives should it pass.
“Directly I don’t think it will have an impact. I view blockchain more as a software product or method and I think captives will take advantage of it.”
“I am trying to keep an open mind and I expect captives will use it.”