A Vermont bill updating the state’s captive statute, including alterations to its financial examinations requirements, has been signed into law by Governor Phil Scott.
The consensus bill was composed by the state’s Department of Financial Regulation (DFR) and the Vermont Captive Insurance Association (VCIA).
The bill includes 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.
Other tweaks 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 clarifies 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 allows 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.
It also provides flexibility in investments by giving companies the option to develop their own investment plan for DFR approval.
Scott commented: “Part of what makes Vermont a leading domicile for captive insurance is our work to continuously modernise our regulations in this area.”
“Captive insurance is a highly competitive sector and my administration is pleased to continue to work collaboratively with the legislature to consistently ensure our captive law keeps pace with the fast-changing needs of the industry.”
David Provost, DFR deputy commissioner of captive insurance, said the alterations to the examination requirements mean the schedule “will better reflect the state’s current practice of prioritising examinations based on an assessment of the company’s risk”.
He added: “I believe the captive industry will welcome this move, along with other updates included in the bill.”
Rich Smith, VCIA president, noted: “As we have for many years, we worked collaboratively with the DFR to develop a consensus bill that will help grow our industry while maintaining our state’s prudent regulatory standards.”
“We are grateful for the continued support from Governor Scott and that of the state legislature.”